I have a lot more to cover on the recently released Statistical Review of World Energy. But today I need to make a digression, albeit one with a tie-in to the Review.
Presidential hopeful Mike Pence has just released a new campaign ad on energy policy. You can view the ad here, and you can read all about Pence’s energy plans here. The ad is so misleading, it must be addressed.
Pence has been widely ridiculed for a couple of obvious issues in the video. He doesn’t select a grade. He doesn’t pay for the gas. You can hear the sound of the pump beeping as he pretends to pump, but he doesn’t actually squeeze the handle at all. Those aren’t the substantive issues, though.
The video starts out with Pence asking, “Remember $2.00 a gallon gas? And then Joe Biden became President of the United Sates and launched his war on energy. Since that time, gasoline prices are up 60%.”
Let’s take this first. If he’s speaking strictly of gas at $2.00 a gallon, the only time that happened during his term as Vice President was when the Covid-19 pandemic briefly crashed the economy in the first half of 2020. (Gasoline pricing data can be found here).
When all the stay-at-home orders were implemented in 2020, the demand for gasoline crashed, oil prices briefly went negative, and gasoline prices fell to around $2.00 a gallon for two months. Afterward, they began rising sharply, and by the time Trump and Pence left office the following January, the price had escalated back to nearly $2.50 a gallon.
If Pence is talking loosely in the $2.00 a gallon range, the average gasoline price during the four years while Pence was Vice President was $2.57 a gallon. Prices did indeed rise sharply after Biden took office, but it wasn’t due to any war on energy. More on this is discussed below.
The price of gasoline surged as the world started recovering from the Covid pandemic, commencing in mid-2020. This occurred because a substantial amount of oil production had been shut down in 2020 due to crashing oil prices, but then the demand began to rebound faster than supply could respond.
This scenario wasn’t exclusive to the U.S.; every country around the world experienced a significant spike in gasoline prices. Furthermore, when Russia invaded Ukraine, prices spiked once again. Once more, this repercussion was observed in every nation globally.
None of that is meant to imply that the Biden Administration has passed policies friendly to the oil and gas industry. For the most part, the administration has been fairly hostile. However, that’s not why gasoline prices shot higher.
However, this isn’t the worst of Pence’s ad. While we could engage in a debate about the reasons for the rise in gasoline prices, some might argue that it was due to Biden’s energy policies. Nonetheless, it would be quite peculiar to believe that Biden’s energy policies could lead to an increase in gasoline prices worldwide.
In fact, in 2021 a friend from Uganda told me that gasoline prices had risen by 50% there. I asked him who the people blame. “Our President.” So, it’s probably common in every country to blame political leaders for high gasoline prices, but that doesn’t necessarily mean they are the actual cause.
In the video clip, Pence went on to say that he has just launched a new energy plan “that will not only put the U.S. back on the path to energy independence, but by 2040 we will reclaim America’s role as the leading producer of energy in the world.”
This is where he goes completely off the rails. If I could ask Pence any question, I would ask “How are you defining energy independence?”
I have covered this before. See my previous article for a deeper dive into this topic.
If energy independence is defined to be “We don’t import any energy”, then we haven’t been energy independent in at least 70 years. We haven’t even been close, because we import a lot of oil that gets refined and then reexported as finished products.
But if Pence defines the phrase to mean “We produce more energy than we consume”, then we were more energy independent in 2022 than we been in at least 70 years.
Second, his claim about reclaiming America’s role as the leading energy producer is highly misleading and requires a great deal of context.
Presently, the U.S. is the leading producer of oil in the world. According to the 2023 Statistical Review, in 2022 the U.S. produced 17.8 million barrels oil per day (bpd). This includes the category of lease condensate and natural gas liquids (NGLs), and I will do a deeper dive on this in the next article.
The second and third leading oil producers were Saudi Arabia (12.1 million bpd) and Russia (11.2 million bpd). China produced only 4.1 million bpd. You will see below why I am including China.
The U.S. is also the world’s leading natural gas producer. In 2022, the U.S. produced an average of 94.7 billion cubic feet per day (bcf/d). Russia was second at 59.8 bcf/d, Iran was third at 25.1 bcf/d, and China was fourth at 21.5 bcf/d.
The U.S. is the world’s leading producer of nuclear power. We produced about 30% of the world’s nuclear power in 2022, which was about twice China’s production.
The one area where China has a substantial lead is in coal production. Last year China produced 4.56 billion metric tons of coal. The U.S. produced 539 million metric tons.
If you convert everything into the same energy units, China does have the overall lead, but only because of their massive coal production. The U.S., however, leads in the far more important categories of oil and natural gas production. We produce more than quadruple China’s oil and natural gas production.
Pence’s plan is almost exclusively focused on oil and natural gas production. Coal is barely mentioned in the plan, but massive coal production is the only reason China is ahead in overall energy production.
This is certainly not what Pence implies, which is why the ad, and his energy policy plan are so misleading. Pence implies that the U.S. is falling behind on oil and gas production, when we lead the world by far in both categories. You certainly wouldn’t think that from Pence’s ad.
The U.S. set a new oil production record in 2022 (again, including condensate and NGLs). But if you omit the NGLs, the U.S. was still the top producer, and still nearly set a new record in 2022 (and is on a path to set a new record this year). For natural gas, the U.S. set new records in 2021 and 2022, after Covid caused a small decline in 2020.
Here’s the bottom line. On the one hand, the Biden Administration’s energy policies haven’t been friendly to the oil and gas industry. Nevertheless, the industry continues to set new production records. Further, the industry itself made more money in two years under President Biden than it did in four years under Vice President Pence.
So, it’s hard to make a case that Biden’s energy policies have created havoc in the industry. Sure, the oil and gas industry would like friendlier policies. But Pence doesn’t give an accurate picture of the current status of the U.S. oil and gas industry.