LETTER: Joe Biden and the oil and gas industry
The Biden administration talking point regarding oil production is that there are thousands of leases that are not being worked. Why aren’t they drilling? Let me count the reasons.
1) A disdain for fossil fuels. Our president is determined to cripple the fossil fuel industry to fight climate change. Would a rational investor knowing this plow more money into fossil fuels? Exxon Mobil is currently investing $1 billion per year in research into alternative forms of energy ranging from algae that produce biofuels to efforts to transform emissions into electricity. That money could go into oil production. By the way, electric vehicles require lithium batteries. More than 75 percent of lithium producers are in China, Australia, Chile and Argentina. Hardly conducive to energy independence.
2) Shortages. The number of workers producing oil and gas has been steadily decreasing, dropping from 137,000 workers in February 2020 to 115,000 today. Add on the difficulty of procuring sand, steel, copper and nickel for the drilling process.
3) Risk. There is the risk of volatility of oil prices. Many institutional investors got burned over the past decade when the attitude in energy was all about growth — before prices tanked. Now the watchword in the oil patch is “capital discipline,” emphasizing paying down debt and return on investment.
4) Regulations. This week the Biden administration announced it is restoring stricter environmental standards for approving new pipelines, and they increased the cost of royalties for companies on new federal land leases.
These a few of the great headwinds facing our oil companies today. There is no message from Washington to “Drill, baby, drill.”