The higher diesel prices driving inflation have been attributed to geopolitical forces such as the Russia-Ukraine war and OPEC countries declining to increase oil production. But a recent analysis by the Wall Street Journal and hard data published by the U.S. Energy Information Administration indicates the problem is largely domestic.
“The Biden administration has leased fewer acres for oil-and-gas drilling offshore and on federal land than any other administration in its early stages dating back to the end of World War II,” the Wall Street Journal reports. “President Biden’s Interior Department leased 126,228 acres for drilling through Aug. 20, his first 19 months in office, the analysis found. No other president since Richard Nixon in 1969-70 leased out fewer than 4.4 million acres at this stage in his first term.”
Pres. Biden pledged to cut back fossil fuel usage and transition the country to renewable energy. The recent rollout of the $1.2 trillion Infrastructure spending package echoes that pledge. Electric vehicle charging stations are being funded, federal agencies purchased more zero-emissions vehicles, and incentives for trucking operations to purchase battery-electric Class 8 tractors have been widely adopted.
Before the war broke out in Eastern Europe, the U.S. reportedly imported a nominal 200,000 barrels of Russian crude per day, which is considered less valuable than premium grades coming out of Texas. Given the leasing climate and policymaking direction, oil companies are reportedly shying away from working with the federal government. Many are buying up acreage and limiting production to private lands.
“The president said he was going to stop leasing. And he’s been remarkably successful,” David Bernhardt, an energy lawyer and former Interior secretary, reportedly said.
The hard numbers confirm that U.S. oil production is in decline and shortages have pushed the price of truck diesel at the pump above $5 per gallon. According to data published by U.S. Energy Information Administration, the country was a net exporter of oil before the pandemic disrupted the economy. American oil production hit a high water mark of more than 402 million barrels in December 2019, hovering around that measure until the country went into lockdown.
“Stepping up domestic production has been a priority of every president from Nixon right up through Obama and of course Trump,” Daniel Yergin, vice chairman of S&P Global, reportedly said. “Whether Democrats or Republicans, presidents have wanted to embrace the idea of energy independence and production.”
With the pandemic largely in retreat and businesses reopening, the latest high water mark occurred in December 2021 at just over 360 million barrels. In June, that output had slipped to approximately 354.5 million. Coincidentally, the price of truck diesel stood around $3 per gallon in December 2019, compared to $5.74 on average in June 2022.
The Mineral Leasing Act of 1920 reportedly tasks the executive branch with onshore leasing each quarter, at a minimum. After six quarters, the current administration has reportedly fulfilled that obligation once.
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