The U.S. Energy Information Administration (EIA) is predicting that the United States is on track for record production of oil and gas in 2024, although some industry experts say there’s trouble brewing behind the scenes that could curtail supply in coming years.
An administration that abruptly canceled pipelines and drilling leases and spent hundreds of billions of dollars to transition U.S. energy production toward wind, solar, and electric cars and away from fossil fuels has also succeeded in increasing oil production to new heights, they say.
However, behind the numbers are signs that U.S. fossil fuel production is atrophying, as regulatory hostility and pressure from climate activists are exacerbating the chronic boom and bust cycles of the oil and gas industry.
The Investment–Production Lag
“There are a lot of moving parts when it comes to the oil and gas industry,“ Joe Trotter, director of the energy, environment, and agriculture task force at the American Legislative Exchange Council, told The Epoch Times. ”It can take years for the effects of policies to be felt in oil production.
“What’s going on right now is that there is record production, but that’s because it takes two to four years from the initial leasing and initial permitting for companies to actually produce a viable commercial amount. So what you’re seeing now is the legacy of the Trump administration, but at the same time, you’re beginning to see some of the problems that are coming out of the Biden administration.”
In its latest move to curtail fossil fuel production, the Biden administration last week canceled the seven remaining drilling leases in Alaska’s Arctic National Wildlife Refuge that had been approved under the Trump administration.
Stung by wasted investments and regulatory uncertainty, many production companies are scaling back investments.
“One of the things that happens, particularly in oil and gas production, is that production is a lagging effect of the drill rig count,” Ryan Yonk, senior research faculty at the American Institute for Economic Research and an author on energy policy, told The Epoch Times.
“What we’re seeing currently is the production from wells that have already been put in, and they’ve been able to ramp up production from those wells.
“While the rig counts are dropping, the production wouldn’t necessarily be dropping during the same time period. There’s a lag that follows.”
Following a modest recovery after the lifting of pandemic lockdowns, the number of rigs sits at 641 as of Sept. 15.
“The decline in the rig count is going to affect production in future years,” Benjamin Zycher, an energy economist and senior fellow at the American Enterprise Institute, told The Epoch Times. “You’re going to see a decline [in production] from this year, whether that happens next year or the year after, but some time in the short run.”
Mr. Trotter said a number of rigs have been retired in areas where the oil has been tapped out.
“But you’re seeing an increasingly hostile administration to oil and gas exploration and production, so the older wells that are being put out of service aren’t necessarily being replaced at this point in time,” Mr. Trotter said.
“The rigs that are already in the ground will continue producing for potentially a decade-plus, but at the same time, without beginning the two- to four-year process to replace the older wells, you’re going to see crunches down the road.
“On top of that, a lot of the refiners are saying, ‘Well, look, the Biden administration and the Democrats as a whole are saying that we are going to move away from fossil fuels, so why should we get involved with trying to permit and build and maintain new refining infrastructure if they’re promising that they’re going to destroy our industry?’”
While a number of smaller oil refineries have been built more recently in the United States, it has been nearly 50 years since the last major oil refinery was built.Mr. Yonk said it isn’t because of a lack of desire to build new refineries, “but rather the regulatory side that makes it very difficult, if not impossible, to permit.”
“The second is that investing in drilling rigs and those sorts of things requires a belief that there will be an opportunity to use them over the long run, and so capital-intensive investments are less likely to happen when that’s not clear,” he said.
‘Consistent Vision’ for Energy Production
The oil industry has called for clarity and consistency from the Biden administration to enable companies to make calculations of returns on capital investments and to be able to ramp up production over the longer term.“As more Americans feel the pinch of inflation and higher energy costs, the consequences of misguided energy policies are becoming more apparent,” Dustin Meyer, senior vice president of policy, economics, and regulatory affairs at the American Petroleum Institute (API), told The Epoch Times.
“It’s clear America needs more energy production to meet historic levels of demand, but the Biden administration has instead taken every opportunity to restrict production—both now and in the future.
“This administration has delayed a five-year program for offshore exploration, stymied infrastructure development, removed millions of acres from leasing in the Gulf of Mexico, and revoked leases in Alaska, all while pushing costly and ineffective policies designed to limit consumer choice.
“It’s past time for the administration to provide a clear, consistent vision that promotes U.S. energy production and helps provide consumers relief. We remain ready to work with them on exactly that.”
The API represents about 600 companies that are part of the U.S. natural gas and oil industry and employ more than 11 million Americans.
When asked by reporters on Sept. 13 whether the Biden administration’s cancellation of drilling permits has played any role in higher energy prices, Jared Bernstein, chair of the White House Council of Economic Advisers, responded: “American oil production now is at an all-time high; it’s just below 13 million barrels a day.
“There are thousands of available permits, places where oil companies could drill. They’ve been highly profitable; they’ve been highly productive; so I don’t think that’s the problem.”
Mr. Trotter criticized the Biden administration for its conflicting statements.
“The administration was very against fossil fuels in the beginning, until the prices started to spike, particularly for things like diesel,” he said.
“Then the administration turned around and said, ‘It’s one of our top priorities to make sure that these fuels are available.’”
Mr. Bernstein touted the benefits of the Biden administration’s economic plan, dubbed “Bidenomics,” which includes extensive government spending and regulation to direct the U.S. economy toward wind, solar, and electric vehicles (EV).
“Bidenomics works because when the middle class does well, the poor have a ladder up and the wealthy still do well,” he said.
“The incentives in the Inflation Reduction Act, the CHIPS Act, the Bipartisan Infrastructure Law are reversing decades of disinvestment in America through the powerful one-two punch of policy incentives crowding in private investment.
“That creates jobs today in constructing these facilities and good jobs tomorrow staffing these factories to manufacture semiconductors, solar panels, and wind turbines on our soil.”
But some energy experts argue that Bidenomics is driving up the cost of energy and that the poorest Americans will suffer disproportionately.
“Every wind farm needs an associated natural gas power plant to flip on when the wind doesn’t blow, and it’s actually more expensive having that natural gas plant cycle on and off when the wind doesn’t blow than it would be just to have it cycle continuously,” Diana Furchtgott-Roth, director of The Heritage Foundation’s Center for Energy, Climate, and Environment, told The Epoch Times.
One feature of Bidenomics is a massive investment in transmission lines and batteries to store intermittent wind and solar energy at the same time that functional coal and gas plants are being retired. While capital expenditures for oil and gas languish, U.S. utilities are spending billions of dollars to create duplicative electricity production and transmission facilities and passing those costs on to consumers.
China’s Dominance of Renewable Energy
Critics say economic policy will divert investment and jobs away from the United States and toward China, which dominates markets for the refining of minerals that are used to make solar panels, wind turbines, and EV batteries. China also dominates the manufacturing of these products.“China produces its power with dirtier coal-fired power plants than we have here in the United States,” Ms. Furchtgott-Roth said. “Here, we have clean natural gas, we have reduced our emissions by 1,000 million metric tons over the past 15 years, whereas China has increased its emissions by 5,000 million metric tons.
“People need to understand that moving energy-intensive manufacturing from one place in the globe, where it’s produced in a clean manner, to another does not reduce global emissions. People are very well-intentioned, everyone wants clean air and clean water, but sometimes, people are misinformed and misguided.”
Investments in the oil and gas industry are “driven by expected prices and costs and all that, but government policies are distorting things in a significant way,” according to Mr. Zycher.
“The policy distortions are growing, and that’s a problem,“ he said. ”That just means the prices will be higher than would otherwise be the case, which is another way of saying that favoritism for unconventional energy impoverishes people. That’s a shame, but here we are.”
Oil companies don’t currently have many opportunities to drill on federal lands. However, the sharp decline in energy prices over the past decade has reversed under the Biden administration, potentially making new investments more attractive.
“I would expect you’ll see more interest and investment will probably creep up, but I think they’re waiting to see,” Mr. Yonk said. “In some ways, the oil industry is increasingly tied to the political cycle because of the stark difference in policies toward drilling between the two parties.”
His advice for the Biden administration is to “make the regulatory climate, especially for refineries, more clear and actually set rules you can comply with.”
“The second is to take a closer look at how they actually manage drilling on federal lands,” Mr. Yonk said.
Focusing on US Energy Companies
Efforts to reduce fossil fuel production have come from not just the Biden administration but also liberal U.S. states, nonprofits, the media, and Wall Street.
“Exxon scientists supported research that questioned the findings of mainstream climate science, even after the company said it would stop funding think tanks and others that promoted climate-change denial,” the authors wrote, citing internal Exxon documents.
These documents are reportedly now being requested by attorneys who plan to sue Exxon for alleged “deception over climate change,” including Hawaii’s Maui County, which reportedly intends to sue Exxon over the alleged role of global warming in the August wildfires.
The climate-related lawsuits against Exxon are reported to be seeking billions of dollars.
Wall Street has also taken its shots at the oil, gas, and coal industries, through the environmental, social, and governance (ESG) movement, which pledges to reduce the production of fossil fuels.
This movement is coordinated via the Glasgow Financial Alliance for Net Zero, a global network of U.N.-based climate clubs, which includes the Net Zero Banking Alliance (NZBA), the Net Zero Insurance Alliance (NZIA), the Net Zero Asset Managers initiative (NZAMi), the Net Zero Financial Service Providers Alliance (NZFSPA), and the Net Zero Asset Owners Alliance (NZAOA).
Members of these clubs, which include the world’s largest banks, asset managers, insurance companies, accounting firms, rating companies, and consultancies, are among the biggest players in global finance; members of the NZIA, NZBA, NZAMi, and NZAOA collectively manage tens of trillions of dollars in assets and are together the largest shareholders in the vast majority of S&P 500 companies.
This movement is also coordinated through global organizations such as Climate Action 100+, Ceres, and the World Economic Forum.
Is It All Worth It?
Despite the coordinated efforts against the U.S. fossil fuel industry, many critics question whether, even if the various net-zero clubs succeed, they would reduce global warming significantly.“Why is it that when we’re in a period of inflation, the federal government is trying to move us to a more expensive form of electricity generation—which wind and solar are?” Ms. Furchtgott-Roth said.
“The answer is that there are people who honestly believe that this is going to reduce carbon emissions, and it is going to save the planet from destruction. There are people who believe that, even though calculations show that if we eliminated all fossil fuels from the United States, it would only make a difference of two-tenths of one degree Celsius by the year 2100.”
