Friday night, Chris Hayes explained this underreported story that illustrates just how competent and good for the economy President Biden and his administration are.
Hayes began by reminding viewers how powerfully damaging to the U.S. economy and our politics OPEC has been in the past. In 1979, for example, OPEC almost tripled its prices after Iranian oil production dropped in the wake of its revolution. “The fallout knocked Jimmy Carter right out of the White House,” Hayes said, and “American presidents have been bedeviled by OPEC ever since.”
That is until President Biden figured out a genius workaround. While Donald Trump was being charged with 88 felonies (recently convicted of 34 of them) and overrun with grievances and dreams of authoritarian retribution, Biden was expertly managing the U.S. oil supply.
The Economist explains how he did it:
In 2022, when he released 180m barrels of crude—or one-third of America’s stockpile—he sold at an average of $95 a barrel. In July last year, when the West Texas Intermediate (wti) benchmark was at $67 a barrel, he began to refill the reserve. The president has replaced about one-fifth of what he sold, posting a profit of $582m, and has managed to time the market to perfection.
Treasury officials estimate that Mr Biden’s early sales knocked about $0.40 from the price of a gallon of petrol.
Funny how “top-class businessman” and convicted felon Donald Trump never did anything like that!
The seeds of Biden’s plan seem to go back to Russia’s invasion of Ukraine and the emergence from the pandemic. Prices were high, supply was low and Biden and our European allies wanted to prevent Russia from using its “oil machine” to finance the war. After he was unable to strike a deal with Saudi Arabia, Biden came up with his plan to use the Strategic Petroleum Reserve to hedge down oil prices.
As The Economist noted above, Biden’s plan worked. But it did more than just reduce prices, it also gave Biden a lot of control over the market. Hayes brought on energy expert Dan Dicker for more:
HAYES: As he is increasing the supply, [Biden’s] like, “Oh, you’re gonna keep supply, you want to keep prices high? Well, guess what? We’re gonna put a bunch of oil and the market and drive the price down. And we are going to sell it into the market.”
DICKER: “We’re going to sell it into the market and more than that, we’re going to look all the other traders in the eye and we’re gonna say to them, ‘If you want my oil, the guy standing on the other end of this trade is the U.S. Treasury, the government of the United States.’” And that scared the bejesus out of every trader and the traders started to drop their own positions in oil.
They were helping drive the price of oil down while the government was selling it because nobody wants to be long oil when the U.S. government is telling the world, telling all the traders “we want to see prices lowered, we’re going to do what we need to do to make those prices go lower.”
They’re coming to the market and saying two things: We want this price to go down and we’re sitting on these barrels and we are going to sell until it does.
Dicker went on to say that Biden created “such a fear from traders of what the U.S. will next” that all he has to do is “threaten one way or the other to make markets move.”
This was a huge innovation, Hayes added, and “basically put a guard rail on oil prices” on both sides of the market. At the same time, it worked to “wildly diminish” the oil cartels.
Dicker agreed and pointed out that the result was to protect oil companies’ profits and also create a lane for green energy. The green energy stocks have been “doing nothing but shooting up, basically because Biden has created a stable oil market for the first time in our history, at some of the most crazy moments in the oil market,” he said. “It’s a tremendous success.”
All that is why Dicker said he calls Biden “the greatest oil trader ever.”
