One thing to start:
Today we are from Houston. The Energy Source team is in town for the World Petroleum Congress, where Nasser made his comments.
The general sentiment here at the WPC is that of an industry under siege. Big Oil executives were keen to show that they are doing their part to fight climate change, while stressing the enduring importance of their products.
ExxonMobil chief Darren Woods told delegates it was “essential to strike the right balance”.
“While a fight to mitigate the risk of climate change is vitally important, so too is work to meet the growing needs of people around the world. “
How to balance these two needs is the topic of today’s power source.
In our first article, Justin Jacobs examines the stalemate between the Biden administration and the U.S. shale zone over pumping out more oil.
Our second article is an op-ed by Morgan Bazilian of the Colorado School of Mines and Jamie Webster of the Center on Global Energy Policy at Columbia on how the White House should pay attention to the inner workings of traditional energy policy even as it pursues its noble climatic objectives.
I will also be spending a few days in Midland and Odessa after the conference to get a feel for the situation on the ground. So, for all readers based in West Texas, please contact us.
Thanks for reading.
This article is an on-site version of our Energy Source newsletter. Sign up here to receive the newsletter directly to your inbox every Tuesday and Thursday
Oil executives skeptical of Biden’s support for increased production
The Biden administration came to the World Petroleum Congress in Houston this week with a message for the national oil and gas industry: Increase production to help lower fuel prices for Americans.
David Turk, Deputy Energy Secretary, told executives there was a need for “leadership from our domestic producers” to deal with high fuel prices and that the Biden administration “was not opposed to the increase in national oil production “.
The call aroused the indignation of many spectators. The oil and gas industry has criticized the administration’s oil and gas policies – which notably called on Opec to ramp up production before U.S. producers, suspended leases of federal land and canceled the Keystone XL pipeline.
President Joe Biden took office promising a long-term transition from fossil fuels and announced ambitious carbon reduction targets. But soaring prices at the pump this year, the most visible source of inflation for most Americans, quickly made energy prices a major political issue.
“Our oil and gas industry is experiencing a remarkable recovery. The top 50 listed companies earned more than $ 30 billion in the second quarter of this year, ”Turk said. “And yet, production has not recovered as a result.”
U.S. oil and gas producers are under intense pressure from their shareholders to use this influx of profits from rising energy prices to increase dividends and share buybacks, rather than to speed up production.
The few U.S. producers who have announced their plans for 2022 have indicated that they plan to limit production growth next year, a major reversal from previous years when high oil prices sparked a drilling frenzy. This expectation has helped support global oil prices.
Darren Woods, CEO of ExxonMobil, said in response that companies are still in recovery mode after the financial devastation of 2020 and are reacting cautiously to a still uncertain economic recovery.
“A lot of what you’re seeing this year is that companies are rebuilding their balance sheets, to basically make sure they’re in position for what we know to be continued volatility,” Woods said.
But he added that signals from governments were important and could hamper investment.
“This is a long term horizon and a big dollar investing business,” said Woods. “Every business will weigh in. . . whether or not they can expect a return over the life of their investment. And I think the political positions and the positions that the government declares have an influence on that. “
Climate vs energy: Biden’s political balance
Joe Biden is the first US president to make climate change a top priority.
During his first year in office, the subject was firmly entrenched in rhetoric, executive orders, staff and regulatory responses – as well as in government departments and agencies across the system.
Despite these significant efforts, the administration will also need to apply the same skill and attention to navigating the choppy waters of a massive set of energy transitions.
Traditional energy issues such as security, relations with OPEC countries, policies for US oil and gas producers and refiners, and prices at the pump will remain critical for many years to come.
Navigating the razor’s edge between industry and the environment in the larger minefield of US politics will be increasingly difficult. On the climate, the administration is in top form, but on the energy front, more commitment is needed. There is an ongoing global energy crisis – and it won’t be the last.
Rising gas prices could push some high-income populations to purchase low-carbon technologies like electric vehicles. But for low-income countries and communities, rising costs can lead to greater use of coal and oil – and this can also have a backlash, potentially slowing climate efforts to date.
While the United States has largely been immune to the worst of the energy crisis so far, the average price of oil in the country, the world’s largest producer of oil and gas, was recently at about $ 3.50 per gallon. This is the highest in the past eight years.
Despite numerous recent polls showing voters care about the climate and the environment, the cost of fueling their cars and heating their homes remain the top priorities.
After a series of overtures to Opec and a continuing period of muddled messages, the Biden administration has teamed up with five other countries to announce a release of crude from the Strategic Petroleum Reserve – and without the typical coordination of the International Energy Agency.
The release of these barrels in partnership with countries like China is unprecedented and perhaps shows the start of a new art of energy. Yet the actions taken so far, including the whispers of a crude export ban, seem more itinerant than the result of elegant strategic intent.
The government should consider engaging more with U.S. producers on differentiated, low-emission products and shifting some of the focus from supply issues to demand-side measures.
The political ‘attention’ and the associated personnel and budgets cannot be distributed evenly. Governments, like individuals and businesses, must make choices.
The Biden administration has prioritized the climate. The timing is right for such a surge, but as a result, the diplomatic focus on energy security has waned.
This has been evidenced in lackluster approaches to energy diplomacy, public communications on the issue, and high-level political appointments.
Biden’s well-intentioned climate goals require paying attention to the inner workings of conventional energy policy and closely monitoring the pace of change. This means that legacy fuels continue to circulate for the time being and at affordable prices.
Naturalist Henry David Thoreau begged us:
“If you have built castles in the air, your work must not be lost; that’s where they should be. Now put a foundation on it.
This advice must be taken into account to reconcile long-term aspirations with the current realities of the real economy.
Jamie Webster is a non-resident researcher at the Columbia Center on Global Energy Policy
Morgan Bazilian is Director of the Payne Institute at the Colorado School of Mines
Soaring natural gas prices helped revitalize demand for coal in the third quarter as power producers switch back (at least for now) to the most polluting fossil fuels. An analysis by S&P Global Market Intelligence found that coal production is up 9% from the same period last year.
The latest increase in coal consumption, however, has not reflected in the labor market. While the average number of coal workers in the United States rose 2.5 percent from last quarter, employment is still down 3.2 percent year-over-year, according to S&P.
Despite the recent increase, coal production and employment in the United States are far from levels of a few years ago. Both measures have fallen by about 40% since 2015, according to S&P. The research company expects demand for coal to return to its downtrend as natural gas prices fall over the next year. (Amanda Chu)
Energy Source is the Financial Times bi-weekly energy newsletter. It is written and edited by Derek Broker, Myles McCormick, Justin jacobs and Emilie Goldberg.
Recommended newsletters for you
Moral money – Our essential newsletter on socially responsible business, sustainable finance and more. register here
Trade secrets – A must read on the evolution of international trade and globalization. register here