On March 29, Dr. Oliver McPherson-Smith, director of energy, trade and environmental policy at the American Consumer Institute, testified before the House Oversight Committee’s Subcommittee on Economic Growth, Energy Policy and Regulatory Affairs. McPherson-Smith was invited to testify as a witness to a hearing entitled “Fueling Unaffordability: How the Biden Administration’s Policies Catalyzed Global Energy Scarcity and Compounded Inflation.”

Below is a transcript of his opening statement:

Thank you, Chairman Fallon, Ranking Member Bush, and other members of the subcommittee for inviting me here today.

The nation’s continued economic recovery from the Coronavirus pandemic has provided a welcome return to family and commercial life for millions of Americans. However, this recovery has neither been seamless nor balanced. The crude oil market provides an indicative case study. U.S. crude oil production peaked shortly before the pandemic in November 2019 at a monthly average of around 13 million barrels per day. Now, while production has gradually recovered from its pandemic low of around 9.7 million barrels per day in May 2020, it nonetheless has remained below the pre-pandemic peak.

However, the nation’s lagging oil production only tells half the story. Consumers and business typically purchase refined petroleum products, not crude oil. America’s capacity to refine its own petroleum products has undergone an even starker decline. This lower supply of crude oil and diminished capacity to refine it unfortunately coincided with an increase in demand attributable to the repeal of pandemic restrictions and the resumption of commercial, leisure, and industrial transportation. This mismatch between supply and demand is evident in the persistently higher gasoline prices of the past two years.

Oil production is determined by a variety of technical, economic, and political factors at the local, national, and international levels. Nonetheless, federal policy has a tangible effect on shaping production. Since January 2021, the federal executive branch of government has sought to inhibit and disincentivize the domestic production and refining of fossil fuels. These efforts include and are not limited to: the cancellation of the Keystone XL Pipeline, an ultimately unsuccessful moratorium on oil and gas leases on public land, the outlawing of oil and gas development within 2.8 million acres of the National Petroleum Reserve in Alaska, and the continued absence of an offshore oil and gas leasing schedule following the expiry of the 2017 to 2022 schedule.

Additionally, a range of proposed or impending policies at the federal level serve to disincentivize investment in future productive capacity within much of the American energy industry. From the Securities and Exchange Commission’s proposed environmental, social, and governance, or ESG, disclosure to the Inflation Reduction Act’s impending methane tax on oil and gas producers, these policies reduce investment in the short term and risk raising consumer prices in the long term.

Had the Biden administration simply mirrored the Trump administration’s oil production growth rate, daily oil production would have reached almost 15 million barrels by December 2022. This represents a hypothetical shortfall of almost three million barrels each day by December 2022, a significantly larger amount than the average OPEC member’s production of 2.23 million barrels per day in that same month. In aggregate, this hypothetical scenario would have facilitated the additional production of more than 850 million barrels of oil since January 2021. This sits in stark contrast to the Biden administration’s recent sale of 180 million barrels from the SPR. The absence of this oil left the American economy and American families vulnerable to international oil market fluctuations, such as that associated with Russia’s renewed and unjustified invasion of Ukraine.

The academic literature on the pass-through of energy prices into overall inflation is varied and vast. Energy is used by virtually every business in the United States. Consequently, elevated energy costs appear not only as individual components within the measurements of inflation, but also within consumer prices of goods and services via higher business costs of lighting, heating, and transportation.

Finally, I would like to draw your attention to a potential remedy to the enduring consumer challenge of energy inflation, which is a federal “all of the above” energy policy. Facilitating greater energy production from all sources, whether they be fossil fuel, renewable, nuclear, or otherwise, enables consumer and community choice, competition among companies, competition among technologies, innovation, and lower prices.

I thank you again for the opportunity to testify today and look forward to your questions.

The full testimony is available here on the Committee on Oversight and Accountability’s website. Email [email protected] to set up a conversation with Oliver McPherson-Smith, director of energy, trade, and environmental policy at the American Consumer Institute.