Production

US to increase oil production following Russian invasion of Ukraine, but energy independence remains a dream – Houston Public Media

This year’s CERAWeek energy conference in Houston was supposed to focus on transitioning from fossil fuels as a way to combat climate change.

Then came the invasion of Ukraine by Russia.

During the conference’s opening address, US Energy Secretary Jennifer Granholm made the case for exploiting strategic reserves and called on companies to increase supply.

“We are on a war footing,” US Energy Secretary Jennifer Granholm said during the conference’s opening address. “We are in an emergency situation. And we need to responsibly increase near-term supply where we can right now to stabilize the market and minimize damage to American families.”

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It’s the stance Republican members of Congress in Texas have demanded since President Joe Biden took office, but his harshest critics have claimed the message is only lip service. Woodlands Congressman Kevin Brady called it ‘intellectually dishonest’ on Twitter, and U.S. Representative Tony Gonzales – whose district straddles the Permian Basin – said he wasn’t buying change either. of your.

“I think words are one thing,” he said. “Anyone can say anything. I think the action is right where it needs to be.”

But whether the president acts or not, experts say there is little the White House can do to increase production and lower prices as it comes up against market forces and the politics of other countries that are beyond his control.

Energy independence is an elusive dream that presidents have been talking about since the early 1970s. The problem is that the United States consumes far more than it produces, even after the shale revolution made it the most largest oil producer in the world. In 2021, the United States produced about 11 million barrels of crude oil per day and consumed about 20 million per day, according to the US Energy Information Administration.

At its peak in 2019, US production reached over 13 million barrels per day. High oil prices are already bringing production back to that level, but the U.S. Department of Energy expects that won’t happen until 2023.

Texas is already far ahead in terms of increasing oil production than the rest of the country. Ingham said the state is less than a year away from hitting all-time record production, with the Permian already hitting all-time highs.

Some of the remaining 7 million barrels per day that the United States consumes may come from Canada, the largest foreign supplier to the United States. It’s part of the reason Republican lawmakers and others lambasted Biden for killing the Keystone XL pipeline as one of his first acts in office. There is little evidence to suggest that allowing the pipeline to proceed would have averted the current crisis.

“While Keystone XL was political football from 2008 to 2022, other pipeline companies doubled and expanded their capacity to push oil across the border,” said University of Houston energy researcher Ed Hirs. “And we still get a lot of oil from Canada by car on the trains. Canada can increase its production and install more cars there.

Hirs added that former President Donald Trump wasn’t beyond reproach either: “The last administration had four years to complete (the Keystone XL pipeline) and failed to do it,” he said. declared.

Much of the rest of the crude oil America consumes comes from less reliable sources. Many of them are either members of the Organization of the Petroleum Exporting Countries or cooperate with the OPEC cartel to restrict their crude oil production to keep prices high.

That was before Russia’s invasion of Ukraine triggered Western sanctions, which pulled even more Russian oil from world markets. How much is still unclear. Karr Ingham, an oil economist at the Texas Alliance of Energy Producers, estimates that Russia produces about 10 million barrels of oil a day, some of which is used at home.

“How much of that is going to be lost in the global market, we have no idea,” Ingham said. “If it’s a million barrels a day or 2 million barrels a day – I’ve heard numbers this week of 5 or 6 million barrels a day. There’s nowhere to go to get that kind of This gap cannot be filled by existing producers, whether in the United States or elsewhere.”

Still, the Biden administration could do more to encourage production, Ingham said — if only to ease the minds of investors, who have been reluctant to pour money into new production, given the policies powerhouses of the Biden administration.

“There are some things they could do, clearly, directly, and that’s just to help with the permitting process on federal lands, federal properties, federal lands and waters,” Ingham said. “They’ve been generally negative about the development of such things, and again with a change in tone and a change in federal practice regarding the permitting of these projects that would go a long way in suggesting to oil and gas operators in the Texas and the United States states that sentiment towards domestic oil and gas production has changed, which hopefully leads to a change in sentiment among investors in this industry, removes a little uncertainty about the endangerment of this money.”

But Mark Finley, a global oil and energy researcher at Rice University’s Baker Institute, said Biden’s energy policies aren’t the main reason investors have been reluctant to lend to producers. On the contrary, after a decade of focusing on growth, investors are demanding a return on their money.

“Rather than drill more when prices rose last year – and it was one of the largest oil price increases the world has ever seen – instead the industry focused on paying down the debt and getting the money back to shareholders,” Finley said. “In fact, the industry saw record profits last year.

All this money is needed because increasing production involves more than just turning on the pumps. Like every other industry, the oil and gas sector is grappling with supply chain shortages on items such as piping – also known as tubular goods – and sand for hydraulic fracturing.

There’s also a labor shortage, ranging from rig workers to truck drivers, and Finley wasn’t convinced that getting them back would be as simple as offering more money.

“I don’t know (about) all of these crews that were laid off during the pandemic,” Finley said. “Where are they now?” Are they sitting at the local employment office waiting to be rehired or have they moved? »

Ingham, of the Texas Alliance of Energy Producers, said there was no chance the industry would return to its pre-pandemic employment peak – more than 300,000 in 2014 – but it is always ready for a hiring boom.

“I think we’re ready to add, probably tens of thousands of jobs, if we have some sort of long, sustained expansion here, which means prices even in the range of $75, $80, $100 “, Ingham said.

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