“We should not be buying Russian energy,” Trump told a Conservative Political Action Conference audience last month. He added, “No president was ever as tough on Russia as I was.” (Cue laughter sound track.)
This was “part of an extended effort to rewrite his Vladimir Putin-friendly presidency into something more attuned to the current sentiment about the Russian dictator” (read story here).
Here are the facts: While Obama was president, U.S. imports of Russian oil “went from 205.5 million barrels in 2009 … to 161.3 million barrels in 2016, … a decrease of 22%.” By contrast, while Trump was in office, Russian oil imports rebounded “from 142.0 million barrels in 2017 … to 197.7 million barrels in 2020 — an increase of 39%.”
But to be fair, U.S. presidents don’t control Russian oil imports, unless they impose restrictions or a ban (as Biden just did). Those decisions are made by “traders and refinery operators seeking the cheapest source at any given moment, not by the federal government,” Huffington Post points out (at link above).
Elaborating, Huffington Post says, “The decrease in Russian oil during Obama’s administration coincided with an increase of cheaper U.S. oil thanks to a boom in fracking … [which] continued two years into Trump’s years before Russian imports started increasing again as OPEC producers sought to build markets in India and other developing nations, making Russian oil somewhat less expensive in comparison.”
Republicans apparently are criticizing Biden for not cutting off Russian oil imports sooner. But remember, the invasion happened only two weeks ago. And now they’re blaming him for higher gas prices resulting, in part, from that cutoff. But most hypocritical of all, “Trump’s recent criticism of Russia’s invasion marks a radical departure from his decades of praise for the country and its longtime ruler. In a 2007 letter to Putin, Trump told him he was ‘a big fan’ of his. Five years later — after Putin had already invaded Chechnya and Georgia ― Trump posted on Twitter: ‘Do you think Putin will be going to The Miss Universe Pageant in November in Moscow ― if so, will be become my new best friend?’”
Politics is politics. Republicans won’t criticize anything Trump — or any other Republican does, even when they’re wrong. They won’t praise anything Biden does right — and will criticize him even when he’s right. And how many Americans even know, or pay attention to, the mundane facts about where oil comes from and what causes pump prices to fluctuate?
Democrats are capable of demagoguing voters’ sensitivity to energy prices, too. This week, “in a direct address to the oil & gas industry …, [he] said ‘it’s no time for profiteering or price gouging.’ Hours later, Senator Warren made an appearance on MSNBC saying, ‘I’m co-sponsoring a bill on windfall profits tax. We get it, supply and demand, prices go up, but profit margins should not go up, that’s just oil companies gouging.'” (See story here.)
This is complete nonsense. Unless Biden and Warren flunked Econ 101, they know the free market brings supply-demand imbalances into balance by the price mechanism. In addition, high prices lead to more supply, bringing prices back down. As the adage goes, “the cure for high prices is high prices.”
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Let’s look at recent Value Line reports for a couple of big oil companies, starting with Exxon. In 2014, before Saudi Arabia flooded the market with cheap oil in a failed attempt to destroy the up-and-coming U.S. fracking industry, Exxon earned profits of $7.60 per share. By 2016, this had dropped to $1.88, and in 2020, Exxon lost $5.25 per share. The story is similar at Chevron, which earned $13.32 per share in 2012, $2.45 in 2015, and had losses of 27 cents in 2016 and $2.96 in 2020, per share. And while their profits are rising with oil prices, both companies’ projected earnings for 2022 and 2023 are still well below pre-2014 levels.
In short, oil companies make money when oil prices are high, and don’t make money when prices are low. Their profits vanished after 2014, and at that point they stopped investing in production, borrowed money to stay afloat, and froze or cut stock dividends; and now they’re using these “windfall” profits to pay down debt and pay their shareholders. Is that a ripoff? No, it’s not. Demand at the pump, not scheming oil executives, is responsible for high pump prices. Nobody complained about low gas prices when oil companies were losing money. It balances out. It has to, or they can’t stay in business.
Trump’s squeaking about Russian oil is hypocritical. Democrats’ squeaking about taxing oil companies’ “windfall profits” is demogaguery, and also counterproductive, because confiscating oil companies’ profits means they can’t invest in boosting production here at home.
Of course, Putin is demagoguing his war of conquest in Ukraine, too. He tells the Russian people that Ukraine is committing “genocide” against its Russian-speakers (false) and Ukraine is trying to build “dirty” nuclear bombs (false). There isn’t a shred of truth to that, just as there’s no truth to Trump’s election fraud claims.
But politics is politics, and never shall politics and rationality meet.
Photo: A Caspian Sea oil complex (read story here)
