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The U.S. was selling its oil for about $27 per barrel — not drilling for that price, energy experts said. And, due to the pandemic, it was losing money in the process.
Energy analysts said that the notion that the U.S. has been paying $105 per barrel for Russian oil probably isn’t too far off, though it’s hard to pinpoint. In general, prices were going up throughout January and February, so the U.S. was paying more for all oil imports, not just those from Russia.
The current, higher prices are largely attributable to Russia’s war in Ukraine and to a sluggish response to energy demands after the pandemic slowdown.
As Russia’s invasion of Ukraine continues to upend the energy market and drive up oil prices, some have used the crisis as an opportunity to point fingers at the Biden administration, alleging that policy decisions on domestic drilling are solely to blame for the higher price tags.
Take this March 6 Facebook post, for example:
"2 years ago we were drilling our own oil for $27 a barrel…We’re now paying $105 a barrel to Russia."
There are multiple problems with this claim. It represents a misunderstanding of how the global market operates, and the pressure it’s under today. The current price of a barrel of oil has a lot less to do with the U.S. drilling than the post suggests and a lot more to do with the impact of a global pandemic and a war between Russia and Ukraine. The numbers presented in the post are misleading, energy experts told us.
The post was flagged as part of Facebook’s efforts to combat false news and misinformation on its News Feed. (Read more about our partnership with Facebook.)
While it’s true that prices have gone up, the U.S. was selling its oil around $27, and losing money in the process — not drilling at that price.
"Saying that we could drill at $27 a barrel is preposterous, it’s not even close," Clark Williams-Derry, an energy analyst with the Institute for Energy Economics and Financial Analysis, told PolitiFact. "And the reason that oil prices were low — there's the thing called COVID-19. The global pandemic cratered global demand for oil and it was a financial bloodbath for the energy industry."
Energy analysts said that the $105 per barrel from Russia cited in the post probably isn’t too far off, though it’s hard to pinpoint. Prices in general were going up throughout January and February, though, so the U.S. was paying more for all oil imports, not just those from Russia.
Russian crude oil accounted for about 3% of overall U.S. crude oil imports in 2021.
Oil prices are set on a global market. Any supply disruption, anywhere, affects prices in the U.S.
When the pandemic hit, global demand for gasoline dropped and cratered the price of oil.
Since that initial economic wallop, demand has risen steadily as business activity has increased. Yet supply hasn’t been able to recover as quickly, due to delays in restoring drilling capacity, higher transportation costs, a tight labor market and sluggish production increases. As a result, prices of crude oil have risen consistently in recent months.
The war in Ukraine, meanwhile, has added more global volatility and impacted the supply of oil from Russia, the second largest producer of crude.
American oil companies also watch the market closely to determine whether it's worthwhile to extract more oil, what they call "putting money in the ground."
And right now, they aren’t doing that. For one, companies have to build new rigs, drill new wells, install new gear and may not see any oil or profit for several months. Add in a volatile market, and they tend to resist making big investments. While moves to expand renewable energy sources by the Biden administration have also made some companies less eager to invest, energy experts say many firms are currently focused more on their investors than on boosting supplies.
"There is no evidence that Biden has increased oil prices. Instead, what is clear is that the oil industry is making a lot of money and choosing not to invest that money in new production. They don't want to," Williams-Derry said. "And the Biden administration doesn't have many easy legal tools at its disposal to nationalize the oil industry and force companies to produce more."
While the Facebook post accurately shows how expensive oil is right now, it ignores several factors that are impacting the energy industry, analysts said, and can’t be attributed to President Joe Biden, or any one domestic policy.
Global turmoil and uncertainty impact prices, Williams-Derry said, "and that has everything to do with COVID-19 and war and nothing to do with the actions of any one politician, other than, right now, Vladimir Putin."
"Even if we produced two times what we consumed, if there is a war that raises oil prices in the E.U., the price in the U.S. will rise," Christopher Knittel, a professor of applied economics at the MIT Sloan School of Management, wrote on Twitter.
Increasing domestic production can lower prices to an extent, experts say, but it’s incredibly hard to be "oil independent." Why? Because when the price of oil increases somewhere in the world, it increases here. Ramping up domestic production can lower the global price, but minimally, because that production increase gets spread around the world.
Some Republicans and conservative commentators have claimed that Biden halted leasing for oil and gas and is holding back production.
While Biden ordered a temporary pause on new federal leases in the first few months of his administration pending a review of federal permitting and leasing practices, a Louisiana federal judge ruled against it in June. Oil production remained unphased in the U.S., even when the order was in effect.
The U.S. Energy Information Administration also reported earlier this year that domestic crude oil production is expected to top 12.4 million barrels per day by 2023, surpassing pre-pandemic levels.
Meanwhile, Biden hasn’t stopped any production that occurs on private lands, nor has he shut down existing leases on federal lands. The Biden administration issued more drilling permits on public lands and water in its first year than did the Trump administration in its first year, according to federal data analyzed by the Center for Biological Diversity.
A Facebook post claims that, two years ago, the U.S. was drilling its own oil for $27 a barrel and thanks to Biden is now paying Russia $105 a barrel.
The U.S. was not drilling it’s own oil for $27 — it was selling at these types of low prices at a loss due to effects from the pandemic. The U.S. has purchased oil from Russia for decades and the $105 per barrel from Russia cited in the post is probable, but prices in general were going up and the U.S. was paying more for all oil imports, not just those from Russia.
Biden and his policies are not playing a meaningful role in the rising prices, experts said. The surge is due to multiple things, including rising demand amid sluggish production increases from pandemic lows, as well as the war in Ukraine.
We rate this post False.
Facebook post, March 6, 2022
Twitter, Christopher Knittel thread, March 7, 2022
PolitiFact, Why are oil prices so high? And what can be done about it?, Nov. 4, 2021
PolitiFact, No, the U.S. did not end its domestic oil production. But it does import some of its oil from Russia, Feb. 28, 2022
PolitiFact, Oil production in Biden’s first year on par with Trump, March 9, 2022
PolitiFact, Ask PolitiFact: Why are gas prices going up?, March 9, 2022
The Center for Biological Diversity, New Data: Biden’s First Year Drilling Permitting Stomps Trump’s By 34%, Jan. 21, 2022
Energy Information Administration, EIA expects annual U.S. crude oil production to surpass pre-pandemic levels in 2023, Jan. 11, 2022
The Washington Post, Biden outpaces Trump in issuing drilling permits on public lands, Jan. 27, 2022
NPR, How a wrinkle in the oil futures market has clogged America's oil pump, March 1, 2022
Vox, America can’t solve its gas price problem (or its Russia problem) with drilling, March 5, 2022
Zoom interview, Clark Williams-Derry, energy analyst with the Institute for Energy Economics and Financial Analysis, March 9, 2022
Email interview, Hugh Daigle, Associate Professor, Department of Petroleum and Geosystems Engineering, University of Texas at Austin, March 10, 2022
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