Smashing Exxon’s profits, meeting the Saudi prince

  • Biden has few options to lower gas prices and avoid eliminating politics.
  • He’s placing a big bet by hitting Exxon and traveling to Saudi Arabia next month.
  • “Mohammed bin Salman’s begging for oil won’t lower gas prices,” Representative Ro Khanna of California said in an interview.

President Joe Biden is staring at a political obliteration in a few months.

A sharp rise in oil and gas prices threatens to inflict a decisive defeat on the Democrats in the November midterm elections. The national average for a gallon of regular gasoline rose past $5 last weekend for the first time. It’s a 10 percent jump month ago, reflecting massive consumer demand outpacing the available supply of oil coupled with severe aftershocks in energy markets from the war in Ukraine.

The White House’s bleak political outlook combined with the inflation report It came worse than many economists expected. It showed that the prices of groceries, airline tickets and rents were increasing at the fastest pace in four decades. Biden has since doubled down on his pledge to fight rising prices and has made it his top domestic priority.

But the sharp rise in gasoline prices supports the current inflation spiral. It burdens businesses with bigger bills for electricity, air travel and freight, driving up prices across the board for Americans. It appears that the White House has few options left to reverse the supply crisis. It has already committed to releasing 1 million barrels per day from the Strategic Petroleum Reserve in May, relaxed regulations on ethanol fuel, and tried to open ports.

“President Biden is basically using the full range of tools available,” Jonathan Elkind, a senior researcher at Columbia University’s Center for Global Energy Policy, told Insider. “It seems to me that the Biden administration was doing a lot of things that made sense.”

But these moves failed to provide relief at the pump, and prompted Biden to bet big on gas prices with no end in sight. He criticized Exxon and reprimanded other big oil companies for it Make huge profits In a letter, he points to a more aggressive approach against a sector that urges it to ramp up production quickly.

He is preparing to meet Saudi Crown Prince Mohammed bin Salman in July, despite his vow to turn Saudi Arabia into an international pariah over the murder of Jamal Khashoggi, a prominent critic of the Saudi royal family and a US-based journalist.

It remains to be seen whether going after a bogeyman in the form of Big Oil and courting another in the form of a questionable ally will be enough to manipulate gas prices and prevent Democrats from losing one or both houses of Congress this fall.

Democrats are not comfortable turning to Saudi Arabia for more oil

Ron Wyden Schumer

Senator Debbie Stabeno (D-Michigan), Senator Ron Wyden (D-Oregon), Majority Leader Senator Chuck Schumer (D-NY), and Secretary of Commerce Gina Raimondo attend a press conference on supply chain issues.

Joshua Roberts/Getty Images

The potential image of Biden shaking hands with the Saudi leader who masterminded the Khashoggi assassination is enough to provoke concern and criticism among his Democratic allies.

Senator Tim Kaine of Virginia told Insider he thought the meeting was a “bad idea,” adding that his “intuition” was that the president’s trip was at least partly aimed at prodding Riyadh to ramp up oil production.

“Mohammed bin Salman’s begging for oil is not going to lower gas prices,” Representative Ro Khanna of California, the leading progressive member of the House of Representatives, told Insider. He added that Biden should set preconditions, such as pushing the Saudi government to lift its devastating blockade of Yemen.

“I see little evidence that the Saudis are going to lower gas prices,” Senator Ron Wyden of Oregon said on Wednesday. “I see a lot of evidence of their horrific human rights violations.”

Riyadh has a very Limited room to intensify oil production – known as “excess capacity” – and analysts say that even if Saudi Arabia pumped more crude, It can still fail To curb the sharp rise in gas prices. “It’s not like he threw in a key,” Elkind said. “It’s not like it’s going to affect things immediately.”

Some are pushing the Biden administration to think outside the box. Skanda Amarnath, executive director of the left-leaning think tank Employ America, argues the federal government You must guarantee the order for a short time For oil producers between Other management maneuvers and prioritizing clean energy initiatives over the long term.

“It’s hard for Democrats to talk about doing things that are right for the industry,” Amarnath told Insider. “But there are things that actually, if you do right, will prevent oil prices from crashing and going back to the boom and bust cycle again.”

“There is nothing the president controls less than gas prices.”

Gas prices over $6 are displayed at a gas station in Sacramento, California, Friday, May 27, 2022.

Gas prices are at an all-time high, exceeding $6 in California.

Rich Pedroncelli/AFP

Experts say the White House is at the mercy of global energy markets, which are badly battered by the war in Ukraine. “There is nothing the president controls less than gas prices and nothing people want to control more than gas prices,” Jason Furman, a former chief economist in the Obama administration, told Insider.

Democrats in Congress are struggling to hold onto a slim majority. Republicans are attacking Democrats as tax and spending liberals, exacerbating inflation with last year’s stimulus bill and stifling domestic energy production.

Some Democrats blame the oil majors for making huge profits at the expense of Americans being squeezed at the gas pump. Wyden is set to unveil a plan that would impose an additional 21% tax on oil companies on profits deemed excessive, along with taxing companies to buy back their shares.

“You have Big Oil doing it very well under the federal tax law at the expense of the consumer,” Wyden told Insider, adding that he believes his action will “communicate” with people. Separate surveys from Left-leaning collaborative core work And the Washington Post The majority of voters appear to blame the oil companies trying to reap profits from the rising gas prices.

“Profits are four times what they were before the war in Ukraine,” said Lindsey Owens, CEO of Groundwork Collaborative who Do extensive research About it, in an interview. “Oil company executives bring in huge profits and brag about them to shareholders in earnings calls.”

Senator Bernie Sanders of Vermont Sheldon Whitehouse of Rhode Island They also released their unexpected tax proposals. These programs are modeled on the programs recently established in Italy and the United Kingdom that provide checks to the poorest families.

The Biden administration has also kept the door open for an unexpected dividend tax, too. But some liberal and conservative economists criticize windfall taxes as potentially inflationary and damaging to efforts to increase crude oil production.

“Wyden’s plan will be partly passed on to consumers in the form of higher prices and will dampen production,” Furman said. “This is not the right approach.”

Donald Schneider, the vice president for American politics at Piper Sandler and a former House Republican aide, told Insider.