President Ronald Reagan would never have allowed a policy that unilaterally disarms us against adversaries. He would be shocked at what the Left has done to embolden Russia in the Ukraine conflict.
In the last five years, the Left's war against fossil fuels, punctuated by claims of impending climate disaster as articulated by shrill Green New Deal propagandists, has indirectly played into Russia's hands. Oil production has plummeted, triggered by drops in U.S. field output, and as world economies recover, prices have steadily risen.
Russia produces about 3.65 billion barrels of crude oil per year. The West Texas Intermediate (WTI) benchmark was $53 per barrel when President Biden was inaugurated. Oil prices have since steadily increased, almost in a straight line, to end at around $99 per barrel this week, averaging $76 per barrel over the last 12 months. Since President Biden's inauguration, a $23 increase in oil price has translated to nearly $84 billion in extra cash for Russia, cash that is all profit, being marginal revenue over the cost of production. The new money has fueled President Putin's confidence and resolve in engaging in war games around Ukraine.
There's a correlation between high oil prices and bad Russian behavior. Russian aggression in the region last occurred on March 18, 2014, when President Putin reclaimed Crimea. WTI crude price closed that day at $99 per barrel, and President Obama was in office. For the next two years, prices steadily fell, forcing Russia into a recession. President Putin went into his cocoon to deal with domestic problems as the Russian economy teetered on the edge of collapse. In January 2016, WTI crude reached its lowest point in 13 years of $27 per barrel. Russia ceased to be a factor on the world stage until the Left revived Russia on a dubious 2016 election interference charge.
During the four years of the Trump administration, oil prices were not high enough for Putin to create mischief. According to the Energy Information Administration, U.S. field production of crude oil for the first 11 months of 2019 averaged about 12.23 million barrels per day - the highest in decades - when the oil-friendly Trump administration promoted energy independence. Besides, Trump's unconventional foreign policy approaches and frequent criticisms of European allies regarding NATO funding derailed Putin. America and Russia even cooperated in defeating ISIS in Syria.
No commodity is more dictated by supply and demand economics than oil, with the slightest shifts causing wild price swings. When the environmental lobby took over all levers of power in Washington, it went on an all-out assault on the fossil fuel industry. On January 27, 2021, seven days into his term, President Biden issued a moratorium on new oil and gas lease permits on federal lands and waters. Republican attorneys general from 13 states sued. A federal judge sided with them, ordering the Biden administration to hold lease sales. Not rebuffed, Biden, in June 2021, halted the Keystone XL pipeline project. The administration reluctantly held the lease sale, but another federal judge last month, to the administration's delight, canceled leases of more than 80 million acres in the Gulf of Mexico.
The results have been immediate. During the first 11 months of 2021, crude production fell dramatically, to just 11.14 million barrels per day, a significant 9% drop. The decrease is a direct result of the aggressive efforts by the Biden White House to cripple oil production and distribution. As world economies recover from the pandemic and OPEC producers and Russia refuse to increase output, a drop in U.S. energy supplies has pushed oil prices up and up.
When Russia "invaded" Ukraine this week, the U.S. and U.K, joined by Europe, Canada, Japan, and Australia, immediately announced various economic sanctions against Russia. They were best summarized by the comments of the E.U. foreign policy chief, Josep Borrell Fontelles: "It will hurt a lot."
No commodity also has a more immediate impact on pocketbooks than oil. Europe, with its historically high fuel taxes, is especially vulnerable. This week, gasoline prices in the U.K. hit 150p a liter, the equivalent of $7.71 a gallon. Oil prices directly impact food costs at a time when inflation has already risen to 7.50 %, the highest in 42 years. If the level of hurt is the new metric, high street prices will hurt commoners just as badly and are unsustainable if the war continues for an extended period.
President Putin, an astute thinker, understands well the west's psychology and its low tolerance for pain. Besides, voters can oust western leaders from office - a danger Putin doesn't face in his own country.
Bank of America predicts that WTI will hit $117 by July. Even Russia's Energy Minister, Nikolai Shulginov, said this level is too high, claiming that the optimal oil price should be between $55 and $70. Meanwhile, Putin is smiling as this will mean more staying power in the region.
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