I saw AWA’s post on a Democrat Senator who wants to impose a 21% tax on oil profits.

Their justification is anti-price gouging.

Before I saw his post I saw this story at Fox Business:

Biden threatens oil companies with ’emergency powers’ if they don’t boost supply amid inflation spike

President Biden may resort to using emergency powers if American oil companies don’t increase output at their refineries, the president told oil CEOs in a series of letters Wednesday.

Biden’s statement blames oil companies for running “historically high profit margins” even as Americans experience surging gas prices. Biden has recently faced criticism for a lack of executive action aimed at curbing inflation.

“There is no question that Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing,” Biden wrote. “But amid a war that has raised gasoline prices more than $1.70 per gallon, historically high refinery profit margins are worsening that pain.”

“Your companies and others have an opportunity to take immediate actions to increase the supply of gasoline, diesel and other refined product you are producing,” he continued. “My administration is prepared to use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term, and to ensure that every region of this country is appropriately supplied.”

I don’t know if Democrats actually believe this or just use it as a talking point for the masses but it’s clear that their narrative is that the oil and gas industry is sitting on huge supplies of crude and massive amounts of production capacity but are throttling supply to drive up prices to maximize their profits.

Of course, for this to work all the oil and gas companies – including overseas oil companies – must be in cahoots operating as an illegal cartel.

Reality it completely different.

The biggest problem is that the US is closing refineries.

There were several reasons for this.

COVID shutdowns reduced demand for gas.  Refineries closed and now are not easily turned back on.

Environmental regulations make it difficult to impossible to upgrade capacity of existing refineries or build new ones.

The Democrats’ push away from gas dissuades investors from investing in refinery construction or upgrades.  If states will ban gasoline in 10 years why invest in building a refinery that won’t be profitable for 20 years?

Refineries are currently running at about 95% capacity, which is maximum safe capacity.

There is no more capacity to kick in.

The growth of China, India, and other countries means were competing for overseas refined product.

The analogy is a draft horse pulling a wagon that is too heavy as fast as it can, and Biden threatening to beat it harder if it does pull faster and Democrat Senator threatening to take 21% of its food away as punishment.

Add to this that the Biden Administration has canceled drilling leases in New Mexico, Alaska, and offshore.

So what will Biden do?

He won’t reverse his drilling ban or cut back EPA regulations or encourage long-term investment in oil and gas.

The fact is that it doesn’t matter if they really believe their narrative or not, they do not understand what the problem is and their actions will destroy the petroleum industry, and that’s the point.

We will feel it here.

I believe they are banking on Democrat Privilege – being judged on intentions and not results – to save them.

They will be praised as “doing something for working Americans” while driving gas past $10/gal, and letting the petroleum industry catch the blame.

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By J. Kb

5 thoughts on “The Democrats are hell bent in destroying the oil industry before the midterms”
  1. Kinda hard to “boost production “ when the biden crowd is the ones twisting the rope around the oil industry s neck…. I think all these oil companies should hoist the black flag and middle fingers and drill baby drill, build the pipeline and get us energy independent….. dreams I know…

  2. I think they do understand what the problem is, and they are hell bent for leather to make it worse.

  3. OK, not an economist here. Frankly, not even business savvy enough to make this statement, but…
    .
    “Biden’s statement blames oil companies for running “historically high profit margins” even as Americans experience surging gas prices.”
    .
    Profit margin, if I understand correctly is the percentage you make on your product(s) or service(s). As in, profit is 1%, 6%, 15% of the cost of doing business. For every $100 of goods or services you sell, you make $6 means you have a 6% profit margin.
    .
    Has the profit margin of the oil companies changed significantly? Is BP now making 20% instead of the normal/historical 10% they used to make? (numbers completely made up.) Somehow, I think the statists in the Brandon administration are using terms they do not fully understand. (Of course, I can be the one wrong here.)

    1. It could be that they are using terms they don’t understand. After all, these are the same people who picked Janet Yellen for Treasury secretary. But a more plausible assumption is that they know exactly what they are doing but are trying to BS the public.

    2. I had this exact conversation with someone else. Margin is a percent. The Democrats conflate margin with overall profits.

      “The oil industry is making record profits.”

      Yes, but the margin is the same, the overall cost is up. 5% on $100/bbl oil is twice the profit on 5% on $50/bbl oil.

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