Energy Operators Will Weather the Coronavirus
Lem Smith
Posted April 23, 2020
While the current decline in crude oil demand and market uncertainty present significant challenges, America’s natural gas and oil producers – especially those using hydraulic fracturing and horizontal drilling – are resilient and remain financially viable, supported by the world’s need for energy.
Contrary to some narratives, our industry is poised to fuel renewed growth once the U.S. and other nations get past the COVID-19 crisis. Natural gas and oil have and will again power modern economic expansion.
Let’s be clear: The impacts of the virus are affecting many other sectors besides energy. Transportation, retail and hospitality, to name just a few, are also experiencing historic downturns as the world responds to the spread of COVID-19.
Despite the sharp dip in crude oil futures earlier this week, which resulted from ongoing demand decline and market technicalities (see here), expert projections continue to underscore the long-term importance of our energy resources. Crude oil maintains its fundamental value, and the U.S. and world economies still require natural gas and oil to power the products and processes that make modern life possible.
Demand is unlikely to return to its long-term growth trend until this global pandemic is behind us, but the industry’s fundamentals remain resilient. By highlighting the balance sheets of only a few companies, as some have done, presents a disingenuous assessment of the broader industry – comprised of thousands of energy producers – within which the most innovative operators will emerge from this situation more productive than before.
Following the mid-2010s price collapse, advances in technology allowed shale companies to streamline operations, strengthening the U.S. economy and domestic energy security. It’s the same can-do, independent spirit that introduced hydraulic fracturing – one of the most critical business breakthroughs in U.S. history – that will ensure American energy businesses emerge from this market dislocation even stronger.
Though some attempt to write off an entire industry’s underlying value, at a moment when the broader economy is faltering, is a short-sighted take on the ever-changing state of today’s marketplace.
For now, America’s natural gas and oil industry is championing efforts to protect the health and safety of workers, communities and the environment, while meeting the world’s essential energy needs. When the coronavirus pandemic is behind us and the need for affordable, reliable and cleaner energy returns, this industry will be prepared to deliver the fuels to power the future.
About The Author
Lem Smith is API’s vice president for Federal Relations. Lem joined API in February 2020 as vice president for Upstream Policy & Industry Operations. He previously served as a principal at Squire Patton Boggs, an international law and public-policy firm, where he advised private and public sector clients on federal and multi-state policy matters and provided counsel on communications strategies, campaign affairs and crises management. Previously, Lem was director, U.S. Government & Regulatory Affairs at Encana, and responsible for all aspects of U.S. government relations and regulatory policy matters at the state and federal levels. Prior to that, Lem was director of Government Relations for Kerr-McGee Corporation. Lem began his career on Capitol Hill, working for U.S. Senate Majority Leader Trent Lott, U.S. Rep. Roger Wicker (Mississippi) and the late U.S. Rep. Charlie Norwood (Georgia), where he negotiated key member priorities within the 2005 Energy Policy Act (EPAct). Lem is a graduate of the University of Mississippi.