It’s easy to notice the high gas prices the past few months, though it’s tougher and tougher for consumers to take the pain at the pump. According to AAA, the average price of regular unleaded gas in Louisiana is $3.16 a gallon, and the price of oil has been sitting north of $80 a barrel for quite some time. In my interview with Professor Eric Smith of Tulane’s Institute of Energy, the professor says the Biden White House is aware of the high prices, because they are the ones driving up the price.
These high gas prices and potential shortages don’t seem to be ending soon.
No, essentially we've got a government that is intent on making life miserable for people who want to produce oil and gas. There's no long-term shortage of crude oil in the ground or of natural gas, but you've got a controller of the currency who says she wants to blame all the independent oil and gas operators. If you want to cause a shortage, our government's doing a very good job of making that happen.
Is the Biden administration seriously considering shutting down another pipeline? What would be the downstream implications of that?
It’s just like shutting down anything else that's on a grid, it’s a matrix-type structure. If you lose a pipeline, it tends to make the remaining systems operate at higher capacity, and that’s if they have the higher capacity to take it on. Typically, you have shortages from that as well… There's the debate in Michigan, where Line 5 runs through Michigan to Sarina, Ontario, Canada. It's a lifeline for a whole petrochemical facility in Southern Canada.The U.S. has treaties in place that say our government can't mess with that pipeline, but the governor of Michigan keeps insisting she's going to shut it down. That kind of talk introduces uncertainty and doesn't inspire people to invest in new pipelines… this is a structural issue with the U.S. system of government right now. Keystone XL was a pipeline that made all sorts of economic sense for both Canada and for the consumers,who were the refineries here on the Gulf Coast, which had plenty of capacity to refine this heavy sour crude. Keystone got blocked by the Obama administration, opened up by the Trump administration, then quickly coming into the presidency, Biden blocked it.
Is there any exigency in how the Biden Administration is responding to high gas prices and limiting oil production? It's almost as if their belief is that this is a non-issue.
I think they understand exactly what they're doing. They are building a case right now to start tapping into the Strategic Petroleum Reserve, which is there strictly for emergencies, even more than they have in the past. Historically, administrations have gone after the Strategic Petroleum Reserve as like a piggy bank to pay for projects. In this case, it's a little more sinister. The Biden White House is saying we don't want anybody else to manipulate the reserve and we'll manipulate it by how much oil we release from the Strategic Petroleum Reserve.
How much is available in the Strategic Petroleum Reserve?
You've got about 600 million barrels of oil in the reserve, that represents several different grades at four different locations. If it was the only supply source we had, we might be able to run for 50 to 90 days.
