Mandy Gunasekara joins the podcast to discuss this month’s policy focus: The State Of U.S. Energy—What’s Driving Expensive Gas. With skyrocketing gas prices and the resulting increasing financial strain, we discuss what has gone wrong. Are international forces to blame? Or have the Biden administration policies been the driving force?
Mandy Gunasekara is a senior policy analyst at Independent Women’s Forum. She is a veteran Republican climate and energy strategist, communicator, and environmental attorney who has a well-earned reputation for delivering results. In 2020, she became a Principal at Section VII Strategies, a boutique energy, environmental, and tax policy consulting firm. Previously, Mandy served as Chief of Staff of the U.S. Environmental Protection Agency (EPA). She is a frequent guest on television and a prolific print media opinion commentator.
And welcome to She Thinks, a podcast where you’re allowed to think for yourself. I’m your host, Beverly Hallberg, and on today’s episode, we delve into this month’s policy focus: The State Of U.S. Energy—What’s Driving Expensive Gas. We’ll discuss the root causes of these skyrocketing prices and who is to blame. Are international forces at fault, or have Biden administration policies been the driving force?
Well, here to break it all down is Mandy Gunasekara. Mandy Gunasekara is a senior policy analyst at Independent Women’s Forum. She is a veteran Republican climate and energy strategist, communicator, and environmental attorney. In 2020, she became a principal at Section VII Strategies, a boutique energy, environmental, and tax policy consulting firm. Previously, she served as Chief of Staff of the EPA, and she is a frequent guest on television and a prolific print media opinion commentator. And it is a pleasure to have her on She Thinks today. Mandy, thank you for being here.
Yeah, thanks for having me.
And I think this is such an important policy focus because we are hearing so many different stories, reasons, different narratives as to why gas prices are what they are. Of course, at this time towards the end of summer, we’re seeing them go down a little bit. So I think people really want to know what’s going on. But I love this policy focus because it gives a really good overview.
And I want to start from the beginning, which is the history of the gas industry and how the invention of the gas power engine really changed American life forever. So I want to take us back decades past and start there. So can you just give us the background of the history?
Yeah, certainly. Well, gas-powered cars really came about early 1900s, and the reason that it took off from a technological perspective are the same reasons why it continues to be the leading vehicle technology today. And that has to do with the fact that gas-powered engines provide a lot of energy for a relatively small amount, you can refuel it in a matter of seconds, and when people are looking to enhance their personal mobility, gas-powered vehicles and the technological development really took off.
And with that, you had the growth of the industry that provides the fuel, so that people can drive and go to where they’re going. And so you really had a massive growth of this industry that’s split up into three main categories: you have the producers, the people who extract the energy and cultivate it; then you have their transportation of that; and then the delivery to market, which is where most consumers interact with the industry.
But by the time you receive gas in your vehicle, you have to know that that molecule has gone through numerous rounds of movement and technological improvement so that it’s available in a reliable fashion and affordable fashion. And it really goes back to the beginnings of this technology, that at the time it blew up on the market so to speak, it was referred to as bottled lightning because it really was a breakthrough for people to use the power of energy that was accessible, that was affordable, but to really improve their lives and use it to go about their day. And we’ve enjoyed that up until…. We still enjoy it today, even though there’s been some massive changes. But this technology was a major, major breakthrough.
And one aspect of the delivery and transportation of oil has been pipelines. And we’ve heard about the Keystone Pipeline, and that’s something that was one of the first things that Joe Biden did when he came into office, was stop the movement of the Keystone pipeline and the development of it. And one of the things I found interesting in this policy focus: I didn’t realize there are 2.7 million miles of pipelines that the U.S. uses to deliver energy. However, I think when people hear “pipeline,” they think of oh, environmental concern. That’s what climate activists say. What is the truth?
Yeah, pipelines are the safest and most efficient way to move molecules of energy around the country. And that industry actually does it so well that, when there is a break in the system, it makes headlines. So there’s the 2.7 million miles of pipelines that you mentioned. There’s an entire industry of engineers and experts that go out there every day to not only maintain this modern pipeline system, but continue to grow it. And the fact that the pipelines, when they are allowed to grow, when permitting and activists and regulations don’t get in the way, it actually lends itself to better environmental outcomes. So the growth of this safe, efficient manner to transport liquid fuel around the country is not only beneficial to the economy and the consumer, but also to the environment.
And another side of this, in addition to the pipelines, is we’ve really had a renaissance within the industry because there’s been what’s called hydraulic fracturing, which is referred to as fracking, horizontal drilling. There have been new ways to open up access to massive amounts of oil and gas resources. When did this renaissance begin, and what have been the impacts, the benefits of it?
Yeah, so it really took off in the United States, 2009 and 2010. And hydraulic fracturing has been around for a long time, but the breakthrough was horizontal drilling, whereby you could drill on one pad, and you could reach a lot of different areas. And then you use this fracking technology that created access to energy resources, and what’s called tight oil formations.
But just think about it, resources that were trapped in rocks. And the development of this technology and breakthroughs that really came together in 2009, 2010, led to a proliferation of U.S. oil and gas in ways that were not predicted; it was unforeseen. And so it started this energy renaissance, which shifted not only the dynamic here in the United States, but across the entire world. For once, the United States was in a position to where we could build up energy independence, enhance our relative energy insecurity, and insulate Americans and the entire system and the economy that’s literally built on top of it from unstable forces that are inherent in the international markets.
And something to note, Beverly, that in 2010, when this breakthrough technology occurred, you had a lot of consternation coming from the then-Obama administration. They too bought into this idea of restricting certain types of technologies. They bought into an activist mentality aimed at limiting the growth of the fossil fuel industry. And they did their best to try and inhibit the growth of this budding technology.
But the good news is there’s a lot of these resources on private lands. And so the development and cultivation of our abundant oil and gas resources on private lands, coupled with this breakthrough technology, it not only unleashed an energy renaissance, but it really set right the economy that was reeling. Remember in 2009, you had the recession.
It really set us on a path to economic growth. And from an environmental perspective, the reason we lead the world right now in overall emissions reductions is because of the proliferation of hydraulic fracturing that unleashed oil and gas that we use very efficiently in our systems today.
And that’s always been something I’ve thought about in terms of environmental concerns. So it is true that fossil fuels do add elements to the environment, and we want to be as clean as possible and as safe as possible. And looking into alternative energy sources is a good thing, it’s part of innovation.
But when we are energy independent, we then are not having to transport oil from any other country. And so I’ve never understood the mentality of shutting stuff down here but needing to go to Iran, or go to Saudi Arabia, or go to Russia or Venezuela, wherever we go. I think of these … what’s OPEC, the Organization of Petroleum Exporting Countries.
Why is it that the environmentalists aren’t concerned about us transporting oil here when those countries aren’t as safe when it comes to environmental concerns, and also there’s the energy to get it here?
Well, it exposes a flaw in their desire to shut down the U.S. oil and gas industry. If you truly care about improving the environmental footprint of the energy resources which, by the way, make up 90% of our total U.S. energy usage. It’s mostly on the liquid fuel front when people are filling up their gas-powered vehicles. But 90% of our energy comes from these resources.
And so environmentalists trying to shut down the development of these resources that are subject to the gold standard of environmental and health and safety standards here in the United States. When they shut that down, they send that demand overseas to these countries. Like you rightfully point on out, not only do they take a more casual approach to environmental standards, but they also have shown a willingness to manipulate the price, to cause harm, and to manipulate it for geopolitical purposes, which we’ve seen most recently with the Russia invasion of Ukraine and the fact that Europe is literally reeling from the fact that they’ve been buying into these environmentalist arguments.
They have been shuttering their own domestic ability to cultivate their energy resources. And they’re extremely reliant on Vladimir Putin, who is threatening to shut down access to natural gas right before winter, which is extremely concerning and potentially putting lives and livelihoods at risk for no reason. People have these energy resources.
So the environmentalist argument to shut it down here, it really is flawed. Really, there’s two reasons. They are all in on the renewables-only front. And that has to do with political affiliations, and donor affiliations, and investments that fund the Democrat party. It truly is tied to that.
And I have nothing against renewable energy sources, but all energy sources have tradeoffs. Even the renewable or the purported green energy sources do, and the problem with them is they don’t provide the power that we need to keep up with current demand today, much less demand that’s projected to grow in the future. And when it comes to driving vehicles, there’s not yet a vehicle that runs on solar panels or windmills.
So we’re going to have to continue to cultivate our oil and gas resources so that Americans can live this great life we’ve all been blessed with. And the good news is, the desire to limit the environmental footprint, alongside good old fashioned American ingenuity, has allowed us to do this while reducing the inevitable environmental impact that really all energy sources have. They’re just not always focused on in the same manner that oil and gas is.
And there has been that big push by the Biden administration and other progressives for people to go out there and buy electric cars. I think electric cars can be great; a lot of people find benefit of it. But beyond even the cost of an electric vehicle, is our country even set up for people in rural areas, for farmers with farming equipment, to be able to use electric vehicles?
And also, electric vehicles come from electricity, which is fueled by fossil fuel. So there is still that connection to fossil fuel. What do you make of the whole narrative about pushing electric vehicles on the country?
I just think government mandates, it’s never going to turn out well. You need the markets to react and respond and adapt to market needs. And it would work out much better if the government would step away. Yes, some people are turning to electric vehicles, and it is a great technology.
But like you said, they require electricity to run. 60% of our electricity in this country comes from fossil fuel resources. A large portion of that is natural gas. A small portion of that is oil. And then the rest of it is from coal on the fossil fuel front. But the electric vehicle infrastructure is nowhere near what it needs to be for Americans to adopt this wholesale.
Overall, it’s about 3% nationwide of Americans that actually drive electric vehicles. And there’s already electricity usage issues. I go back to a point I said earlier: we’re already having trouble meeting energy demand today in certain areas, especially in areas where they’ve bought in too fast and too early on this renewable energy front without dealing with the inherent intermittency, meaning they only work when the wind blows and the sun shines, without building out for that or the development of other supportive technologies.
So not only is our energy grid vulnerable today with current demand, if people suddenly start plugging in their cars, that’s going to put a lot of strain on a system that is not equipped to handle demand today, much less projected growth. And with this push to get away from fossil energy resources, which is the densest, you get the best energy bang for your relative buck, that only exacerbates those vulnerabilities that exist today.
And the last thing I’ll say on the electric vehicle front is the minerals that go into making batteries right now — these are things like cobalt, lithium, rare earth minerals. We have those here in this country. But that’s been another area where the Biden administration has been putting up roadblocks for mines to be developed and cultivated to provide those mineral resources to the battery manufacturers. And so instead, the battery manufacturers have to purchase those minerals from overseas entities.
And right now, China owns the critical mineral market. And not only is that potentially replacing reliance on OPEC plus a oil and gas cartel, but it’s pushing us to rely on the Chinese Communist party for critical minerals that will be increasingly needed with the growth of electric vehicle batteries and the electrification writ large.
And not only is that concerning from a geopolitical perspective, but it’s also concerning from an environmental perspective. They don’t have the same standards that we do. They have major pollution problems because they use coal fire power plants that don’t use technology our coal fire power producers have been using for decades. And they engage in serious humanitarian issues, including child labor practices at the mines in the Democratic Republic of the Congo, where the majority of the cobalt resources of the world are located, to extract that material. So there’s a whole host of issues, if you look a little bit bigger, that go into the development and cultivation of electric vehicle batteries that folks really need to be aware of.
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And Mandy, I want to get to the big question that we started out with today, which is why are gas prices so high? So we’ve gone into the background of how it started, how it works, what’s going on. The Biden administration’s continue to say that Russia is one of the reasons why we have gas prices as high as they are. Is that the case? What should we all make of this?
Yeah, so the Russia situation certainly impacts the price consumers pay at the pump, but that’s not the reason we are paying exorbitantly high gas prices. Even right now, when there has been a slight reprieve. So from day one in this administration, there has been an all-out assault on our U.S. oil and gas industry, and this goes back to a campaign promise President Biden made when he was running for the office, and he said that he was going to end all fossil fuels.
Now the way they go about doing that is by using the power of the federal government to make it more expensive and less lucrative to actually go about extracting these resources and delivering it to market. And so they create regulatory barriers, they make it more expensive, they increase liability. And then they also send these signals to the market that, if you’re building a refiner, we’re not going to welcome those sorts of technologies in the future.
So if you’re a capital investor looking to invest the tens of millions of dollars it is to build this out, you want to make sure you have a return on that eventually in the future. This administration is sending signals to the market that that’s not a good investment today because they’re going to be working to shut those down in the future.
So from day one in the administration, they initiated this all-out assault. There’s a great analysis out there from some friends of mine over at the American Energy Alliance that did an assessment, where they found the administration had taken over 100 actions…
Aimed at restricting the development of oil and gas. The Keystone XL pipeline made headlines. That was a pretty well-known action day one of this administration. But also they’ve imposed all sorts of moratoriums and limited access to resources on federal lands, both onshore and offshore. They’ve shut down all sorts of pipelines. They’ve imposed massive amounts of red tape that, again, increased costs and liability.
And before — it’s important for folks to understand. The day before Russia invaded Ukraine, gas prices had already increased by about 50% from the day President Biden entered the oval office. So these policies were already at work. And the other thing that it does is it exposes the American market and American consumers to, like I said earlier, the inherent instability that has always been a part of the international markets.
It was in 2010 that we finally were able to insulate ourself. But if the administration doesn’t allow for the U.S. oil and gas industry to grow and prosper, then not only does that make the price go up here because of domestic reasons, it makes us vulnerable to these international actions, and that’s why you saw the price go up even more, where, in the past, we had been insulated from those sorts of instabilities.
So despite what the president says, and some of his top officials, they’ve literally tried to blame everyone except for themselves. And it truly is their policies that have not only driven up the price of gas consumers pay at the pump, but have made us vulnerable to what’s going on internationally that just makes it that much worse.
And for clarification: last day, President Trump, his presidency, were we energy independent at that time?
Yeah, so we had finally become, after years, decades really, of being energy reliant, we had become net exporters of both oil and natural gas. Which was great for the economy, great for American consumers. We enjoyed low-cost gas. But it was also great for our allies abroad. We could share our energy independence and security with our friends in these international areas, in Europe, in certain Asian countries so they would not have been vulnerable to the threats of people like Vladimir Putin and others. So our energy independence and our ability to export that to our allies abroad really made the world a safer and more stable place.
And how much, what percent of our consumption is now reliant on getting oil from Saudi Arabia, for example?
You know, that’s a good question. I don’t know the exact number off the top of my head, but it’s more than should be necessary. And it’s not only Saudi Arabia. It’s also, President Biden recently, instead of going to Texas and trying to work with U.S. producers, he went to places like Venezuela. And he’s been lifting sanctions against oil oligarchs affiliated with the Madero Regime that are tied to all manner of humanitarian crises.
He’s been lifting long-standing oil sanctions against them to try and import oil from Venezuela. And there’s similar actions going on in Saudi Arabia. We still receive some of our energy resources from Russia. And instead of having to deal with those folks, he could just focus on the industry that we have here in the United States and the people who are so ready to do what they do best, which is safely, reliable and efficiently deliver the energy resources we all need.
And I want to clear up a narrative that we have heard from President Biden. He’s talked a lot about the evil oil companies, and how they’re making such a high profit these days. So he’s correlating increase in cost of gas means that they have more take-home. That they are just making all this money on your pain. What is the reality of oil companies, and what this has meant for them?
I even found it interesting in the policy focus you wrote that we should even look at gas stations. When you go to an Exxon or Mobile, these are independently-owned businesses. It’s not a large corporation. It’s not Exxon that owns that business. It’s more that they get their oil from Exxon, but it’s an independent business. Just want to kind of clear up what you think the narrative should be about oil companies and independent gas stations.
Hey, sorry. There was a, there’s a little bit a…
There was a glitch.
A glitch, okay.
Did you hear the question?
I did. I heard the question. I can answer that.
Okay, go ahead.
Yeah, so one of the most concerning actions I’ve seen from this administration was when he directed the ire of consumers for paying high gas prices at gas station owners themselves. It’s important to know of the gas station owners, the majority of them are owned by families or single-store owners. Meaning these are small business owners, that they themselves are trying to continue their business post-COVID economy, and then in the face of the inflationary impacts of broader economic issues.
And President Biden, because he didn’t want to look inward and assess the policy trajectory that they’ve taken that’s caused high gas prices, directed the ire of the American people on gas station owners. And you pointed out correctly, Beverly, that gas station owners, by the time they receive oil and gas — you’ll see it in these large tankers that pull up to gas stations and fill up tanks that are located underneath the pumps that we use to fill up our cars — they’ve already…. So much of what consumers pay, that price has already been set by forces well beyond their control.
And yes, they add a small profit. This is called the marketing price. But that small profit helps them pay their employees, cover credit card swipe fees, and basically keep the lights on for their business. Oil and gas station owners as a business, as a whole, is actually one of the lowest margin, returns the lowest profit margins. Goodness, get my words correct. The lowest profit margins across all industries.
They have an average profit margin of about one to 2%, which is really low. So directing the ire towards them, it was totally misplaced. And then the larger oil and gas companies, yes, they have a boom-bust cycle. A lot of them did have record profits this year. But a lot of that’s because they were totally gutted during COVID when everything shut down. So the fact that they’re on the up and up and recovering is a good thing. Because 90% of our energy, I’ll say it again, 90% of our energy comes from these resources. And it’s not only the energy we put in our cars. It literally fuels our entire economy, which is so important to our way of life and the wellbeing for so many people.
And so, final question for you on all of this. We have seen gas prices go down a little bit. We have seen the Biden administration take a victory lap and celebrate that, which I actually think is ill-advised because it’s still very high, so it’s not time to take a victory lap.
What has been the cause of it going down? And what can we expect moving, especially into winter, when heating is needed? Not just gas in the cars, but heat in our homes.
Yeah, so gasoline prices have dipped a little bit, but that’s because demand has gone down. People are cutting back. And it has to do with the fact the administration won’t admit it, but we are in a recessionary economy. And folks truly are having to make decisions between putting $10 dollars of gasoline into their car, or $10 to go get groceries.
I’m at a conference right now, and I was actually with a friend of mine who works at a food pantry out in Kentucky. And he said that recently the number of families coming in for support from the food pantry has doubled. They used to service about 70 families, and they’ve had about 140 families come through now. So the effects of this economy are, it’s causing financial pain for all sorts of Americans. And they’re having to choose between gas in their vehicles or food on the table. And they typically choose the latter. And because of that drop in demand, prices have gone down. On top of the fact that we are in the midst of the largest release from the strategic petroleum reserve in its history.
President Biden announced this in April, but this is extremely problematic. One, it’s short lived. It ends in October. And the oil resources from the strategic petroleum reserve are really there for unforeseen circumstances like hurricanes that disrupt the ability of areas in need to receive energy. The Biden administration has used the strategic petroleum reserve to try and address political crises they’ve created because of their bad policies that have made prices skyrocket. So not only is it a misuse of a very important strategic reserve, this is going to end in October, and the prices are going to go back up.
And then on the heating oil side, I am truly concerned about this winter. Not only on the lost resiliency to our electricity grid that is plaguing so many communities around the country, but we’re one cold snap that’s going to happen, because cold snaps occur in the winter all the time, from people having to do without heat when they need it most.
And this is especially concerning for our older, low-income, fixed-income and older American citizens that are vulnerable to extreme weather. And if they don’t have access to heating oil or to electricity writ large, it’s really going to put them in dire straits. And then there’s going to be the issue of maybe they can get it, but the prices are going to be exorbitantly expensive.
Yeah. There’s so much to consider with it all, which is why I think this month’s policy focus was so important, is so important. People should read it. It’s called The State Of U.S. Energy—What’s Driving Expensive Gas.
You can get that iwf.org. And the author with us today, we thank her so much. Mandy Gunasekara, we appreciate your information and also this timely report.
Yeah. Thanks for having me, Beverly. Great to be with you.
And thank you all for joining us.
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