Fossil Fool, Part I
President Biden's desperate energy and economically-illiterate gaffes continue - for those willing to pay attention.
I. Wars! Real and Fake
The 2005 movie Lord of War stars Nicolas Cage, Jared Leto, and Ethan Hawke. Cage and Leto star as Yuri and Vitaly Orlov who compose of Ukrainian-born New Yorkers. The two brothers team up to as illegal arms dealers starting in the early 1980s after Yuri makes an interesting connection after seeing a Russian mobster gunned down in a local New York restaurant: just as people need to eat and restaurants fulfil this need, people need to kill and protect, and arms sales fulfils this need.
The two brothers “make it” by supplying arms to both the Israelis and the Lebanese during the 1982 Lebanon War and suppling Colombian drug lords later in the same era. There in Colombia, Vitaly becomes addicted to cocaine and is both in and out of rehab and the arms trading business. Upon the collapse of the Soviet Union, the brothers obtain special deal on former Soviet arms courtesy of their uncle back in Ukraine who just happened to be a General in the Soviet military but now oversees the new Ukrainian military. Yuri soon expands his operations to West African nations such as Liberia where he does business with the dictator Andre Baptiste Jr and later on in Sierra Leone. The film’s title comes from Baptiste, a native speaker of French (France colonized large parts of Africa) calling himself “Lord of War.” When Yuri bravely corrected the dictator by saying it’s really, “War Lord,” Baptiste replied that he prefers it his way.
Over the course of his arms trading career, Interpol Special Agent Valentine, played by Hawke, chases the Orlovs around the world yet is seldom able to pin them for crimes. Yuri eventually gets caught by Valentine on a somewhat different law violation than actual arms trafficking (I don’t want to give away all the spoilers) and his detained in NYC awaiting trial. But at the end of the film (spoiler) he’s released stating to Valentine in an interrogation room that an unknown US General will let him off knowing that the US Government actually benefits from his arms trading deals as these weapons end up with militias and armies the US “supports” but cannot officially support. In other words, dirty dealing.
The film closes with a harsh reality: that the largest arms dealers in the world are not illict black market ones like Yuri but are instead the large nation states - in particular the five permanent members of the United Nations Security Council. The movie is meant to be a cynical take on the hypocrisy of the very states in such an illustrious and noble part of the UN. This was mid 2000s Hollywood, not today’s version.
Few viewers of the film and hopefully readers here likely deny what Yuri and his brother were doing: war profiteering.
And that’s real war. The one with guns, bodies, bombs with nation states, militias, or insurgencies. The mass murder type.
Not fictitious wars such as the ones on nouns like drugs, poverty, crime, cancer , Christmas, coal, cars, cops , or Revisionism. (ah well okay “wars on” drugs and crime may as well have caused a few real wars too)
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II. I Did
n’t do That!
No more drilling on Federal lands. No more drilling, including offshore. No ability for the oil industry to continue to drill. Period. - US Presidential Candidate Joe Biden, 2020
It’s simply not true that my administration or policies are holding back domestic energy production. - US President Joe Biden, March 2022
Back in reality land, few places around the world are immune from ever growing energy and inflationary crisis. Today, US President Joe Biden, long disconnected from the reality of energy, continued his bickering against the oil and gas industry blaming them for high prices. Not seeing that he and his party are largely part of the problem - because such are features, not bug of politicians and their ilk he embarrassed himself and his political allies just in time for the all-important Midterms and at a time when Americans are hit with record
transitory inflation and likely an economic recession.
Biden in his remarks today hit peak imbecile. He opens with comments that gas prices have been on the rise around the world since the start of Russia’s invasion of Ukrainein late February 2022 and he credits his administration for using the US Strategic Petroleum Reserve (SPR) as a tool to bring down these prices. The SPR is meant as an emergency reserve for oil should a crisis such as the 1973-1974 oil embargo but has increasingly seen use by both political parties as a short term political fix for high gas prices. It's also a budget manipulating
Both of Biden’s claims here by the way are far from true, as we assume so-called Fact Checkers will diligently confirm this any second now. (/s)
In November of 2021 – long before Putin invaded Ukraine –Biden authorized the release of 50 million barrels from the SPR because he felt the price of oil was too high, as per the official press release titled “President Biden Announces Release from the Strategic Petroleum Reserve As Part of Ongoing Efforts to Lower Prices and Address Lack of Supply Around the World.” In the days after Putin’s invasion, Biden authorized the release of a further 30 million barrels. Frustrated that oil remained expensive despite these transfers, on March 31st Biden went full bazooka, pledging to release 180 million barrels over the next six months. The impact on the SPR inventory has been breathtaking:
Irina Slav who writes her own excellent and highly recommended Substack also covered the Nov 2021 event. Irina nearly predicts exactly what’s happened almost a year later too.
Other people, familiar with how both oil and geopolitics work warned that releasing barrels from the SPR might perhaps be counter-productive for U.S. relations with its ally Saudi Arabia and the rest of OPEC+. Let me just note here briefly that OPEC alone, that is, not counting Russia and the Central Asian partners in OPEC+, accounts for 40% — this is forty percent — of global crude oil production. The U.S. accounts for 18.6%. With Russia, which has a 12% share in global oil production, the OPEC+ total comes in at over half of global oil production.
What happened this week was effectively Washington flipping the bird to that same OPEC+ that supplies more than half the world’s oil. Rather, it tried to flip it the bird, despite the warnings it may be an unwise move, and despite insistence by experts that releasing any amount from the SPR will only have a short-term effect on prices. The Biden administration, it seems, really wanted to show OPEC who’s boss and, in a certain way, it did. Not a day after the official announcement of the release, the first reports emerged that OPEC+ is mulling over a suspension of production additions. Amazing, isn’t it?
Biden’s actions have led to the lowest SPR levels in nearly 40 years in what many see as a desperate attempt to keep gas prices down prior to the upcoming midterm elections is an entire energy crisis in itself. Never mind that much of the oil in the reserve itself isn’t able to be processed easily by US refineries and has to be processed abroad. There it’s either refined into products used outside the country or re-imported as refined products back into the US. Speaking of refined products, there is a severe diesel shortage currently in the Eastern portion of the country. Stocks are down to the last 25 days. That’s an entire separate post in and of itself. Not good!
None of this is to say Putin’s war (real war) on Ukraine hasn’t done anything to exasperate the issue, it indeed has. There are also plenty of things to criticize Putin rightfully for, but his actions are not singlehandedly to blame for the high gas prices or other energy woes in the United States.
But back to Biden’s speech. (Note: to keep the copy clean and short, long quotes are cited verbatim in the footnotes below the post!)
He insists that Americans have “stepped up to do the right thing,” (evidentially he forgot about his notoriously divisive authoritarian speech last month where he essentially cast half the American population as enemies but whatever) although he doesn’t explain exactly what that is. Such a thing is typical with politicians and their speechwriters - try to gain the trust of the audience (the American people) only to pit them against someone or something. In this case it’s the oil industry who Biden point blank insists, “has not met its commitment to invest in America and support the American people.” Again, Biden makes a pretty nasty gaffe but instead of towards roughly half the country, he seeks to demonize the millions who work in just one industry. This is an industry with steady high paying (sometimes even Union) jobs that any reasonable politician of either political party would love to claim credit for creating and/or maintaining.
And with all do respect (I have very little for him nor any politician for that matter) to someone who is a career politician whose likely never worked remotely a single day a typical American would work, such a statement is grotesquely incorrect and reeks of elitist arrogance.
Like it or not, the oil (and gas) industry provides millions of high-paying jobs, keeps the country extremely competitive on multiple fronts, and maintains the USA’s status as a top energy exporter. Oil provides not just gasoline and diesel to fuel transportation but it’s also the feedstock for countless products we take for granted every single day. Natural gas, contrary to the near equally imbecilic takes, have been covered several times on this site, has stepped in an electrical energy grid saver countless times as renewables have not been able to meet demand. Natural gas based fertilizers feed over half the world as well. These benefits can be weighed objectively against the negative side effects of extracting, producing, and consuming products derived from them, although such discussions are sadly lacking in today’s hyper politicized disconnected from reality society.
“Whenever someone starts talking about 'fair competition' or indeed, about 'fairness' in general, it is time to keep a sharp eye on your wallet, for it is about to be picked.”
― Murray N. Rothbard
Biden comments that oil companies have made “record profits” and blabbers that this isn’t a “fair return on hard work.”Again how a rent-seeking career politician can even remotely begin to understand what exactly is fair is beyond any person even partially lobotomized. But fair is one of those words which hijacks the rational mind, making it useful for politicians and other purveyors of propaganda.
To his credit, he does say each company is entitled to, “a fair return for the work they do or innovation they generate.” Then he bumbles, "it means, but I mean profits are so high it’s hard to believe.He doesn’t provide any context as to what in his mind is the boundary for too high of profits other than stating BIG NUMBERS for Shell and Exxon-Mobil for the past two quarters.
He conveniently leaves out other important figures such as total revenue or the fact nearly the entire oil and gas industry operated at a loss between 2015 and 2021. He also conveniently leaves out someone could make the same argument for “record profits” from two other industries: so-called Big Tech, and Big Pharma. One of those entities is currently receiving billions in fiat Benjamins (aka guaranteed profit) for a particular product which is supposed to prevent the transmission and severe illness of a little known virus. Biden then asserts, but fails to provide any evidence (shocking!) that had the big evil oil companies not overcharged the Victim Americans so much, they’d pay 50 centsless at the pump.
Biden then insists he’s a capitalist!
That means he presumably understands basic concepts of Capitalism, right?
He even says so, ”Give me a break. Enough is enough,” he cries trying to imitate a normal American (migrants who are in the process of becoming Americans) who isn’t a member of the political swamp, “You’ve heard me say this before: I have no problem with corporations turning a fair profit or getting the return on their investment and innovation.” But he insists this oil industry shenanigans are not an example of this and that they’re somehow not innovative. Somehow the Big Bad Evil Oil Companies are all the sudden deciding just since last February to up the ante on screwing over the little guys.
Biden continues to pit the oil companies against the American people by demanding they “act in the interest of their consumers, the community, and the country,“ he says the best way to do this is by them increasing their production and refining capacity. I’ve attempted to ignore this topic because many others have covered it, from Javier Blas of Bloomberg, Doomberg, S&P Global Insights, Shellenberger, and David Blackman.
The basic tl:dr is that no new major refinery has been built in the US since the late 1970s followed by many refineries are being either closed or converted to renewable fuels only (again Doomberg has discussed the ramnifications of this as well). The Biden Administration earlier this year had the rare opportunity to expand refining capacity for a refinery in the US Virgin Islands but his own EPA denied the permits back in March. A few months later, Biden canceled oil and gas leases in Alaska, adding to his long laundry list of
industry sabotage campaign promises to end fossil fuel in order to save the planet from the supposed climate crisis.
Biden, of course, has denied his administration is stifling domestic energy production. Reduced refining capacity means less refined products including gasoline for one's car. Refineries have been running at 95+ percent capacity for months which is not typical and increases the chance of a failure. Refineries also must be periodically taken offline for seasonal maintenance. For each outage, capacity is reduced and prices go up. Basic economics. Basic supply and demand. Or what used to be common sense.
In today’s speech, the President then gets serious. He proposes higher taxes on “excess profits” and calls for the oil industry to “face other restrictions.” It’s here he gets to the the real meat, "it’s time for these companies to stop war profiteering.”
Of course this is largely an empty threat oddly enough, as the President exercised a rare trait of actually being a President - asking Congress to send him a bill as opposed to abuse the Executive Branch as he and several of his predecessors have repeatedly done. He then closes by stating, “The American people are going to judge who’s standing with them and who is only looking out for their own bottom line. I know where I stand, and I want to let the — I’m — going to hear more from me about this when the Congress gets back.” A metaphorical microphone was dropped and a foot was stomped. Or so I heard.
Actually not. This assclown doesn’t speak for anybody but himself and his cronies.
Now oil companies are no angels, but to assert that their actions, especially in the US domestic energy front, amount to war profiteering is an irresponsible stretch - especially coming from the Commander in Chief of the world’s largest military whose arms are provided by the military industrial arms complex. Never mind he (and most people in both parties) voted for damned near every defense spending bill, war, or thing resembling a war (including the fake ones) across his decades as Senator, drone strike happy Vice President, and now as President.
Oh yeah, what about war profiteering for defense firms a-la what the film Lord of War was trying to cynically point out? What about record profits for them? Let’s just slip those under the rug.
Stay tuned for Part II.
“Now, the second quarter of the profits were really high. But the third quarter — last week, Shell announced that it made $9.5 billion in profits for the third quarter — $9.5 billion. That’s almost twice as much as it made in the third quarter of last year. I think that’s something. You think that’s incredible? I thought, “My — that’s as good as — as high as it’s going to get.”
Then along came Exxon. Exxon’s profits for the third quarter were at $18.7 billion. One quarter: $18.7 billion — nearly triple what Exxon made last year and the most in its 152-year history. It’s never made that much profit.
In the last six months, six of the largest oil companies have made more than $100 billion — $100 billion. And we had a little discussion about this, the three of us and others. One hundred billion in profits in two — less than 200 days. That’s not bad.”
Excellent piece and totally agree. Peak stupidity is here for sure. Love the Rothbard quote.
Wouldn't it be nice if we could get a political leader in the US who didn't speak out of both sides of their face ... in the same speech? How does that pass the public's sniff test, at all? I digress. Really liked the tie-out to the movie here ... good fiction to reality bridge that helps to show why it feels like we're living in some poorly written fiction today.