President Joe Biden on March 8 announced a ban on US importation of Russian petroleum, liquified natural gas, and coal, on new US investments in the Russian energy sector, and on US financial investments in foreign companies making such investments. He describes this action as a “significant” one “with widespread bipartisan support that will further deprive President Putin of the economic resources he uses to continue his needless war of choice.”

Mr. Biden made several additional arguments that can be summarized as follows:

• “We recognize that not all of our Allies and partners are currently in a position to join us.”
• The multinational sanctions on the Russian central banks and the largest Russian banks have cut them off from the international financial system, thus depriving the Russian economy of the foreign reserves needed to maintain key sectors of the Russian economy.
• The US together with other members of the International Energy Agency will release 60 million barrels of crude oil from government stockpiles as a tool with which to “mitigate the pain American families feel at the pump.”
• Thousands of drilling permits on federal lands are going “unused,” “federal policies are not limiting the production of oil and gas,” even as “we make the shift to a secure clean energy future.”
• The oil and gas sector “should not use Putin’s war as an excuse for excess price increases or padding profits.”
• “In the long run, the way to avoid high gas prices is to speed up — not slow down — our transition to a clean energy future.”

Where to begin? If some significant part of the market for Russian energy is not “currently in a position to join us,” then a unilateral US ban will have virtually no effect, as fossil fuels, crude oil in particular, are fungible, that is, they can be reallocated on the world market so that the US would import less Russian energy, others would import more, and other than some increased transport costs, perhaps some discounting of prices for Russian energy, and other second-order effects, nothing fundamental will change. Accordingly, Mr. Biden’s loud “ban” on imports of Russian energy is almost wholly symbolic, which may be politically useful, but the assertion that it will “deprive President Putin of the economic resources he uses to continue his needless war of choice” is a lot of hooey.

Mr.
Biden — or his advisers — implicitly acknowledge this, in that their point
about the effectiveness of the multinational sanctions on the Russian banking
sector depends on that very multinational characteristic. Like crude oil,
financial capital is fungible; a unilateral US sanction on Russian financial
flows would not work nearly as well.

Global crude oil production is roughly 100 million barrels per day. The Biden assertion that the IEA release from stockpiles of 60 million barrels — in total, not per day — will mitigate increases in gasoline prices is preposterous, and it really is a mystery as to how the administration has maneuvered itself into a position in which it must defend so silly an assertion.

This
is only one dimension of the utter incoherence of the overall Biden energy
policy, in which long-run constraints on investment in conventional US energy
resources and infrastructure — that is what the “transition to a clean energy
future” means — are combined with supplication to OPEC+, the Venezuelans (!),
and other foreign producers to produce more in the here and now so as to shield
the administration from the adverse political implications of its ideological
stance against fossil fuels. That thousands of drilling permits on federal
lands are going “unused” is a complaint that bespeaks utter ignorance about the
investment process for fossil resources: Once a lease is granted, the process
of exploration, analysis of structural geology, price and cost forecasting,
continues ad infinitum. Unlike the common analytic methodology in the
Beltway, in which assertions are treated as reality, the private sector must
determine actual realities under conditions of massive uncertainty.

As for the purported “use [of] Putin’s war as an excuse for excess price increases or padding profits”: oh, please. Does the administration actually believe that such silliness is persuasive? If gasoline prices are artificially high as a result of “profiteering,” why then do foreign exporters of gasoline not flood the US market as a means of capturing those high prices for themselves? The larger reality is that the ideological war against fossil fuels — the “transition to a clean energy future” — means that future investment will be constrained artificially, with effects reflected in prices almost immediately.

Is it too much to ask that the journalists confront administration officials with some hard questions both obvious and difficult to reconcile with the Biden executive order? One can hope that the answer is “no,” but longtime observers of the Beltway game would be justified in deep skepticism.

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