Chilling the Energy Investment Climate
Posted November 11, 2021
The Biden administration continues to look for answers on increased energy costs resulting, in no small part, from its energy policies. Higher costs for energy certainly have played a big part in the highest consumer prices since 1990.
Starting this summer, White House blamed OPEC+ for not accelerating crude oil production to meet post-pandemic energy demand. The crude oil demand-supply mismatch has put upward pressure on crude costs, driving prices at the pump that were 50% higher in October than October last year.
Then, in the past week U.S. Energy Secretary Jennifer Granholm shifted blame for lagging crude oil supply to the natural gas and oil industry – for “not flipping the switch as quickly as the demand requires,” and for not using federal leases, on and offshore (more on this below). Granholm to CNN on higher energy prices:
“Of course, every president is frustrated because they can't control the price of gasoline, because it’s a global market. You can call upon increased supply, which he has done, and OPEC is unfortunately controlling the agenda with respect to oil prices.”
President Biden, Granholm and others in the administration have said they are looking at all available tools that could provide relief to American consumers, but the administration has bypassed the best tool – fostering increased U.S. production.
Instead, the opposite has been true. Since the administration’s first day in office, its policy approach has effectively chilled new American oil and natural gas investment and has been an impediment to increased domestic production.
It killed the Keystone XL crude oil pipeline, which could have delivered Canadian crude oil to parts of the U.S. that have been hardest hit by inflation. It indefinitely paused new federal oil and gas leasing and has considered hiking industry taxes and fees.
Generally, the administration has signaled that American oil and gas isn’t part of America’s future energy mix – the president’s nominee to regulate the U.S. banking system is on the record as saying she wants to “starve” companies of money to invest in the oil and gas industry – even as it has begged OPEC+ to speed up its oil production.
Talk about chilling out investment. That’s what the Biden administration has done to world-leading American natural gas and oil, one of the country’s most vital economic sectors – 11.3 million jobs supported – and which not long ago provided the “spare capacity” to world crude markets that put downward pressure on crude costs and strengthened U.S. energy security.
Now this – the administration blaming industry and its investors for not quickly “flipping the switch” on domestic production? Given the administration’s words and actions, it’s remarkable that anyone would further invest in oil and gas. API President and CEO Mike Sommers:
“Certainly, one of the key factors [in American production] is that the Biden administration has made an effort to reduce production in the United States. … When the administration is continually putting forward new proposals to limit production in the United States, American oil and gas companies are cutting back on production.”
A few words on Granholm’s “unused leases” claim, one that has been used in the past by those who wanted to restrict or ban access to U.S. natural gas and oil reserves.
First, the principle of “use it or lose it” already exists in regulations applicable to federal leasing. Companies are required to develop a lease within a specified term or return it to the government.
Additionally, companies pay a rental fee during the pre-production phase of development, after a lease is procured. Rental fees on offshore leases can exceed $100,000 annually on many leases. Rental rates increase in later years of the lease to encourage development.
Lastly, not every lease contains oil or natural gas, nor does every non-producing lease represent untapped resource potential. Natural gas and oil exist on only a small number of leases, and it’s economically feasible to produce oil and gas from an even smaller number.
Bottom line: Sitting on an approved permit to drill on a lease rarely happens, as the energy secretary suggested.
Americans watching the cost of energy rise this year have seen the administration express concern, grovel before OPEC+ and, seemingly, look everywhere for solutions except those right here at home. Shifting blame might be needed politically, but it doesn’t serve the country.
The U.S. has plentiful supplies of natural gas and oil that can be difference makers for consumers, the economy and the nation’s overall security. But there must be decisions to support safe and responsible development. Sommers:
“We have been able to limit the amount of dependence that we've had on foreign countries for our oil and gas over the course of the last decade. … We need to continue development in the United States, rather than being dependent on other countries for American energy.”
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.