Bloomberg

Biden’s Oil-Relief Plan Seen Backfiring as Drillers Dig In Heels

Kevin Crowley and Paul Takahashi
Thu, March 31, 2022, 3:49 PM

(Bloomberg) -- U.S. President Joe Biden’s plan to tackle record gasoline prices with an unprecedented release of emergency oil reserves may stifle domestic crude drilling just when it’s needed most. ... Although the immediate impact of Biden’s latest energy initiative has been a 7% drop in oil prices, analysts warned any reprieve will be short-lived. The president wants to exact financial penalties on drillers for unused federal permits, and enhance the focus on clean energy, leaving oil executives less inclined than ever to invest the proceeds from $100-a-barrel crude into new wells.

“What that is doing is disincentivizing sustainable production from coming on, and is in fact incentivizing demand to stay high,” Saad Rahim, chief economist at Trafigura Group, said on Bloomberg TV Thursday. “In reality you really need to be doing the opposite.”

After making climate a keystone of his campaign, Biden had a fractious relationship with the domestic oil industry from the very start of his term last year. And when Russia’s invasion of Ukraine upended global energy markets, relations went from bad to worse: the president scolded American oil companies for rewarding investors at the expense of raising output.

For the oil industry, the most-contentious facet of the plan Biden announced Thursday would impose penalties on companies that hold federal oil permits they fail to drill.