Fuel Crisis: Oil and Gas Suppliers Call for Forex Interventions and Tax Reviews


My columns tend to generate a lot of “passionate” responses from viewers. I try to correct misconceptions, misrepresentations and beliefs about the energy industry. But in doing so, I mean the very people who hold and promote these beliefs. For example, every time I explain the factors behind the rise in oil and gasoline prices, I get three different types of comments.
The first is simply grateful for the explanation. The second is from angry Republicans upset that I didn’t blame President Biden and the Democrats. The third comes from angry Democrats, who are furious that I don’t blame the oil companies.
I provide this preface because today’s column is one to bring out angry people. It’s going to be backed by facts. Some won’t appreciate the facts, but I think it’s important that people have accurate information about the energy industry.
Last month, Rep. Jim Jordan tweeted:
This is a weird tweet, because who does Jordan think people are paying this money to?
First, we can agree that people are paying a lot more for gas under President Biden. We could discuss the reasons, but it is a fact that the prices are much higher. In turn, inflation soars.
We can discuss President Biden’s energy policies. I criticized many of them. I criticized the shutdown of the Keystone XL pipeline project. I criticized the general hostility towards the US oil and gas industry, especially in light of the fact that the administration is now kowtowing to Saudi Arabia.
How about improving relations with American oil producers? Instead of demonizing them and blaming them for high oil prices, how about having a civil dialogue and understanding the industry better?
So, I completely agree that Biden has not been a pro-oil president.
Nonetheless, contrary to the misconception Jim Jordan tweeted, the US oil industry flourished under President Biden. Share prices of energy companies have soared since his inauguration as their profits have surged.
To be clear, I’m not saying it’s because of Biden. It’s not. But to suggest that Biden is wiping out the energy industry is absurd. Let’s look at some numbers.
There is an index commonly used as a stock market benchmark for oil and gas producers. This is the SPDR S&P Oil & Gas Exploration & Production ETF. The stock symbol is XOP. It currently owns about 60 oil and gas producers and refiners, from giants like ExxonMobil and Chevron to very small producers.
I’ll provide you with some numbers that you can check on Yahoo Finance. Enter the stock symbol, select historical data and review the stock price over time. Use “adjusted closing prices” as this corrects the stock price for dividends and stock splits, giving a more accurate view of performance over time than stock price alone .
President Trump was inaugurated on Friday, January 20, 2017. XOP closed that day at $151.70.
Although oil production has continued to rise under President Trump, oil producers themselves have not fared as well due to low oil prices. On January 19, 2021, President Trump’s last full day as president, XOP closed at $69.02.
This means that XOP, a good benchmark of the health of the oil and gas industry, fell 54.5% while President Trump was in office.
Some would say it was because of the COVID-19 pandemic. In fact, at the start of 2020, before the first Covid case in the United States, XOP was at $90.00.
Thus, it was already down 40.6% before the pandemic. Even if you go back to the previous summer, XOP was trading around $105-$110, still well below the value when Trump took office.
President Biden was inaugurated on Wednesday, January 20, 2021. The closing price of XOP on President Biden’s first day in office was $68.64. As I write this after the June 16, 2022 close, even after a huge selloff, XOP has closed at $139.68.
That’s a 103% gain in XOP over the 1.5 years President Biden has been in office. This implies that the market value of the US oil industry roughly doubled under Biden, after sharp definition under Trump.
You can repeat this exercise for just about any oil and gas company, and you’re going to find similar results for most of them: a big drop under President Trump and a big gain under President Biden.
So say what you want about President Biden’s hostility to oil and gas. I will probably agree with you. But imply that the industry is doing badly under Biden, and that’s a complete denial of reality. Many companies, even big companies like Chevron, have seen their values ​​skyrocket since Biden took office.
Some of the conservatives who go this far will be angry, wondering “Why are you defending Biden? I’m not. I correct a misconception. Biden is not the reason their stock prices have skyrocketed.
They went up because oil prices soared. (Of course, if you blame him for soaring oil prices, I guess you’ll have to give him credit for the huge expansion in the valuation of the oil industry).
There is another counter-intuitive example from history worth mentioning.
President George W. Bush was widely seen as a tanker, with a tanker as Vice President to Dick Cheney. Yet US oil production declined while they were in power.
Then President Obama, who like Biden was generally hostile to oil and gas, arrived and oversaw the largest oil production expansion in US history.
How can this be? President Obama happened to be in power when fracking started to pay off. He reaped the benefits of developments that had been taking place for years.
This is just another example of a president being impacted by the events of the previous administration and taking credit (or sometimes blame) for it.
This is also the case here with President Biden. The initial spike in oil prices was the result of the collapse of oil supply in May 2020 and then the subsequent recovery of demand over the following two years. The production crash took place under Trump, as did the start of the recovery.
But the surge in demand continued during Biden’s tenure, while supplies struggled to catch up. This pushed oil prices and oil company stock prices much higher. Biden was just president when it happened.
The point here is that correlation does not imply causation. But let’s make sure we understand the facts.
Rapier reports for oilprice.com


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