By Dr. Harold A. Black
When Joe Biden said in the final presidential debate that he was going to “end fossil fuels” I thought he would lose the energy producing states. I was wrong. Pennsylvania and New Mexico voted for him despite their dependence on energy production. So, Biden is just keeping a campaign promise that he made on more than one occasion. In New Hampshire he said, “I guarantee you we are going to end fossil fuels.” From his first actions shutting down the Keystone pipeline to canceling leases, Biden has made it crystal clear that he wants the price of gasoline and natural gas to be so high as to make “renewables” competitive. That he is succeeding can be seen in West Knoxville with all the Teslas running around. I’ve even seen an electric Mustang and one Rivian pickup– which for some reason reminds me of an Edsel.
Biden has no intention of “fixing” the crisis he created. It’s not Putin. It’s not greedy oil. It’s not the tooth fairy. It’s Joe Biden. He will release gas from the strategic reserves, make overtures to Venezuela and Saudi Arabia in order to pretend that he is doing something. He is only pretending to address the problem that he created. He is not about to undo any of his previous actions. That he is play acting is obvious when last month he canceled oil and gas leases in the face of rising gas prices. Biden and the Democrats view climate change as an “existential threat” and is pompous enough to think that they can avert it. Democrats are more than three times as likely as Republicans to view climate change as an imminent threat to humanity’s existence.
I was asked by a dear friend why are gas prices so high and going even higher. Economics tells us that under these conditions, more producers come into the market and increase supply, bringing prices down. Why isn’t this happening? It is because the government is not allowing the market to operate efficiently. First, virtually all government agencies have a climate change agenda and are contributing to keeping gas prices high. That makes additional investments in fossil fuels tentative at best. Investors do not like uncertainty and even though the Democrats are likely to be voted out, it is highly unlikely that they will stay out. Like the Terminator, they will be back and those monies if invested in fossil fuels will be not able to generate acceptable returns. Second, even if the producers were willing to invest in energy production, they would find it difficult to acquire financing. The financial regulators are discouraging energy investments and loans. Moreover, the United States and 20 other countries have pledged not to fund international fossil fuel projects. Third, the private sector plays an outsized role in keeping prices high. Forty of the world’s largest banks have formed the “Sustainable Markets Initiative” and its Net Zero Banking Alliance pledged to align lending and investments with net zero emissions by 2030. No wonder Big Oil is sending earnings to shareholders as increased dividends rather than investing in drilling and exploration. Moreover, the three largest fund managers, Blackrock, State Street and Vanguard who control over $20 trillion in assets are placing “woke” policies above return. Blackrock and State Street are members of the Climate Action 100 which pushes fossil fuel companies to show how they will meet carbon emissions goals. Blackrock’s CEO wants to achieve 75% zero carbon investments by 2030. The fund manager’s investments are pushing ESG (environmental, societal, and governance) investing. Blackrock is also insisting that firms that have diverse boards and engage in something called the Gender Initiative. Mind you that none of this has anything to do with firm profitability. Indeed, Elon Musk and Blackrock’s former sustainable investing chief have said that ESG investing is a scam. ESG products command higher fees that add to the profitability of the investment firms but not the returns to their managed portfolios. Several of the large pension funds have pushed back. Texas which has $2 billion of its pensions at Blackrock has threatened to drop the company if it persists in its “woke” agenda. Other Republican run states have joined Texas to compel Blackrock to support and invest in the fossil fuel industry. However, Texas and other pension funds may be best served by moving their monies to a fund manager who seeks to maximize returns. Regardless, get used to high oil and gas prices because on this issue the Greenie Weenies have won.