Thu. Sep 29th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

March 1, 2022

US Democratic administrations normally promote green energy and put pressure on fossil fuel industry. Biden Administration is no exception, for example pipeline project have been put on hold or cancelled after Biden took office 13 months ago. However, Ukraine war has taken priority and Biden has to do “something” or “anything” to control US rising gasoline price that drives high inflation. It is a major drag on Biden’s approval rating that threatens his party’s mid-term election success.

There is no hope that the Ukraine will be over anytime soon, the economic sanctions against Russia will last even the war is over. Russia is a major oil and gas producer and exporter in the world. As of now, US led sanctions against Russia exclude energy industry. But the global crude oil prices are peaking.

As such, Biden Administration is silently changing its no-fossil energy stand to encourage domestic oil productions. But major challenges remain.

  1. Crude oil and/or gas production is not as simple as turn on the tap water. Even reviving a caped well takes investment and time. It is a major investment decision for any oil company.
  2. Existing overburden environmental policy and regulation diminish industry’s intention of jumping to the pool at moments notice. Mere calls from the White House, in reaction to a war induced price hike, do not change the landscape for US oil industry.
  3. Industry makes production decisions based on long term price trend, supply, and demand balance: not by short term events.
  4. “What would be best to accompany” a reserve release “would be an attitude to support investment in U.S. resource development,” Wirth (CEO of Chevron) said. That would “ensure that this country remains strong from an energy security standpoint.”
  5. Basically, Biden has an attitude issue: against fossil energy and US oil industry is alreday turned off.

White House Quietly Calls On U.S. Oil Companies To Increase Production

Editor OilPrice.com Tue, March 1, 2022, 10:00 AM PST

In a move that likely angered his environment-conscious base, the White House has issued a muted request for U.S. oil companies to increase crude oil production in the wake of high crude oil and gasoline prices.

Though words are different than deeds—and President Joe Biden’s deeds have been decisively anti-fossil fuel expansion—a White House official told U.S. oil companies on Tuesday that they could increase production if they want.

“Prices are quite high, the price signal is strong. If folks want to produce more, they can and they should,” White House National Economic Council Deputy Director Bharat Ramamurti said in an interview today.

While the words fell short of an official request to U.S. oil companies to increase production, it is decidedly different from ignoring U.S. oil companies’ production plans altogether while asking OPEC+ to do the heavy lifting when it comes to oil production—to no avail, no less.

Ramamurti also dispelled the notion that the U.S. Administration was somehow curtailing crude oil production.

But U.S. oil companies have long held that while the Administration hasn’t directly restricted U.S. output, the energy policies flowing out of the White House have put a damper not only on the attitude involving crude oil production but has made it far more difficult for oil companies to ramp up.

The White House has received a lot of pushback in recent days for not tapping what many see as at least a partial solution to the headache that is high oil prices—U.S. shale.

Oil companies such as Devon Energy have said they have been perplexed that the White House has not called on them directly to ramp up oil production. And Ramamurti’s comments today still do not rise to the level of asking U.S. producers for more oil.

By Julianne Geiger for Oilprice.com

Biden Aide Says Oil Companies Can Up Production If They Want

Jordan Fabian, Kailey Leinz and Guy Johnson

Tue, March 1, 2022, 9:14 AM

(Bloomberg) — A White House official said Tuesday that U.S. oil and gas companies should increase production if they want, pushing back against executives who’ve criticized Biden administration energy policies as prices soar.

“Prices are quite high, the price signal is strong. If folks want to produce more, they can and they should,” White House National Economic Council Deputy Director Bharat Ramamurti said in a Bloomberg Television interview.

Ramamurti said there are 9,000 unused leases that the U.S. government has provided for oil and gas production and, “people are free to use them if they’d like to.”

“The idea that there’s some kind of severe restriction on that production is simply untrue,” he added.

President Joe Biden faces pressure to do more to lower oil prices, which have helped drive inflation to levels not seen in decades. Russia’s invasion of Ukraine has exacerbated the problem, sending West Texas Intermediate to more than $100 a barrel on Tuesday.

More: Chevron Calls on Biden to Support U.S. Oil Amid Russia Risk

Chevron Corp. Chief Executive Officer Mike Wirth said Tuesday that any short-term measures to reduce prices, such as releasing barrels from the Strategic Petroleum Reserve, should be paired with more support for domestic oil producers. West Virginia Democratic Senator Joe Manchin also called on the White House to help boost U.S. production.

“We’re buying 650,000 barrels a day from Russia. It’s ridiculous. Totally ridiculous,” Manchin said Monday.

Devon Energy Corp. CEO Rick Muncrief said in an interview with Bloomberg News this week that he’s “a little mystified” the White House hasn’t reached out to his company about increasing production.

Ramamurti said the administration is taking an “all-of-the-above” approach when it comes to oil prices, including releasing barrels from the SPR and urging OPEC+ nations to ramp up production.

The U.S. and other major economies agreed to a coordinated release of 60 million barrels from stockpiles around the world, the International Energy Agency announced Tuesday. Under the agreement, the U.S. will release 30 million barrels.

Biden campaigned on promises to combat climate change, accelerate renewable fuels and ban new oil and gas permitting on public lands and waters. As president, he revoked a permit for the Keystone XL pipeline — a move that analysts have said might have yielded a minimal price benefit were it operating today.

The administration has held just one auction of drilling rights in the Gulf of Mexico, which was subsequently invalidated by a federal court, and has yet to sell new oil and gas leases.

Biden’s Interior Department, however, is still approving drilling permits on federal lands. More than 3,800 were authorized onshore last year, according to a Public Citizen analysis of Bureau of Land Management data. That’s down from the 5,426 permits issued in 2020, but in is line with prior years’ permitting levels.

U.S. oil companies generally have been reluctant to pump more, preferring to steer cash flows back to investors instead of spending it on new drilling that could flood the world with cheap crude.

Chevron Calls On Biden to Support U.S. Oil as Russia Raises Risks

Kevin Crowley

Tue, March 1, 2022, 8:22 AM

(Bloomberg) — Chevron Corp. said any short-term efforts by the Biden Administration and its allies to ease crude prices should be backed up by long-term commitments to support investment in America’s domestic oil industry.

President Joe Biden and other major economies have agreed on a coordinated release of 60 million barrels of oil from stockpiles around the world after Russia’s invasion of Ukraine, people familiar with the matter said Tuesday. Without a “balanced and pragmatic conversation” about energy security and transition, such a move would have little long-term effect, Chief Executive Officer Mike Wirth said on a call with reporters.

“What would be best to accompany” a reserve release “would be an attitude to support investment in U.S. resource development,” Wirth said. That would “ensure that this country remains strong from an energy security standpoint.”

The domestic oil industry has felt shunned by the Biden administration since it took office due to restrictions on drilling Federal lands in its early days, followed up by pleas to OPEC to increase oil production once prices became elevated. As the war in Ukraine brings the possibility of sanctions that would limit the trade in crude from Russia — one the world’s biggest producers — America’s oil industry could be one of Biden’s best ways of reducing energy prices.

“In the early months, I wish there had been more dialog than there was,” Wirth said at a presentation later with analysts in New York. “The administration had their priorities and the interaction with us was lower on the list than some other things.”

Leading oil executives believe governments including the U.S. have been lulled into a false sense of security on cheap oil and gas supply over the past decade, partly due to the growth in shale, while focusing too heavily on climate change. Now, with commodity shortages and prices skyrocketing around the world, it’s time for a change, they say.

Devon Energy Corp. CEO Rick Muncrief said Monday he was “mystified” why there hadn’t been any dialog between the administration and oil producers at a time when the country is facing severe energy challenges. An appeal from the president may have provided some incentive for U.S. shale to accelerate production growth and ease what’s fast-becoming a major driver of cost-inflation around the world, Muncrief said.

Senator Joe Manchin, a West Virginia Democrat, joined the fray Monday evening, calling for a series of hearings on energy independence.

“We produce energy cleaner than anybody in the world,” Manchin said. “We’re buying 650,000 barrels a day from Russia. It’s ridiculous. Totally ridiculous.”

Chevron hopes to have “good, constructive dialog with this administration going forward,” Wirth said. There’s much “common ground” between both the government and oil industry’s goals, he added.

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