Sorry Pundits, George W. Bush Made the Saudis. Putin Too
“Under Biden, America has surrendered the oil economy. The Saudi king is now the world’s oil king again, and we are all worse for it.” Those are the words of Daniel Turner, founder and executive director of Power the Future, an organization that “advocates for American energy jobs.”
Up front, oil is an essential commodity. Without it, or some kind of oil equivalent that at least for now we’re unaware of, life would be defined by unrelenting misery. The simple truth is that oil has powered the machines that multiplied human productivity in staggering ways, not to mention that oil has figuratively shrunk planet Earth in a beautiful way such that the world’s eight billion inhabitants increasingly work together on the way to similarly staggering leaps in productivity.
At the same time, Turner’s conclusions are upside down. Indeed, if he disdains Joe Biden for having “surrendered the oil economy,” then he must dislike Bill Clinton too. During his presidency the price of a barrel routinely floated with $10/barrel such that there was vanishingly little oil exploration in the U.S. Oil was so cheap that it was non-economic to extract. After which, Turner must surely despise Ronald Reagan. So cheap was oil during Reagan’s presidency that per Gregory Zuckerman, author of The Frackers, “The 1980s were among the worst periods in the history of the domestic energy industry.” Well, yes. Oil was cheaper in the Reagan ‘80s than it was during the Clinton ‘90s.
In both decades oil was nominally very cheap because the dollar in which oil is priced was very strong. A strong dollar was policy under both Reagan and Clinton, and inexpensive oil was a logical result.
We imported that vast majority of our oil then, and no sane person cared. Gasoline fetched less than a dollar per gallon in those decades, and this was even true in high-tax states like California.
It’s important to think about with Turner’s thesis top of mind. Turner blames Biden for the revival of the Saudis, but his history is wanting. No fan of Biden myself, what Turner and other conservatives argue just isn’t true.
To see why, consider an August 2017 interview of George W. Bush conducted by American Way magazine. Talking about Vladimir Putin, Bush recalled that “Putin changed when I was president. Early on, Russia was broke and he wanted help, and I thought he was going to promote a civil society that enabled people to have a big say in their government. When the price of oil went up, Putin began to change.” Well, yes, once again.
During his presidency, Bush reversed the Reagan/Clinton policy of a mostly sound dollar in favor of currency weakness. With the dollar in decline, the price of oil soared. It quadrupled during Bush’s presidency, and at one point sextupled. With oil at various times over $100/barrel throughout Bush’s presidency, and on into Barack Obama’s, individuals like Vladimir Putin found their footing. So did the Saudis. So did “American oil.”
Once again, it’s not economic to extract energy stateside when the dollar that every American earns is strong, and oil is nominally cheap. It’s only economic to extract oil when the dollar every American earns is weak, and oil is nominally expensive. Oil soared and so did U.S. extraction during a Nixon/Carter 1970s defined by a weak dollar, and much the same has taken place in the 21st century. In other words, the value of the dollar that every American earns must be shrunken so that it’s economic to explore stateside, and this includes exploration employing the fracking technique. As Harold Hamm, the Godfather of fracking once put it, “Rates of return get pretty minimal below fifty dollars.”
Once again, oil is essential. It’s the ultimate “alternative fuel.” What’s not essential is that the oil must be “American.” When “American oil” is relevant it’s a sign of dollar weakness, weakness that harms every American worker, and weakness that lifts global despots in addition to U.S. energy. Saudi Arabia and Putin? Bush did that.
