Critics say Biden is failing on energy policy. The facts say otherwise.

Texas Congressman and House Speaker Sam Rayburn joked, “Any moron can knock down a barn, but it takes a skilled carpenter to build one. This analogy which is particularly relevant when assessing the recent energy policies of the Biden administration, including the generally skeptical reaction of industry analysts to the most recent speech on oil markets this week.

This reaction shows that energy analysts have slipped on their own oil slick of misinformation. It is always easy for cynical but contradictory industry analysts and commentators to politicized lob beanbags to administrative decisions. Of course, the White House may have had its ups and downs with some early mistakes, as well as bad messaging on energy solutions. But listening to these biased industry complaints has increasingly become a story of two realities.

The dominant narrative presented by most energy analysts is one of a disastrous and dystopian global view of the “supply shock” of oil. They paint the administration as largely rudderless on energy challenges, politicizing the publications of the rapid decline Strategic Petroleum Reserves (SPR) to put a band-aid on lower prices ahead of the midterm elections, unable to tackle supply challenges. They further blame the administration for simultaneously offending the second and third largest oil producers, Saudi Arabia and Russia, amid drastic OPEC+ production cuts and the sixth package of sanctions from the European Union to ban Russian oil in December. And they accuse the White House of murdering America’s energy independence by launching an ESG crusade against oil, blocking pipelines, cutting federal leases and threatening energy companies’ access to capital and prospects. long-term demand.

But this dystopian view is based on misleading information. Perhaps those energy analysts would be wise to redirect their fire from President Biden and instead target their skepticism at the devious Saudi-Russian OPEC+ cartel. These biased analysts, who predicted that oil would now be $400/barrel instead of the current $84/barrel, fail to recognize some key realities, including:

* The United States is now the largest oil producer in the world and has almost no need for Saudi oil; while the United States has already reduced its imports of Saudi oil by more than 90% over the past decade to just 356,000 barrels one day.

* The United States owned Aramco but recklessly gave it to the Saudis when President Nixon and Henry Kissinger panicked in the 1970s.

* Gasoline prices should have fallen recently to match the drop in crude oil, but refineries are enjoying a skyrocketing windfall, with earnings quadruple from 2021 levels. Refiners added $30 a barrel refining margins in addition to the price of crude – even if 1 million barrels per day in refining capacity added in 2022 with more to come in 2023. This is without counting the return of hundreds of thousands of barrels of capacity that have been taken offline due to idiosyncratic outages and disruptions the past two months due to poor management of the refinery.

* The billions of dollars oil producers lost in 2020 were not due to Biden, who had yet to be elected, but to COVID-related economic shutdowns.

* Federal leases under Biden far exceed those under Trump—with 3,557 oil and gas drilling permits on public lands in Biden’s first year, far exceeding the Trump administration’s first-year total of 2,658, with a record number of unused leases. This is the case even though all federal leases combined represent less than 20% of all US oil and gas production.

* The United States already provides more gas to EU than Russia at its peakand now the EU is buying 80% less from Russia than before the Russian attack on Ukraine.

* The recent Saudi/OPEC price hike was not justified by oil markets as producers were already making profit margins of 80%. Only the inefficient oil producer Russia, witheven production costs twice that of Saudi Arabia Arabia needed these price hikes to fuel its war.

* US SPR releases are not political. Every modern president authorized significant SPR releases, including Donald Trump—who also faced selfish industry attacks voice. Moreover, countries like Saudi and China maintain their own significant strategic oil reserves from which they released sufficient supplies to at least until this year.

* Biden’s New Policy to replenish the SPR through futures contracts, taking advantage of retroactive futures markets where oil hovers cheaply around $70 a barrel, secures huge profits for domestic oil producers for years to come, which Riyadh refused to do.

Likewise, contrary to Vladimir Putin’s propaganda that Western sanctions will lead to energy supply shocks, it is in fact Putin who is voluntarily withholding oil and gas supplies. The US Treasury Department has proactively put pass the price cap system explicitly to avoid a supply shock in December. 5, when new EU sanctions come into effect, ensuring that Russian oil continues to flow to world markets while simultaneously limiting Putin’s income.

Any decision by Putin to cut off oil supplies after Dec. 5 in the same way he is withholding gas supplies from Europe would be a catastrophic and unforced mistake. He’ll probably have to roll over, the same way he does now begging Europe to buy no more Russian gas after months of blackmail.

And much to the chagrin of many conservationists, Biden laid the groundwork for a gradual transition to clean energy, not the overnight transformation that industry boogeyman critics have urged him to do. . His speech this week explicitly called for an increase in domestic oil and gas production as well as much-needed permit reform to speed up the construction of power plants. infrastructure, in particular gas pipelines that can be transformed into green hydrogen pipes overtime.

It is perhaps even more surprising that many analysts retain any credibility in the market, given the number of missed calls by many analysts in the last year alone. Among them.

* Some denied that OPEC+ was going to have an unforeseen surprise in October with a 2 million barrel production cut.

* Many believed the Saudi propaganda that the kingdom had no spare capacity, when in fact the Saudis are 33% off production levels of two years ago, while refusing to publish the SPR inventory.

* These experts felt that Riyadh’s pleas that a cut in production was needed to maintain profitability, never appreciated that US technology allowed the Saudis to extract oil at well under half the cost of oil Russian with low breakeven points of around $22 a barrel.

* They forgot to count in the massively higher shipping costs for shipping Russian oil to Asia, adhering to Putin’s “pivot to Asia” mythology. They also mistakenly believed that gas was fungible and that Putin could switch from selling piped gas to Europe to China, despite not having the necessary pipelines.

* Many, including JP Morgan, said oil was now would cost $380/barrel

* They underestimated the speed of liquefied natural gas (LNG) to replace Russian gas to the EU (the US now sells more gas to the EU than Russia did at its peak in February). 86% of Russian gas went to the EU, but the EU didn’t need it as much as Putin needed to sell it to them.

* They do not have imagine that Germany could build six massive LNG conversion plants in record time to supplement the existing 150 billion m3 regasification capacity.

Obviously, when it comes to energy industry analysts, sometimes the emperor is naked – with these conflict experts too close to their own biased industry sources, repeatedly mistakenly falling into Saudi and Russian misinformation. Riyadh no longer even bothers to cover up its blatant manipulation of industry analysts. Recently, the Saudi oil minister publicly, ruthlessly reprimanded a Reuters reporter and banned Reuters from OPEC+ meetings while watering favorite analysts whom he considered “good friends” with extensive access at the last OPEC+ press conference. No wonder with so many industry experts on Saudi payroll or dependent on access to Saudi sources, experts shudder with fear at the thought of crossing Riyadh.

Beyond industry analysts reproducing the brutal misinformation of the Saudi-Russian OPEC+ alliance, US energy policy is quite promising – without giving industry a blank check or pandering to Saudi blackmail like the furniture of garden. If only some industry analysts could get past the groupthink that greases their way.

Jeffrey Sonnenfeld is the Lester Crown Professor of Management Practices and Senior Associate Dean at the Yale School of Management. Steven Tian is director of research at the Yale Chief Executive Leadership Institute.

The opinions expressed in comments are solely the opinions of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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