President Biden visits Saudi Arabia in July to mend fences with its de facto ruler, Crown Prince Mohammed bin Salman, after previously excoriating the country as a “pariah” because of its awful human rights record. In return, the Saudi leader, known as MBS, is expected to boost oil production — to help ease U.S. gas prices and bolster Biden’s political fortunes.
Meanwhile, Biden took a somewhat more punitive stance toward the U.S. domestic oil industry, previously arraigned by Democrats for pumping out fossil fuels regardless of climate change, and now chided in a presidential letter for inadequate supply and “refinery profit margins well above normal being passed directly onto American families.”
And the president is recommending a three-month suspension of the federal 18.4 cents-a-gallon gasoline excise tax, as well as calling on states to cut their equivalent levies.
All of which raises a question: What would Biden do if instead of being forced to hector, cajole and plead, he ran an oil company himself? What if the United States, the world’s number one petroleum producer, nationalized its resources, as have countries accounting for 75 percent of world production? What would Biden do with the same kind of control over the United States’ output that MBS has over Saudi Arabia’s and Russian President Vladimir Putin has over Russia’s?
It’s a hypothetical question, and, as such, clarifying. The likely answer is the president probably wouldn’t quite know which way to turn at first, but would soon face strong incentives to make the status quo even worse.
The United States’ chronic energy policy incoherence stems from basic economic reality, not corporate greed or governmental mistakes — though neither factor is blameless.
Specifically, the United States has a conflict of interest. It is, uniquely, the world’s largest oil and gas producer and the largest consumer, accounting for a fifth of global output and a fifth of global consumption.
Many, if not most, other countries produce more oil than they consume (e.g., tiny Kuwait and Norway) or consume far more than they produce (e.g., wealthy, industrialized but petroleum-poor Germany and Japan).
This makes it easier for them to have “pretty clearly developed and relatively consistent views on energy policy,” as Mike Wirth, the chief executive of Chevron, noted during a recent visit to The Post. “In the U.S., we’ve been able to get away with being a little sloppy because we’ve got a big industrial economy, and we’re also blessed with a big energy resource.”
Wirth, a target of Biden’s recent complaints, is not an unbiased source; nor, however, is he an unknowledgeable one. In this case, he has a point. Policy cannot simultaneously maximize gas-price affordability, incentives for domestic production and environmental protection.
Yet those are the contradictory directions in which U.S. policy pushes — because those are the contradictory directions in which voters and lobbyists constantly tug. If the president wore a second hat as de facto CEO of “Nationalized Big Oil Inc.,” they would tug on him, too.
The policy wonks who — interestingly but unconvincingly — back nationalization see things differently. The Democracy Collaborative’s Carla Skandier, for example, has proposed a federal buyout of 51 percent of the oil companies. “Only democratic government can ensure the planned wind-down of fossil fuel production in accordance with climate safety goals,” she writes. “With room for private profit cut out of fossil fuel extraction and production, the powerful entrenched opposition of the energy sector would crumble.”
Perhaps, but oil nationalization would also remove Big Oil as a convenient scapegoat for higher prices at the pump, making Biden himself — or any other president — the unshielded target of consumer fury.
Any politician accountable at the polls for gas prices would lean toward keeping it cheap, even to the detriment of objectives such as a balanced government budget, investing in expanded production — or fighting climate change.
The history of relatively democratic oil-producing countries with nationalized industries, such as Mexico or (before the Maduro dictatorship) Venezuela, certainly suggests as much. Both pursued — even subsidized — cheap gas, with massively wasteful consequences.
Biden reveals a similar policy preference now by calling for the elimination, albeit temporarily, of the one federal policy that directly discourages fuel consumption by raising its cost: the federal gas tax.
The lesson of this little thought experiment: The United States cannot soon eliminate its national conflict of interest on energy. It could, however, manage it more intelligently. A gradually rising tax on carbon emissions (rebated to protect the poor) could limit both U.S. dependence on fossil fuel and vulnerability to the variables — corporate profit-seeking, geopolitics and consumer demand — that determine it.
A carbon tax would stimulate investment in conservation and alternative fuel technologies while providing fossil fuel consumers and producers alike a predictable policy environment in which to plan for a lower-carbon future.
It is the simple, logical policy, which means the United States probably won’t adopt it until we have tried everything else, and maybe not even then.