Will Joe Biden’s gamble on big oil pay off in leveling gas prices?

theguardian.com:

Can Joe Biden push big oil to drill for more oil, lower gas prices and speed up the switch to electric vehicles? That’s the ambitious aim of a plan the Biden administration is implementing as drivers continue to wrestle with soaring gas prices. Unusually, the plan has support not just from the oil industry but some economists and environmentalists.

As 2022’s gas prices set off inflation and oil companies celebrated record profits, Biden practically begged industry executives to take a basic step that could have brought down costs: pump more oil to increase supply. His pleas fell on deaf ears.

While critics charge the industry with acting out of greed, oil companies see real risk in pumping more oil. Since 2008, oil oversupplies have repeatedly caused prices to collapse, leaving companies with dwindling profits.

“Exxon is not going to do a national service by producing a lot more oil and risk a massive oversupply, because the executives know that if they get that wrong, then their shareholders will fire them,” said commodity analyst Alex Turnbull.

In late July, the Biden administration changed tack, moving forward with a risky if innovative plan designed to protect consumers from high gas prices, reduce oil companies’ risk and push the nation toward electric vehicles. The proposal would work by wielding the Strategic Petroleum Reserve, the federal government’s store of oil, in a way that sets a partial floor and ceiling on oil prices.

In short, when demand is weak and prices fall so low that pumping more oil becomes unprofitable, the government would buy at a price that’s high enough to buoy industry’s profits and store barrels in the reserve. When demand is strong and prices climb, the government can intervene by flooding the