The White House knows Energy policy is nuanced
A good marketer knows that a good chart wins the narrative. Caveat emptor
A picture is worth 1,000 words and a great graphic can become a powerful marketing campaign. In a glance, the best of these graphics tell you everything they want you to know without making you ask too many questions.
Take the image below as an example. Isn’t it remarkable how much better Chevy does than Nissan?
A little skepticism goes a long way, as those of us who have presented at an AFE meeting know, and a little magic and some axis scaling go a long way! In case you missed it, have a look at the scale. The “Y intercept” is 95%, so Chevy’s marketers have compressed the differences between the companies to magnify them at 20x the scale. Tada…. Marketing 101.
When numbers won’t do, resort to feelings. That’s why the team at Purdue pharma invented the term “breakthrough pain” to sell more opioids. They invented this graphic and ensured it was in as many doctors offices as possible to “help doctors communicate with their patients.” The side benefit? It led to doctors prescribing more and more pain pills. Purdue ended up paying a $4.5 billion fine. For the record, if I have a cold, I’d smooth in a cool “9”.
The White House has good marketers, too as the “shift the blame of gasoline prices” game continues. From the windfall profits tax to the beating the drum that Oil and Gas companies are “profiteering” off the backs of hard working Americans, the administration continues to beg U.S. producers to do their civic duty and produce more oil while at the same time, calling on American’s to grab their torches and pitchforks.
For background, and in case you missed the rules on how the rules to the blame game shift are structured, here is a brief summary.
Rule #1: Absolutely, positively, do not blame climate policies.
Rule #2: Absolutely, positively, blame Putin.
Rule #3: Absolutely, positively ensure that the average citizen never hears the words “Supply or Demand” spoken together in a sentence about markets.
Rule #4: Absolutely, positively, do not explain that 57% is 45 degree or higher but that the average slate of US refineries is 36 degree so we need heavier grades (credit to OG O&G) like the Urals or Sokol from Russia which are 30 and 36, respectively so sanctions in Russia impact U.S. gasoline prices disproportionately as world supply of heavy grades has fallen.
Rule #5: Absolutely, don’t explain that WTI pricing is on a forward month delivery so gasoline coming to market is based on purchases 30+ days ago, refined at some cost impacted by electricity prices (to crack the crude) and delivered on trucks that are in short supply due to a labor shortage, replacement part shortage and inflation.
Rule #6: Don’t explain that most oil and gas producers aren’t refiners and it is the refiners that sell the gasoline.
Got it? Good. Here is today’s chart of the day.
It’s a striking graphic. It sure looks like over the last 7 days, big, bad Oil and Gas refiners are gouging consumers, and it plays perfectly into the Administrations talking points. They have hit Putin hard (#PutinsPriceSpike) and now, they are vilifying oil and gas companies. As summarized by the Babylon Bee:
And so with due with credit to Javier Blas, who is one of the best follows on Twitter for his reporting on Energy, he rebuilt President Biden’s graphic using percentage of change since December 1st.
As you can see, the graphic shows a very different story. From this graph, you might say that retail gasoline prices are catching up to the January increase which is approximately when the refineries purchased at least some of their oil for production and delivery in March. Ah shoot! I broke rule #5!! I knew I’d be no good at politics.
The point of this post is not to vilify the Biden administration for using graphics to advance talking points. Everyone does it, clearly. The point of the post is to identify the core problem of the intellectual inconsistency we have we when talk about energy policy which is driven by this (and Europe’s) administration’s obsession with climate change. But here’s the thing:
If the administration wants to address climate change then higher gasoline prices reduce demand.
If they were truly serious about climate change, then they would impose a direct gasoline tax of $5/gallon to reduce demand to encourage consumers to make different transportation choices AND use the revenue raised as a tax credit to the poorest in the country who are most impacted by the price of gasoline INSTEAD of a windfall profits tax that ends up at consumers anyway.
If they really wanted to sanction Russian crude effectively and minimize U.S. disruption, then they would temporarily suspend the Jones Act which prevents non U.S. flagged ships from moving diesel from PADD3 to PADD1 to help alleviate some of the pricing pressure (credit to Mark Rossano for that idea).
Most importantly, if they really cared about climate change, then they would take EQT’s talking points on reducing carbon emissions seriously (credit to Toby Rice and his team for these).
Any Climate Change Plan Must Prioritize International Coal
Coal is the source of 48% of current international energy emissions
Replacing power generation from coal with natural gas results in emissions reduction of approximately 60%, equal to the benefits seen from switching to electric vehicles
Nearly all coal-reliant countries do not have the natural gas resources to facilitate coal-to-gas switching without imports
Increasing U.S. LNG capacity to 55 Bcfd by 2030 would replace international coal at an unprecedented pace
The Emissions Reduction Impact of Unleashing U.S. LNG is Equivalent to the Combined Impact of:
Electrifying 100% of U.S. passenger vehicles
Powering every U.S. home with rooftop solar and battery backup packs, and;
Doubling U.S. wind capacity by adding 54,000 industrial scale windmills
U.S. LNG Could Grow at a Rate Six Times the Current Obstructed Pace with Three Steps
Adding 50 rigs to increase production by ~45 Bcfd (+50%) by 2030, in-line with historic upstream activity levels
Prioritize construction of 40 Bcfd of new LNG export capacity by 2030, and 50 Bcfd by 2040, together with associated pipeline infrastructure, and;
Distribute U.S. LNG to help meet the 175 Bcfd of coal-to-gas switching demand in the world
Alas, we are living in the land of talking points. Here was Robert Reich, Clinton’s former secretary of labor with 1.4 mm Twitter followers entirely ignoring the economic principles of supply-demand on either crude oil OR gasoline, which is incredibly hard to do.
Given that we shouldn’t let nuance get in the way of a good story, I decided to jump in on the game, too! I therefore present the most important reason get CO2 emissions under control, and preferably have them starting falling immediately.
Robert Reich makes my head hurt
There is a fleet of refined products tankers that sail under the US flag today, so if the NE can't bring in diesel from overseas they can do it now. But, no LNG ships yet.