Lot of good comments here. I disagree with the basic premise of the article, or at least the conclusion the casual reader might draw from the presentation. The time constant for oil production (discovery, validation, approvals, production) is very long, sometimes decades. No judgement about the impact of Biden policies can be made from current production. Ron
A couple of key points of clarification. The U.S. also imports a significant amount of crude oil. That is because many U.S. refineries were engineered and constructed to refine heavy crude from countries such as Venezuela (when the U.S. was heavily dependent on imported oil). New crude and NGL (discussed below) production from shale deposits over the last 15 years is of lighter grade and incompatible with many U.S. refineries. Thus, we export light crude and import heavy crude. Key point two: U.S. oil production consists not only of crude oil as discussed in Roger's piece but also natural gas liquids that are a byproduct of natural gas production. Those NGLs average about 6.8 MMbpd. So, total oil production in the U.S. is around 20 MMbpd which consists of 13.2 MMbpd of crude and 6.8 MMbpd of NGLs. That 20 MMbpd supply exceeds our daily demand by about 2 MMbpd which allows the U.S. to be a net exporter.
As populations grow we need affordable energy to prosper and oil and gas has been the clear winner for many years. The USA is in prime position to be the supplier of choice for the world to our benefit. As long as our politicians don't screw it up with policies promoting Net Zero and rapid decarbonization.
So in other words, Biden's policies, along with all other global initiatives to reduce fossil fuels, aren't working. Good energy policy encourages reliability, affordability, and sustainability. Biden scores low in all three categories. The grid is less reliable with more intermittent power, energy prices as a whole have increased significantly over the past 3 years, and investing in short lived wind and solar, which is less energy dense and requires more resources, is not sustainable. Furthermore, green energy policies in Europe and the United States have been more like legalized collusion for oil and gas companies....especially when coupled with OPEC policies to cut production. And then Biden threatened to implement windfall taxes on O&G, which would only make energy more expensive. Biden policies are more about pandering to the ignorant citizens who don't understand markets and economics, and not about good policy that would encourage more reliable, affordable, and sustainable energy. A big part of Biden's platform is "ending fossil fuels". How has he performed?
Fossil fuel demand still accounts for the vast majority of the world's primary energy consumption. Over the last 20 years, the proportion of fossil fuels in the world energy mix has gone from about 84% to about 81%. In other words, this number changes very, very slowly. Mainly because it relies on the turnover of capital, which is a slow process.
Low/no carbon fuels have taken an increasingly large share of the growth in the last ten years and will probably continue to do so. but they have been additive rather than replacement sources of energy.
Question is, has the production kept up with our country’s demand? Joe’s decision to deplete the SOR would indicate no. And it gets exasperated Joe refilling it at prices double or triple what he got when he sold it world wide especially to the Chinese.
Actually, the US production has vastly outrun demand. In the last 12 years, production roughly tripled from just over 4.5 million barrels per day (the low point of a decline that started in the 1970's) to over 13 million b/d. At the same time, demand grew by less than 3 million b/d. the net result was that the import dependence ratio went from about 70% to roughly zero today (the US is actually a net exporter). Today, we still import oil for quality reasons, but we export about 3.5-4 million b/d.
Keep in mind that the price of crude oil is set on a global basis. The balance within the country is only one part of a much larger puzzle. This has been both good and bad for the US. In my analysis, global prices have largely been quite low. Fuel prices have deflated over the long-term.
"Like all good traders, Mr Biden has turned volatility into profit. In 2022, when he released 180m barrels of crude—or one-third of America’s stockpile—he sold at an average of $95 a barrel. In July last year, when the West Texas Intermediate (WTI) benchmark was at $67 a barrel, he began to refill the reserve. The president has replaced about one-fifth of what he sold, posting a profit of $582m, and has managed to time the market to perfection.
Treasury officials estimate that Mr Biden’s early sales knocked about $0.40 from the price of a gallon of petrol. That was a relief for consumers (and probably boosted his party’s performance in midterm elections). Yet price falls may hurt domestic producers, and discourage investment in new production."
Once again though, it was all artificial manipulation of oil and there fore gas prices meant for the privilege of one President. No doubt it happens all the time. But no president has made the honesty and integrity claims joe has. Especially through JKP wh has nonissues lying all the time about everything
Great article, but the comments here have also been great. It appears from the comments that the missing considerations in your article are 1) the timeframe in between policy implementation and outcome (enacting production enabling policies and actual production), and 2) the limits of Fed policies over non-fed resources. Those comments make sense to me, though I'm not an Oil & Gas guy. I'm just a concerned citizen who is convinced that civilization, and everything else, is downstream of dense, cheap, and readily available energy for all. I'm a happy subscriber; keep it up.
1. The US government owns the mineral rights of about 1/3 of the Western US. But the amount of land that is prospective or actually producing is determined by geology. Producing areas are concentrated in SE and NW New Mexico, Wyoming, Western Colorado, and Central Utah. For the most part, the oil and gas industry already has access to the land that it wants in the L48. Individual companies are quite keen on selected new areas for exploration, but this is, frankly, not important.
2. In the context of the shale revolution, access to public lands is not really important. One of the nice things about shale is that about 91% of shale oil and gas wells are on private land. Individuals own the mineral rights, get the royalties, and provide access to the companies. Furthermore, the regulation of these activities is carried out by states. The federal government has been (mostly successfully) seeking a larger role, but remains mostly a bit player. In other words, federal policy and actions have actually had very little impact on the trajectory of the shale's meteoric rise, no matter who was in the White House. Note that the federal government is the primary driver offshore and in Alaska, but that the time frames in which actions manifest themselves is much, much longer, so actions taken by any administration will not have impacts until 5-10 years afterward.
3. If you want to understand US oil and gas production growth (I do this for a living), stop looking so hard at policy. Policy matters somewhat, butt he key factors that explain US oil and gas are 1) oil and gas prices, which are set by supply/demand fundamentals, 2) corporate behavior of producers (especially the independents), 3) technology and oilfield service costs and equipment, and 4) geology and the physics of well production.
4) if you break out the DOI production expansion into the areas where it is occurring, you will find that more than 100% of the growth is in SE New Mexico. This part of the Permian Basin has probably the highest productivity shale wells in the country. They are excellent and should continue to power growth in the region for several years, as there is still room to run. But it is also important to note that these leases are all HBP (held by production). They were leased long ago for the most part, and any change in federal leasing policy has no impact. The Biden administration did make noises about withholding permits to drill, but companies had stockpiled permits during the latter days of the Trump administration and the Biden administration resumed issuance of permits at a normal rate. There is no realistic impediment to development beyond the usual bureaucratic burdens of logistics in a remote area and state and federal processes.
Given the above realities, the notion that production in the US -- even on federal lands -- will align with the attitudes and actions of a particular administration is unlikely to prove true.
Very informative, thank you. Regarding your No. 1, development of mineral rights on those federal lands are stalled by the conflict between the Administration's weaponization of regulatory agencies and its "nut-zero" policies.
Regarding your No. 4, "find that more than 100% of growth"? How can you have more than 100 percent growth? As an aside, the Permian Basin is obviously very important, but why do the oil companies object to WCS and Orano's intent to develop spent fuel storage in Texas, or Holtec's effort to develop similar storage east of Carlsbad? Doesn't make sense.
My meaning was that the rest of the federal lands/DOI production continues its long-term decline. Thus, the absolute growth from New Mexico is more than 100% of the absolute growth of the entire system. In other words, NM is not only responsible for all of the net increase, but it is also making up/backfilling the decline of the other areas. Sorry if I was unclear.
I believe that you misunderstood the 4th point. If you double something you get 100 percent growth. If you more than double something get greater than 100 percent growth.
Your headline is the problem, though the sub-head is accurate. Biden might be the "Produce, Baby, Produce" President, but the leasing, exploration and drilling happened earlier.
Record production is the result of technology, hydraulic fracturing. Interesting data sets are the number of wells in production and the number of new wells. Capital investment for exploration is down in the US. It is possible that a Trump administration could assist an increase in exploration and drilling of new wells. As always, I appreciate the data and inferences from THB. It keeps me thinking.
Drill Baby Drill is about the jobs. Geology, lease applications(auctions). and drilling permits make jobs but drilling and field development makes working class jobs. The mountain states with lots of federal lands have been unjustifiably penalized under the Biden administration by the denial of lease auctions and drilling permits on federal lands and on private lands with federal mineral rights. We have lost jobs and have been left with drilling equipment and related assets sitting idle. So its just politics.
Meanwhile Germany and other countries can't import natural gas fast enough to avoid burning coal to generate power. Where's the environmental gain in impeding natural gas production?
Would be neat to see how different administrations affect nuclear power development. Would love to see a politician really push for less regulations and further innovation in that sector.
What is missing in this discussion of oil and gas production is refining capacity. The permitting process to build new refining facilities is so burdensome that energy producers have had to curtail refined fuels in their product line. Yes, we're producing massive crude oil sufficient to export it all over the world, but don't see the benefit ourselves of an abundant fuel supply.
US Refining is indeed production-constrained, a combination of lack of capacity and long lead times for permit reviews/approvals and construction. We export crude and import refined products. The US leads the World in imports of refined petroleum products as of 2022, which, I believe is still the case in 2024. However, I do not have the financial breakdown so I have only my speculation. If there wasn't a financial gain in the transactions for US producers, I doubt it would continue.
Thank you for the informed support. Guess I just feel better wishing that policy makers would keep self-sufficiency in the mix when times are volatile as they are presently.
My conclusion is that variation s in presidential policy is far less potent than the long-term trend of dramatically increased shale oil and gas production.
I think where presidential administration's influence oil and shale is in how they stimulate or stifle demand. In taking office, Biden "promised" to end fossil fuels, immediately canceled Keystone XL and creating uncertainty in about 10,000,000 jobs. Harris' opposition to fracking threatens a similar number of jobs. Those promises create uncertainty about supply, thus raising prices.
Veriten COBT
“This Will Be The First Year Since 1958 Without an Offshore Federal Lease Sale” Featuring Erik Milito, NOIA
https://veriten.com/stream/cobt-242/
Lot of good comments here. I disagree with the basic premise of the article, or at least the conclusion the casual reader might draw from the presentation. The time constant for oil production (discovery, validation, approvals, production) is very long, sometimes decades. No judgement about the impact of Biden policies can be made from current production. Ron
A couple of key points of clarification. The U.S. also imports a significant amount of crude oil. That is because many U.S. refineries were engineered and constructed to refine heavy crude from countries such as Venezuela (when the U.S. was heavily dependent on imported oil). New crude and NGL (discussed below) production from shale deposits over the last 15 years is of lighter grade and incompatible with many U.S. refineries. Thus, we export light crude and import heavy crude. Key point two: U.S. oil production consists not only of crude oil as discussed in Roger's piece but also natural gas liquids that are a byproduct of natural gas production. Those NGLs average about 6.8 MMbpd. So, total oil production in the U.S. is around 20 MMbpd which consists of 13.2 MMbpd of crude and 6.8 MMbpd of NGLs. That 20 MMbpd supply exceeds our daily demand by about 2 MMbpd which allows the U.S. to be a net exporter.
Well said. This is the so-called "export champagne and import beer" situation.
Glad to see that despite President Biden’s rhetoric the oil and gas industry continues to persevere. Just keep drilling! (except in my backyard)🤔
This article by Mark Mills in City Journal relates to the subject of this post. https://www.city-journal.org/article/drill-america-drill?skip=1
As populations grow we need affordable energy to prosper and oil and gas has been the clear winner for many years. The USA is in prime position to be the supplier of choice for the world to our benefit. As long as our politicians don't screw it up with policies promoting Net Zero and rapid decarbonization.
I like the Honest Broker for many reasons, but one is that - OIl and gas hate has no home here!
So in other words, Biden's policies, along with all other global initiatives to reduce fossil fuels, aren't working. Good energy policy encourages reliability, affordability, and sustainability. Biden scores low in all three categories. The grid is less reliable with more intermittent power, energy prices as a whole have increased significantly over the past 3 years, and investing in short lived wind and solar, which is less energy dense and requires more resources, is not sustainable. Furthermore, green energy policies in Europe and the United States have been more like legalized collusion for oil and gas companies....especially when coupled with OPEC policies to cut production. And then Biden threatened to implement windfall taxes on O&G, which would only make energy more expensive. Biden policies are more about pandering to the ignorant citizens who don't understand markets and economics, and not about good policy that would encourage more reliable, affordable, and sustainable energy. A big part of Biden's platform is "ending fossil fuels". How has he performed?
Fossil fuel demand still accounts for the vast majority of the world's primary energy consumption. Over the last 20 years, the proportion of fossil fuels in the world energy mix has gone from about 84% to about 81%. In other words, this number changes very, very slowly. Mainly because it relies on the turnover of capital, which is a slow process.
Low/no carbon fuels have taken an increasingly large share of the growth in the last ten years and will probably continue to do so. but they have been additive rather than replacement sources of energy.
Question is, has the production kept up with our country’s demand? Joe’s decision to deplete the SOR would indicate no. And it gets exasperated Joe refilling it at prices double or triple what he got when he sold it world wide especially to the Chinese.
Actually, the US production has vastly outrun demand. In the last 12 years, production roughly tripled from just over 4.5 million barrels per day (the low point of a decline that started in the 1970's) to over 13 million b/d. At the same time, demand grew by less than 3 million b/d. the net result was that the import dependence ratio went from about 70% to roughly zero today (the US is actually a net exporter). Today, we still import oil for quality reasons, but we export about 3.5-4 million b/d.
Keep in mind that the price of crude oil is set on a global basis. The balance within the country is only one part of a much larger puzzle. This has been both good and bad for the US. In my analysis, global prices have largely been quite low. Fuel prices have deflated over the long-term.
The Economist recently discussed this:
"Like all good traders, Mr Biden has turned volatility into profit. In 2022, when he released 180m barrels of crude—or one-third of America’s stockpile—he sold at an average of $95 a barrel. In July last year, when the West Texas Intermediate (WTI) benchmark was at $67 a barrel, he began to refill the reserve. The president has replaced about one-fifth of what he sold, posting a profit of $582m, and has managed to time the market to perfection.
Treasury officials estimate that Mr Biden’s early sales knocked about $0.40 from the price of a gallon of petrol. That was a relief for consumers (and probably boosted his party’s performance in midterm elections). Yet price falls may hurt domestic producers, and discourage investment in new production."
https://www.economist.com/finance-and-economics/2024/05/16/joe-biden-master-oil-trader
Um.. if he only refilled one fifth of what was sold.. did he really "managed to time the market", or maybe.. left us hanging..?
Once again though, it was all artificial manipulation of oil and there fore gas prices meant for the privilege of one President. No doubt it happens all the time. But no president has made the honesty and integrity claims joe has. Especially through JKP wh has nonissues lying all the time about everything
Great article, but the comments here have also been great. It appears from the comments that the missing considerations in your article are 1) the timeframe in between policy implementation and outcome (enacting production enabling policies and actual production), and 2) the limits of Fed policies over non-fed resources. Those comments make sense to me, though I'm not an Oil & Gas guy. I'm just a concerned citizen who is convinced that civilization, and everything else, is downstream of dense, cheap, and readily available energy for all. I'm a happy subscriber; keep it up.
Just a few things to add to the conversation:
1. The US government owns the mineral rights of about 1/3 of the Western US. But the amount of land that is prospective or actually producing is determined by geology. Producing areas are concentrated in SE and NW New Mexico, Wyoming, Western Colorado, and Central Utah. For the most part, the oil and gas industry already has access to the land that it wants in the L48. Individual companies are quite keen on selected new areas for exploration, but this is, frankly, not important.
2. In the context of the shale revolution, access to public lands is not really important. One of the nice things about shale is that about 91% of shale oil and gas wells are on private land. Individuals own the mineral rights, get the royalties, and provide access to the companies. Furthermore, the regulation of these activities is carried out by states. The federal government has been (mostly successfully) seeking a larger role, but remains mostly a bit player. In other words, federal policy and actions have actually had very little impact on the trajectory of the shale's meteoric rise, no matter who was in the White House. Note that the federal government is the primary driver offshore and in Alaska, but that the time frames in which actions manifest themselves is much, much longer, so actions taken by any administration will not have impacts until 5-10 years afterward.
3. If you want to understand US oil and gas production growth (I do this for a living), stop looking so hard at policy. Policy matters somewhat, butt he key factors that explain US oil and gas are 1) oil and gas prices, which are set by supply/demand fundamentals, 2) corporate behavior of producers (especially the independents), 3) technology and oilfield service costs and equipment, and 4) geology and the physics of well production.
4) if you break out the DOI production expansion into the areas where it is occurring, you will find that more than 100% of the growth is in SE New Mexico. This part of the Permian Basin has probably the highest productivity shale wells in the country. They are excellent and should continue to power growth in the region for several years, as there is still room to run. But it is also important to note that these leases are all HBP (held by production). They were leased long ago for the most part, and any change in federal leasing policy has no impact. The Biden administration did make noises about withholding permits to drill, but companies had stockpiled permits during the latter days of the Trump administration and the Biden administration resumed issuance of permits at a normal rate. There is no realistic impediment to development beyond the usual bureaucratic burdens of logistics in a remote area and state and federal processes.
Given the above realities, the notion that production in the US -- even on federal lands -- will align with the attitudes and actions of a particular administration is unlikely to prove true.
Very informative, thank you. Regarding your No. 1, development of mineral rights on those federal lands are stalled by the conflict between the Administration's weaponization of regulatory agencies and its "nut-zero" policies.
Regarding your No. 4, "find that more than 100% of growth"? How can you have more than 100 percent growth? As an aside, the Permian Basin is obviously very important, but why do the oil companies object to WCS and Orano's intent to develop spent fuel storage in Texas, or Holtec's effort to develop similar storage east of Carlsbad? Doesn't make sense.
My meaning was that the rest of the federal lands/DOI production continues its long-term decline. Thus, the absolute growth from New Mexico is more than 100% of the absolute growth of the entire system. In other words, NM is not only responsible for all of the net increase, but it is also making up/backfilling the decline of the other areas. Sorry if I was unclear.
I believe that you misunderstood the 4th point. If you double something you get 100 percent growth. If you more than double something get greater than 100 percent growth.
Wonderful info, thanks Raoul!
Roger,
Your headline is the problem, though the sub-head is accurate. Biden might be the "Produce, Baby, Produce" President, but the leasing, exploration and drilling happened earlier.
Headlines around here should be taken with a wink, nod, grain of salt, wry smile, knowing glance, and ifykyk. 👍😎
Record production is the result of technology, hydraulic fracturing. Interesting data sets are the number of wells in production and the number of new wells. Capital investment for exploration is down in the US. It is possible that a Trump administration could assist an increase in exploration and drilling of new wells. As always, I appreciate the data and inferences from THB. It keeps me thinking.
Drill Baby Drill is about the jobs. Geology, lease applications(auctions). and drilling permits make jobs but drilling and field development makes working class jobs. The mountain states with lots of federal lands have been unjustifiably penalized under the Biden administration by the denial of lease auctions and drilling permits on federal lands and on private lands with federal mineral rights. We have lost jobs and have been left with drilling equipment and related assets sitting idle. So its just politics.
Meanwhile Germany and other countries can't import natural gas fast enough to avoid burning coal to generate power. Where's the environmental gain in impeding natural gas production?
Would be neat to see how different administrations affect nuclear power development. Would love to see a politician really push for less regulations and further innovation in that sector.
What is missing in this discussion of oil and gas production is refining capacity. The permitting process to build new refining facilities is so burdensome that energy producers have had to curtail refined fuels in their product line. Yes, we're producing massive crude oil sufficient to export it all over the world, but don't see the benefit ourselves of an abundant fuel supply.
US Refining is indeed production-constrained, a combination of lack of capacity and long lead times for permit reviews/approvals and construction. We export crude and import refined products. The US leads the World in imports of refined petroleum products as of 2022, which, I believe is still the case in 2024. However, I do not have the financial breakdown so I have only my speculation. If there wasn't a financial gain in the transactions for US producers, I doubt it would continue.
Thank you for the informed support. Guess I just feel better wishing that policy makers would keep self-sufficiency in the mix when times are volatile as they are presently.
My conclusion is that variation s in presidential policy is far less potent than the long-term trend of dramatically increased shale oil and gas production.
I think where presidential administration's influence oil and shale is in how they stimulate or stifle demand. In taking office, Biden "promised" to end fossil fuels, immediately canceled Keystone XL and creating uncertainty in about 10,000,000 jobs. Harris' opposition to fracking threatens a similar number of jobs. Those promises create uncertainty about supply, thus raising prices.