U.S. Government Cancels Oil and Gas Leases Amid Record Fuel Prices

Matt Posky
by Matt Posky
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u s government cancels oil and gas leases amid record fuel prices

Despite the United States confronting some of the highest energy prices in its history, the Biden administration has canceled oil and gas lease sales in the Gulf of Mexico and Alaska’s Cook Inlet.

According to the American Automobile Association (AAA), national fuel prices are averaging out to a whopping $4.43 per gallon of regular gasoline. Diesel is much higher at $5.56 and is speculated to endure mass shortages in the coming months as reports from the Northeast have indicated there are already seeing record-low inventories. Over the past twelve months, fuel prices have risen by nearly $1.50 per gallon and most market analysts expect rates to continue moving upwards through the summer. Though they’re not all in agreement as to who should be blamed for our current predicament.

That’s because there are a plethora of likely suspects.

As the government agency officially responsible for canceling the leases, the Department of the Interior claimed it was actually the energy sector that didn’t want to drill in Alaska.

“Due to lack of industry interest in leasing in the area, the Department will not move forward with the proposed Cook Inlet OCS oil and gas lease sale 258,” a DOI spokesperson told Fox Business in a statement on Thursday.

“The Department also will not move forward with lease sales 259 and 261 in the Gulf of Mexico region, as a result of delays due to factors including conflicting court rulings that impacted work on these proposed lease sales.”

Lease sale 257 (also located along the Gulf) was similarly invalidated in January.

Meanwhile, the oil industry is currently enjoying record profits as energy prices skyrocket. The New Yorker even went so far as to suggest that the industry was actively engaged in war profiteering — citing ExxonMobil having made $5.5 billion (after taxes) within the first three months of 2022, Chevron’s $6.3 billion, and ConocoPhillips’ $5.8 billion. Here, we have the common excuse that the war in Ukraine is the true culprit behind surging oil prices and that the situation has been made immeasurably worse by greedy energy companies.

It’s a hard position to disagree with, especially since we know wars always tend to drive up the cost of raw materials. Russia is also an important oil-production nation with its actions directly influencing the global market. Though your author would argue that the brunt of the burden is being placed upon neighboring states, especially Germany. While the situation in Ukraine has undoubtedly contributed to today’s energy problems, crude prices spiked dramatically in late 2020 as oil futures began trading on the assumption that Joe Biden would soon be in the White House.

Some of the speculative action was the result of rebounding prices after demand cratered at the start of the pandemic. However, the Biden administration had expressed a strong interest in transitioning the United States toward all-electric vehicles and what it said would become a more environmentally conscious economy. Unfortunately, just about every nation that’s done likewise has endured rising energy costs as penance for the alleged progress.

One of Biden’s very first actions as president was an executive order to suspend federal oil and gas leases. While this was immediately challenged by Republican-led states challenged the ban, and a federal judge ruled in their favor overcoming the suspension and opening a lease sale for more than 80 million acres in the Gulf of Mexico for oil drilling, environmental groups sued to stop the leases in the courts and ultimately succeeded. Last year also saw the White House calling for an end to tax benefits for oil and gas production. Though the most contentious decision was Biden’s cancellation of the Keystone XL’s cross-border permit — effectively ending the 12-year project to funnel affordable fuels down from Canada and into American refineries.

Last month, the Interior Department stated that would be restarting the sale of oil and gas leases on federal land. However, the agency reduced the amount of land under consideration by 80 percent and increased the sum of royalties energy companies would be required to pay the government if they extracted anything of real value.

Despite the Biden administration having asked the industry to produce more oil to help lower costs, it has repeatedly taken actions that stifled domestic production. But its current position is to blame the war in Ukraine for the high cost of energy and the swelling inflation that’s making everything worse.

Inflation is also part of the problem and it’s not one limited to either party. Years of relatively unfettered government spending were placed into overdrive during the pandemic, only to be followed by massive spending bills. The United States is currently confronting currency devaluation on a scale not witnessed in decades and it’s only expected to worsen into the fall of 2022. This creates a snowball effect on all commodities, including those reliant on petroleum extraction.

The reality of the matter now hinges largely on which news outlets you consume and what their particular bias happens to be. A majority of legacy media sources and the Democratic Party have decided to focus on Ukraine and oil companies. Meanwhile, independent media, Fox News, and the Republican Party have zeroed in on decisions made by the White House and an inability (or unwillingness) to spur production — suggesting it’s at odds with the green agenda.

They’re all correct in their criticisms. However, the U.S. government only has direct control over its own spending and how it decides to regulate industries that have long since abandoned the free market to become intertwined with political action. If the price of gasoline is to come down, there are only a handful of realistic solutions. Government can attempt to strongarm the industry into increased oil production or deregulate it in the hopes that competition will eventually emerge to help tamp down prices. While the latter option would take years to yield any results, the former could see changes within a matter of months. But the core issue of supply and demand is what’s at play here and nobody should assume a monopoly of ultra-massive oil concerns is going to increase output while profits are so high.

Perhaps Alaska was indeed too expensive for them to survey and tap.

Even Donald Trump had a hard time getting more than a handful of interested parties when he opened the Alaskan Arctic National Wildlife Refuge (ANWR) for drilling in August of 2020. Climate activists also made the plan look unsavory on the national scene, despite local residents being broadly in favor of the prospect of the oil industry adding new jobs. The state itself was interested. But there’s little incentive for oil concerns to invest when they’re likely to make more sitting back and letting high prices do the hard work for them. And the timing of opening ANWR coincided with regional lockdowns that discouraged oil consumption to a point where per barrel prices had pitched into the negative.

The Alaskan argument is harder to attach to the canceled Keystone XL or the suspended leases based around the Gulf of Mexico, however.

While I’m inclined to agree that today’s oil prices are influenced by a multitude of factors, tough decisions need to be made if the economy is ever to return to normal. Tragically, what few actions have been taken by the White House and Congress to address fueling seem wholly designed to worsen the matter. Whether that’s coincidental, part of advancing the Biden administration’s green agenda, or simply the result of U.S. leadership being woefully out of touch with the plight of the common man is anybody’s guess. But it’s becoming increasingly ridiculous to suggest that our present course of action is somehow the correct one as evidence to the contrary continues mounting on a near-daily basis.

[Image: evgenii mitroshin/Shutterstock]

Matt Posky
Matt Posky

Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.

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  • Probert Probert on May 16, 2022

    "Though the most contentious decision was Biden’s cancellation of the Keystone XL’s cross-border permit — effectively ending the 12-year project to funnel affordable fuels down from Canada and into American refineries." Not quite: Keystone was going to transport tar sand oil. This stuff is only viable when prices go up - so not cheap. The liquid - once sand tar oil is thinned for pipeline transport it is legally not oil - was going to texas refineries, but for export. There was no benefit for the US apart from construction work, and maybe 10-15 full time jobs. The risks involved, and the turmoil it created, are "contentious". Police forces working directly for corporate interests, laws passed to enable attacks on protesters by private security forces - not pretty . Also, because the fluid is so diluted, it is construed by oil companies as "not oil", for the purposes of avoiding clean-up costs for inevitable leaks. Kind of boondoggle all around. But I'm sure a few people were set to make a killing - they wanted it so bad.

  • Arthur Dailey Arthur Dailey on May 16, 2022

    Somebody please explain how an ICE vehicle is superior. Performance? No. Reliability? No. Ease of maintenance? No. NVH? No. Range anxiety? It is like running out of gas never happened to anyone on this board or any of their friends/family. Ease of refueling. So you have to drive to a gas station. Hoping that it is open and has fuel. You have to stand outside in the wind, rain, snow, while you pump the fuel into your vehicle. How many of you got into trouble when driving a parents car for not returning it fueled? Or got upset with a partner child for the same? How often have you not refueled going home then white knuckled it in the morning? Or when on a long drive/trip in unknown territories. As opposed to when you park at home, at work or at the shopping mall/plaza you can 'plug your vehicle in' and it refuels why you go about your business, or sleep. Ecology/environment (for those who want to try that argument). Exploring for oil, drilling, transporting it to the refinery, refining it, transporting it to the distribution centres, pumping it into tanker trucks, driving the trucks to the 'gas' stations, pumping it from the tanker into large drums stored underground. The drums often rust and/or leak making it very expensive to remove them/replace them/clean the soil. The 'gas' stations take up expensive real estate, often being located at crucial intersections. The gas stations use electricity. Oh and if there is a power failure then you can't pump your gas into your ICE vehicle. Whereas with an EV the electrical transmission grid is up and in place. Yes the materials for batteries have to be mined and disposed of. But overall is there a significant environmental advantage for either. Sorry but the arguments for ICE replicate the arguments against electrical lighting that the 'oil' industry used at the turn of the 20th century. Or that the coal industry used when the British Navy converted to oil.

    • See 1 previous
    • ToolGuy ToolGuy on May 16, 2022

      @Arthur Dailey, yours is a thoughtful post. When I commuted to work in a series of EV's starting 10 years ago, here are the advantages and disadvantages I saw: • I very much enjoyed the instantaneous and useable torque (but there was no top end to it) • Reliability was great • I very much enjoyed no oil changes (but long-term the battery is deteriorating a little whether you use it or not) • I got spoiled by the lack of noise/vibration/harshness, to the point where almost every ICE vehicle I sat in at idle after that felt primitive and unrefined • The low center of gravity made it relatively zippy for a heavy vehicle • The money savings on fuel was significant for me at the time and was worth some trade-offs (also electricity cost was much less volatile and it was nice to have a predictable expense vs. fuel prices bouncing around) • The range at the time for the vehicles I had was adequate in ideal conditions but absolutely miserable in cold weather. The range got progressively better with each new model year and I put up with it due to the other advantages. • While appreciating the real-world functionality of some of the design elements, I didn't enjoy the styling overall • Charging at home was great - only problem was if I got home with low range and needed to quickly go someplace else • I was generally disappointed in the availability and uptime of chargers away from home • Getting instant heat in the winter to clear the windshield is hugely convenient - you get spoiled • I definitely started to resent it every time I needed to fuel up an internal-combustion vehicle at a fuel station (expensive, messy, dangerous) A lot has changed in 10 years and EV's (and hopefully the charging network) continue to get better. *Many* EV's available today would have completely addressed the range concerns I had back then. But there are definitely use cases where I would still pick ICE (or hybrid) today.

  • Sobhuza Trooper I won't buy one.I can't buy one.But it's not about me.And, damn, I'm glad it exists.
  • Marty S Corey, thanks for your comment. Mercedes has many different models, and will survive. Jaguar is planning on only offering electric models and will be in trouble. They should continue their ICE models as long as possible, but have discontinued the F-Type already and will probably be discontinuing everything else. We purchased the current XF this year, which is a nice car, but would have been splendid if they had just continued the supercharged V-6 in it.By the way, I have really enjoyed your Continental and Eldorado series. Was just showing it to my barber, who owned several 1954-56 Eldorado convertibles.
  • Marques My father had one of these. A black 1984 Pulsar NX with a 5-speed stick and a grey interior. Dad always kept it in pristine shape-that black paint was shiny even in the middle of the night. I swear I could still smell the Rain Dance carnauba wax! The only issue that car ever had was that it was never driven enough-it would sit for 10 days at a time! The Hitachi carburetor on it(and other Nissans of the time) were known to be troublesome. It went to the boneyard at 72K miles when a hole got punched in the block. By that time the Pulsar had long ceased production.
  • VoGhost This is the only new vehicle I have the slightest interest in.
  • VoGhost I love it. Can't wait to get one. Finally, trucks are becoming actually capable, and it's great for America.