Destructive policy & rhetoric have caused producers and investors to approach new oil and gas projects with extreme caution
By Cody Campbell
As an executive in the oil and gas industry with operations in the Permian basin, I know oil price cycles are no new phenomenon. But in my 14 years of industry experience, I can clearly see a series of calculated signals coming on high from Washington and other major capitals, and it’s only setting the stage for a “super cycle,” and not in the way consumers were hoping for as they plan their summer vacations.
Last year alone, oil prices rallied more than 50%, followed by another 50% increase this year. Market observers might anticipate an increase in production to capture high prices. After all, reflexive and seemingly automatic supply increases are precisely and empirically the reason that the world has come to rely on the U.S. as the energy market’s largest swing producer.
But rather than seizing the opportunity, American producers are delivering a resoundingly muted response to market signals.Yes, oil production in the U.S. is modestly recovering. But still, the U.S. rig count, according to Baker Hughes, stands at a mere 740 compared to over 1,000 in 2019, when the price per barrel averaged around $50 less than today.
So, what’s holding back American producers? Take it from me, it certainly isn’t because of a lack of willingness to grow, and it certainly isn’t because of a lack of domestic resources to develop.
The answer is that U.S. producers are shackled by powerful external limiters, in part emanating from the ESG investing movement, but perhaps most penetratingly from the overriding idea that the need for oil and natural gas is soon coming to an end. Investors want to see companies produce as much as possible from existing assets now, pay the highest current dividends possible, and invest as little capital as possible in future exploration and development.
In John Kerry’s world of alternative facts, this might be the right course. According to him, the natural gas industry will no longer be necessary in just 10 years’ time. But this view is dangerously disconnected from reality.
He isn’t alone, though; ironically, the very organization founded in response to the 1970s oil supply crises, the International Energy Agency, is feeding the frenzy by calling for “immediate action” to end investment in oil and gas.
This is the mindset that is forcing Americans to stare down a bleak future. We now face rolling blackouts and families are forced to choose between basic needs and filling their gas tanks.
Meanwhile, the U.S. struggles to help lessen from the threats of commodity shortages. And these are just some of the challenges we face, as energy denominates the cost of everything – food, housing, clothing, and medical costs.
It’s time to recognize market realities. The truth is that demand for oil is projected to reach an all-time high in 2022 and another all-time high in 2023. What’s more, the Energy Information Administration has long proclaimed that both oil and gas will play a dominant role in the global economy through 2050 and beyond.
Meanwhile, the U.S. struggles to help lessen from the threats of commodity shortages. And these are just some of the challenges we face, as energy denominates the cost of everything – food, housing, clothing, and medical costs.
It’s time to recognize market realities. The truth is that demand for oil is projected to reach an all-time high in 2022 and another all-time high in 2023. What’s more, the Energy Information Administration has long proclaimed that both oil and gas will play a dominant role in the global economy through 2050 and beyond.
Despite these long-standing assessments – and all the negative signals flowing from every aspect of the market – policymakers are doggedly staying the course of a disastrous war on American energy production. Their destructive policy and rhetoric have caused producers and investors to approach new oil and gas projects with extreme caution.To increase domestic production, reduce energy costs, and increase energy security, there are very simple steps to take. Yes, the government should facilitate infrastructure and resource development, from pipelines to federal lands. But the most significant actions the Biden Administration could take are to help the American public understand our need for oil and gas, and to openly support the industry.
Honestly admit that an energy transition will take time, and to reduce the pains of remodeling the energy system — creating a truly sustainable and ‘just’ transition — we must support the production of oil and gas. After all, these resources will underpin our economy for decades to come and will ultimately provide the energy we need to deploy alternative sources, like renewables.
Bottom line, stop treating us like the bad guy, stop using us as a political punching bag, stop calling us “criminals who are killing people,” stop calling us war profiteers, and stop threatening us with new taxes. This only discourages much-needed investment.
The real criminals are the ones who demonstrate through words and policies that they don’t care about the economic outlook of families the world over. Our leaders should be forthright with the American people about our need for oil and gas and should send positive signals to the investment community.
It won’t take much convincing; American families are feeling the effects in their pocketbooks daily.Cody Campbell is the co-CEO and co-Founder of Double Eagle Energy Holdings IV and a Distinguished Fellow at the America First Policy Institute.
