Mon. Nov 28th, 2022
Why can't the United States halt the rise in oil and gas prices

As oil prices skyrocket, Jason Herrick, a Texas oilman, is trying to pump more oil in pursuit of profit.

Despite his efforts, he anticipates that the productivity of his family-owned business would decline for the third consecutive year.

It has been years since his company, Pantera Energy, invested in new production, since funds dried up when energy prices plummeted – infamously falling below zero at one time – in the early stages of the epidemic.

Why can't the United States halt the rise in oil and gas

Now, like many other businesses around the United States and the world, he faces significant delays while he searches for the necessary materials and personnel to complete the projects.

“Our duty is to create as much as possible,” he adds. “We’ve done that.” We are so far behind that it is tough for us to catch up.

It is one of the indications emanating from the United States, the world’s largest oil and gas producer, that the high energy costs affecting families may persist.

Since the beginning of 2021, oil and gas prices have increased around double or more, as demand recovers from the shock of the 2020 Covid lockdowns.

The conflict in Ukraine, which has prompted Western nations to reject Russian energy supplies, has only accelerated their ascent.

Forecasts indicate that US output will climb by almost one million barrels per day this year as the market heats up.

The last time oil prices were this high, in 2014, U.S. oil production increased by 20% and the fracking revolution was in full swing, so this is a long cry from the reaction.

The muted response is a result of companies being constrained by rising costs and shortages of key materials, equipment, and personnel, as well as longer-term concerns from investors regarding the amount of oil and gas that will be required as the world attempts to transition away from polluting fossil fuels in response to climate change.

Mike Wendt, an engineer with the oil exploration company Lone Star Productions, said that his company has numerous new projects in the works, but has been unable to locate the necessary steel pipes, resulting in delays and escalating expenses.

He adds, “We’re trying to drill as rapidly as possible, but supply and demand difficulties are stifling the market.”
Global warming headwind

Why can't the United States halt the rise in oil and gas price

According to Trey Cowan, an oil and gas economist at the Institute for Energy Economics and Financial Analysis, the difficulties confronting North American businesses are unparalleled.

And although many tiny private enterprises, like Mr Wendt’s, are still trying to raise output, the bigger corporations have so far kept with investment plans set before prices actually rose, opting to put the windfalls mostly toward shareholder payments, rather than further production.

This strategy is a significant shift, which experts attribute to pressure from Wall Street as climate change alters perceptions of the energy industry.

Investors are pressing firms to share profits immediately, instead of making long term investments, given uncertainties about demand as the globe moves to transition away from fossil fuels, says Raoul LeBlanc, vice president at S&P Global.

“The market is concerned that demand may not materialize, leaving these assets stranded,” he adds. “If there’s no long term value in my stock price, that implies I have to pay a very aggressive dividend.”

With prices predicted to continue high, Mr LeBlanc thinks corporations are likely to expand investment – at least a little.

“It’s not going back to the go-go days,” he adds. But “The Ukraine conflict demonstrated that we still live in a world dominated by fossil fuels. The energy transition has not been discarded, but the discourse has shifted to focus on our immediate and intermediate needs.”
Uncertain about climate commitments?

In the political arena, the “rebalancing” has sparked worries in the US that President Joe Biden, who made tackling climate change a pillar of his campaign, would cease pressing as hard for environmental measures to limit emissions and hasten the transition to renewable energy.

While he has continued to advocate for investments in renewable energy, his most ambitious initiatives remain stalled with no indication of progress.

Why can't the United States halt the rise in oil and gas pric

While Republicans blame his environmental policy for high energy prices and his support ratings decline, Obama has inked agreements to increase US natural gas exports, freed oil from national reserves, and authorized hundreds of drilling licences on federal territory.

Robert Rozansky, a research analyst at Global Energy Monitor, which studies energy projects throughout the globe, observes that the Biden administration is hesitating on its prior climate pledges.

Such a trend is not unique to the US.

Western officials, notably Vice President Biden and British Prime Minister Boris Johnson, have called for assistance from Saudi Arabia and other producers, who, according to experts, have the potential to increase supply without significant additional expenditures.

In Canada, the fourth biggest oil producer behind the United States, Saudi Arabia, and Russia, the liberal government has revived discussions about reviving long-stalled oil and gas projects, such as export terminals for natural gas to Europe.

Alfred Sorenson, CEO of Pieridae Energy, which scrapped its plans for a liquefied natural gas facility in Nova Scotia last year after failing to attract investors, explains, “It’s a 180-degree change in perspective.”

As a result of an indication that the government may now be prepared to provide additional assistance, the company is now anticipating a resurgence.

Uncertainty persists as to whether changing political winds will overcome market skepticism, particularly given continuous public resistance to oil and gas infrastructure such as new terminals and pipelines, which may delay projects for years in legal limbo.

“Politicians and business are now actively promoting the notion that we must preserve Europe with our oil and gas,” says James Gunvalden Klaassen, a lawyer with EcoJustice, which has filed a lawsuit against Pieridae.

“We’re using solutions from the 20th century… and we already know that they don’t work,” he adds.

According to him, the Pieridae natural gas port would not be ready to ship natural gas until 2027, which would do nothing to alleviate the present issue.

“To ensure energy security in Europe, Canada, and the United States, renewable energy sources must be developed,” he continues. “This is possible and… should be, must be”

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