Oil prices are rising, and you can thank President Biden.
By sanctioning Russian tankers and producers in recent days — something that should have been done over a year ago — the president has caused oil prices to soar, climbing from a low on Dec. 6 of $67 per barrel for West Texas Intermediate crude to nearly $80, a jump of nearly 19 percent. Strong economic data has contributed to the rise, but shutting down Russian exports is a game-changer.
Gasoline prices have also increased, up 4.4 percent in December, posing a challenge for President-elect Donald Trump, who has promised to put a lid on inflation.
Pushing oil prices higher is not the only way Biden is gleefully spreading nails onto the path of his successor, but it is one of the nastiest. Biden and his team know that spiking gasoline prices could undermine Donald Trump’s honeymoon; they would like nothing more. And they know that if the Trump White House moves to undo those sanctions, in a move to keep oil prices subdued, the president will face renewed charges that he is in thrall to Vladimir Putin
This is not the White House’s only policy move that could dull Trump’s popularity and complicate his administration’s start-up. In its waning weeks, the Biden White House been busily punishing its foes and rewarding friends, arguably becoming more active than it has been for the past four years.
Just recently, Biden’s Federal Trade Commission sued John Deere (a company that recently dropped the president’s cherished DEI initiatives) for allegedly restricting customers’ ability to get tractors serviced by non-Deere enterprises. In addition, the White House has funneled additional billions into wiping out student loans, even though the courts have ruled such actions illegal. It also published special counsel Jack Smith’s report on his investigation into Donald Trump’s supposed attempts to overturn the 2020 election. The liberal media celebrated Smith’s claim that Trump would have been convicted at trial. But what else was he going to say? Was he going to deem his own work a waste of time? The report was, by its nature, one-sided and inconclusive.
In addition, the Securities and Exchange Commission just sued Elon Musk, accusing him of not notifying that agency or shareholders of his purchases of Twitter shares in early 2022. They claim that, by hiding his accumulation of stock, Musk was able to buy the company on the cheap.
It’s an amusing claim, given that Musk spent an almost certainly excessive $44 billion to buy Twitter; no one could possibly argue that was a bargain. His lawyer described the violation as “an alleged administrative failure to file a single form” that, if proven, would “carry a nominal penalty.” Musk, of course, has grown close to President-elect Trump; most will view this lawsuit as a politically motivated parting shot.
But more consequential than any of these last-ditch efforts to scuttle Trump or build a credible legacy is the Treasury Department’s sanctioning of Russian oil producers, oilfield service providers and tankers. In a statement describing the moves, Treasury Secretary Janet Yellen said, “The United States is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine.” She added that the increased sanctions were in addition to policies adopted in 2022 to cap the prices Russia receives for its oil.
The Biden administration has gingerly tried to restrict Russia’s oil exports and income while not causing any real hike in energy costs, a laudable goal but one that has undoubtedly prolonged the conflict with Ukraine. Our NATO allies have been willing partners in this delicate two-step; their leaders, too, are politically vulnerable to rising energy costs.
Yellen, and Biden, should explain why they did not adopt these more aggressive measures earlier in the war. The reason is simple: Biden was scared of the political fall-out from higher oil prices.
After all, record-setting $5 per gallon gas in June 2022 caused one of the biggest hits to Biden’s popularity and approval ratings. That’s why Biden dumped 40 percent of the oil stored in America’s Strategic Petroleum Reserve in the run-up to the midterm elections; he was taking no chances on oil and gasoline prices rising further.
The half-measures taken by the Biden administration to limit Russian oil production since the war began have not had much impact. Russian oil production is down only 8 percent from the month before Putin invaded his neighbor. In January 2022, Russia produced about 10 million barrels per day; last September (latest available), output had dropped only to 9.7 mb/d.
However, higher prices received for their exports boosted income. The International Energy Agency reports that though “Russia’s crude oil and oil products exports fell 350,000 barrels per day last year,” revenue rose 2 percent — that’s $3.8 billion.
To win a war, it is sometimes necessary to make some sacrifices. A few months after Putin sent troops into Ukraine, Biden promised the U.S. and its allies were going to “squeeze” the aggressor country by denying Russia most-favored-nation status, cutting it off from International Monetary Fund or World Bank loans, cracking down on Moscow’s oligarchs and banning the import of vodka, diamonds and seafoods. Not a word about interrupting Russia’s oil exports, the lifeblood of its economy.
Hence, even as the West has given Ukraine hundreds of billions of dollars to prop up its economy and wage its war, Russia has been allowed to continue a high level of oil and gas exports. China has been Putin’s willing enabler, an unwelcome development on many fronts, taking advantage of the discounted price Moscow can charge.
Biden’s half-hearted prosecution of the Ukraine war, his frequent delays in providing necessary equipment and limitations placed on Kiev’s aggression has led to a stalemate. If he had blocked Russian oil exports early on, convinced Americans that higher energy costs were a small price to pay for protecting against Putin’s adventurism, and truly starved Moscow of funds, the war might already be over.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim and Company.
