By Arab News
By Wael Mahdi*
The response that US Energy Secretary Jennifer Granholm gave to Bloomberg’s Tom Keene on Friday was truly shocking, typical, and full of contradictions.
“That’s hilarious. Would that I had the magic wand on this,” was her answer to Keene’s question about her plans to increase US oil production.
If we understand her comments clearly, gasoline prices are high because the global oil market is controlled by a cartel called “OPEC,” and that cartel decided on Thursday it would not pump more oil than what it had already planned to do at 400,000 barrels a day in December.
Moreover, she couldn’t answer why US oil and gas companies weren’t producing more at a time when oil prices were at $80, yet she said that President Joe Biden’s solution to this was to go green and diversify energy resources.
That doesn’t sound like a plan to me or to any person with understanding of the energy market. You can’t solve short-term issues with long-term solutions. I don’t know who will wait 40 years to see a net-zero carbon economy while he keeps paying more today for fuel at the pump!
The pump prices can’t be a measure of US energy policy success nor independence. It’s all about supply and demand and market adjustments, but free markets don’t always work well, so what’s the solution?
The US government has to intervene either by releasing oil from its strategic petroleum reserves or by incentivizing all these US companies to pump more by taxing them less if they produce more, or simply by allowing them to use more federal land or build more pipelines to import oil from Canada or Mexico.0 seconds of 39 secondsVolume 70%
Her statement on how oil companies are not responding to free market principles by pumping more was one of complete hopelessness of free oil market mechanism.
To correct some of what she said about the situation: First, OPEC isn’t a cartel and it only controls today, at most, 40 percent of global oil production. Second, OPEC is no longer calling the shots, it’s OPEC+ and that’s an international alliance that has no characteristics of a cartel.
Third, it’s not wise that a strategic commodity like oil is left fully to the free market that is driven by greed. Oil companies in the US don’t produce out of sympathy to US citizens, they produce when they make hefty gains and there are clear government directions and policies to invest in the long term.
It can’t be possible that an energy secretary says that she is in Glasgow now to kill the industry in the long term and move away from it, and at the same time asks them to invest and produce more oil.
Adding to that contradiction is the fact that the US government doesn’t want to see more oil and gas production at home because that would hurt the environment, but at the same time encourages countries elsewhere to do so and dirty our planet.
I’ve been covering the oil market for many years and have had enough of racist and misleading comments against OPEC and now OPEC+.
I hold a very strong belief that the energy crisis of today is structural price rooted in the policies of the US and other developed nations. I also believe that the current US administration has no clear energy strategy and no clue on how to bring down energy prices except by blaming OPEC+ and asking others to fix the situation.
The energy market needs regulation and regulated production. It needs clarity of policies and it needs brave actions by someone who can take the responsibility of fixing the situation without blaming others.
It needs a long-term view on how long the US will remain reliant on oil and gas, and this must be communicated clearly to all voters. You can’t change your energy sources overnight and it’s not wrong to keep using oil and gas until you are fully green.
The jury is out and I rest my case.
• Wael Mahdi is a senior business editor at Arab News and co-author of “OPEC in a Shale Oil World: Where to Next?” Twitter: @waaelmahdi