Nobody expects almost-80-year-old Joe Biden to understand much of anything these days. But on Monday, he outdid himself, exemplifying his utter ignorance about energy markets, congressional authority, and basic microeconomics in a single diatribe.
After begging Saudi Arabia to bail him out of his self-made oil crisis, the senile septuagenarian settled on a second tactic — bullying domestic oil companies. He is now accusing Western oil producers of “war profiteering” and threatening a windfall tax against oil profits should domestic output fail to increase.
WHITE HOUSE ‘WATCHING’ SAUDI ARABIA’S NEXT STEPS AS BIDEN MULLS RESPONSE FOR OIL CUT
“You know, at a time of war, any company receiving historic windfall profits like this has a responsibility to act beyond their narrow self-interest of its executives and shareholders,” Biden said, calling out Shell and Exxon specifically. “You know, if they don’t [increase production], they’re going to pay a higher tax on their excess profits and face other restrictions. My team will work with Congress to look at options that are available to us and others. It’s time for these companies to stop war profiteering, meet their responsibilities to this country, and give the American people a break and still do very well.”
As a matter of basic supply and demand, punitive taxation doesn’t work. It would reduce oil firms’ available funds to invest in increased drilling and refining — the opposite of Biden’s stated goal. And as a matter of political reality, Biden must be in denial. With Joe Manchin as the deciding vote in the current Senate, there’s already no way to pass such a tax. Next week, when betting markets and the polls increasingly favor Republicans to clean House and Senate, Biden’s threat will be nothing more than a pipe dream.
And Biden’s bluster belies the reality that his oil-free fantasy largely depends upon oil companies’ massive profits. Who exactly does Biden think will fund the net-zero future demanded by Davos? Greta Thunberg and her band of tyrannical truants? The hopes and dreams of nonprofits? Windmill and rainbow manufacturers? No — it will be Big Oil, and God willing, it will be American companies and those of our allies.
Let us look specifically at ExxonMobil, which Biden singled out as particularly villainous. It is true that the Texas-based oil producer earned $18.7 billion last quarter, posting its second straight quarter in a row of record profit. It also posted record output from its refineries and spent a third of its profit on capital expenditures, totaling more than $15 billion on investments this year thus far.
Exxon, like all the Western oil giants, is funding the future of carbon-neutral energy. It already funds more than a third of the planet’s existing carbon capture capacity and is now plotting a carbon capture partnership with CF Industries (market cap: $21.48 billion) and takeover of Denbury (market cap: $5 billion). Earlier this year, Exxon invested another $125 million in a biodiesel production firm, and fellow American producer Chevron spent $3.15 billion to buy its own Iowa-based biodiesel production firm, Renewable Energy Group. Chevron, which pledged to push profits into clean energy investment before initiating stock buybacks, also partnered with Google to raise a quarter billion for a nuclear fusion startup earlier this year.
Shell, which already sells renewables directly to Texans, is a British company, so it is not immediately clear how Biden’s proposed tax would affect it.
The oil industry is already serving three masters: consumers with highly inelastic demand, investors who know Western oil demand will peak in the next decade as clean energy investments pay off, and the global governments expecting them to fund the net zero transition. Biden can make their jobs easier in the short run by deregulating domestic drilling and granting further drilling permits, but he has nobody to blame but himself for the current supply crunch.
