Destroying Exxon Profits, Meeting the Saudi Prince

  • Biden has few options for cutting gas prices and avoiding political defeat.
  • He’s taking a big gamble by attacking Exxon and traveling to Saudi Arabia next month.
  • “Implicating MBS for oil will not lower gas prices,” Representative Ro Khanna of California said in an interview.

President Joe Biden is facing a political downfall within a few months.

A spike in oil and gas prices is threatening to give Democrats a decisive defeat in the November election. The national average for a gallon of regular gasoline passed $5 last weekend for the first time. That’s a 10 percent jump from a month ago, reflecting massive consumer demand outstripping available oil supply combined with severe aftershocks in energy markets from the war in Ukraine.

The bleak political outlook for the White House was compounded by an inflation report that came out worse than many economists had expected. It showed that prices for groceries, airline tickets and rents rose at the fastest pace in four decades. Biden has since doubled down on his pledge to fight rising prices and make it a top domestic priority.

But rising gasoline prices sustain the current inflationary spiral. It’s burdening companies with higher electricity, air travel and freight bills, driving up prices across the board for Americans. There appear to be few options for the White House to reverse the supply crisis. It has already committed to releasing one million barrels a day from the Strategic Petroleum Reserve in May, relaxed regulations on ethanol fuels and tried to unclog ports.

“President Biden is basically using the full set of tools available,” Jonathan Elkind, a senior fellow at the Center for Global Energy Policy at Columbia University, told Insider. “It seems to me that the Biden administration has done a lot of the kinds of things that make sense.”

But those moves failed to defuse the bomb, and that led Biden to take a big gamble with gasoline prices soaring with no end in sight. He criticized Exxon and chided other major oil companies for making big profits in a letter, signaling a more aggressive approach against an industry he is calling for to quickly ramp up production.

He is due to meet Saudi Crown Prince Mohammad Bin Salman in July, despite vowing to turn Saudi Arabia into an international pariah over the murder of Jamal Khashoggi, a prominent critic of the Saudi royal family and US-based journalist.

It remains to be seen whether going after one bogeyman in the form of Big Oil and approaching another in the form of a questionable ally will be enough to tamper with gas prices and prevent Democrats from losing one or both houses of Congress this fall.

Democrats Not Comfortable Turning to Saudi Arabia for More Oil

Ron Wyden Schumer

Senator Debbie Stabenow (D-MI), Senator Ron Wyden (D-OR), Senator Majority Leader Chuck Schumer (D-NY) and Secretary of Commerce Gina Raimondo attend a press conference on supply chain issues. supplies.

Joshua Roberts/GettyImages

The possible image of Biden shaking hands with a Saudi leader who is the mastermind behind the Khashoggi assassination is enough to provoke discomfort and criticism among his Democratic allies.

Senator Tim Kaine of Virginia told Insider he thought the meeting was a “bad idea”, adding that it was his “intuition” that the president’s trip was aimed, at least in part, at spurring Riyadh to increase oil production.

“Begging MBS for oil will not lower gas prices,” Representative Ro Khanna of California, a prominent House progressive, told Insider. He added that Biden must establish preconditions, such as pressuring the Saudi government to lift its devastating blockade of Yemen.

“I see very little evidence that the Saudis are going to lower gas prices,” Senator Ron Wyden of Oregon said Wednesday. “I see a lot of evidence of their horrible human rights violations.”

Riyadh has very limited room to increase oil production – known as “idle capacity” – and analysts say that even if Saudi Arabia pumped more oil, it still might not slow the rise in gas prices. “It’s not like flipping a switch,” Elkind said. “It’s not like it instantly affects things.”

Some are pushing the Biden administration to think outside the box. Skanda Amarnath, executive director of the left-wing think tank Employ America, argues that the federal government should soon secure demand from oil producers among other administrative maneuvers and prioritize clean energy initiatives over the long term.

“It’s disgusting for Democrats to talk about doing things that are industry-friendly,” Amarnath told Insider. “But actually, there are things that, if you do them right, will keep oil prices from going down and going back into this up-and-down cycle.”

“There is nothing the president controls less than gasoline prices”

Gas prices above the $6 mark are displayed at a gas station in Sacramento, California, Friday, May 27, 2022.

Gas prices are at the highest level on record, surpassing $6 in California.

Rico Pedroncelli / AP

Experts say the White House is at the mercy of churning global energy markets severely affected by the war in Ukraine. “There’s nothing the president controls less than gas prices and nothing people want him to control more than gas prices,” Jason Furman, a former Obama administration economist, told Insider.

Congressional Democrats are struggling to retain their slim majority. Republicans are attacking Democrats as tax and spending liberals who worsened inflation with last year’s stimulus bill and stifled domestic energy production.

Some Democrats are blaming the big oil companies for making huge profits at the expense of Americans being squeezed at the gas pump. Wyden is expected to unveil a plan that would apply a 21% surcharge to oil companies on profits deemed to be excessive, in addition to taxing companies that repurchase their shares.

“You have Big Oil doing very well under the federal tax code at the expense of the consumer,” Wyden told Insider, adding that he believes his move will “connect” with people. Separate polls by the Groundwork Collaborative and The Washington Post show that most voters blame oil companies trying to cash in on rising gas prices.

“Profits are four times what they were before the war in Ukraine,” Lindsay Owens, executive director of the Groundwork Collaborative, which has conducted extensive research on the issue, said in an interview. “Oil company executives are making huge profits and bragging about it to shareholders on earnings conference calls.”

Senators Bernie Sanders of Vermont and Sheldon Whitehouse of Rhode Island also released their own windfall tax proposals. These are modeled after recently established programs in Italy and the UK that provide checks to the poorest households.

The Biden administration also kept the door open for a windfall tax. But some liberal and conservative economists are criticizing the unexpected taxes as potentially inflationary and damaging to efforts to increase oil production.

“The Wyden plan would be partially passed on to consumers in the form of higher prices and would discourage production,” Furman said. “It’s not the right approach.”

“I think the fact that the Biden administration is putting a windfall tax or saying it’s going to consider it shows that they’re in blame-shifting mode, not really constructive mode,” Donald Schneider, deputy chief policy officer for the United States. Piper’s USA. Sandler and a former Republican aide to the House, told Insider.

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