Publications: Notes at the Margin

Benign Neglect and the OPEC Carbon Fee (June 21, 2021)

 

Joe Biden is no Donald Trump. Trump attacked OPEC for high prices in April 2018.[1] Prices began to fall. When prices rose again in July, President Trump tweeted that OPEC was manipulating them and had “better stop it.”[2] He tweeted similarly whenever he thought gasoline prices were too high.

 

President Biden does not tweet. President Biden has also said nothing about crude oil prices. One finds no items when one googles “Biden calls on OPEC.” Almost three thousand items come back when one searches for “Trump calls on OPEC.” Crude prices also fell in 2019 twice following Trump tweets.

 

President Biden will likely say little about crude prices. Indeed, he may exercise “benign neglect” toward oil markets. Increasing oil prices serve the purpose of the president and those supporting a rapid end to fossil fuel use. The faster crude and gasoline prices rise, the faster the transition from fossil fuels to renewables, electric vehicles, and the like.

 

Benign neglect of the oil market, then, appears to be the administration’s optimal course, given the need to raise fossil fuel prices to curtail their use and the failure of most past presidents to influence oil exporters. The Biden administration may also want to ignore oil because producers are doing the world a favor. Today, by restraining production, they in effect impose a carbon tax of between $50 and $75 per ton. Under these circumstances, the White House has no reason to complain.

 

 

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