US oil producers ignore Biden’s rallying call to drill

While U.S. drivers are paying record prices at the pump, Joe Biden has urged the country’s oil producers to turn on the taps and stop the jump.

On Saturday, average U.S. fuel prices rose above $ 5 a gallon, according to AAA, a nationwide group of drivers. The economy.

But calls for more oil production – a complete departure for a president who vowed to crack fossil fuels – have largely gone unanswered, as the industry insists the days of its drilling campaign are behind it.

“When the White House started calling in a panic, they thought splitting oil production might increase sharply in the near term – like within months or quarters,” said Bob McNally, head of consulting firm Rapidan Energy.

“They were shocked to discover that it’s like asking for blood from a stone. It’s almost impossible.”

There are fuel prices in the US Soared to unprecedented levels Because the war in Ukraine is exacerbating the already crowded world oil market. Prices this week broke $ 4.95 per gallon, according to AAA, Motor Group. In California, drivers pay more than $ 6 a gallon.

For consumers, pump prices have become one of the visible effects of rampant inflation across the economy. This created a headache for the president, who many voters blame for the rise.

“Fair or not, this is a problem for Biden because he is perceived as the maestro of the economy, although there really is not much a president can do to influence real-time fuel prices,” said Sasha Meckler, CEO of the energy program. In Washington.

The administration was reluctant to stop the rise: it did Took out record volumes Of crude oil from the country’s strategic reserves, gave up for sure Anti-pollution laws And relies on producers in the Middle East Pump more. But as prices continue to climb, the White House has urged local industry to raise production, which at around 11.6 million barrels a day last month remained well below the pre-epidemic peak of nearly 13 million barrels a day.

Jennifer Greenholm, US Secretary of Energy, Told operators Recently the country stood on a “war base”. “It means you produce more now, where and if you can,” she said.

The industry is gradually expanding output, which the U.S. Energy Information Administration expects to reach $ 11.9 million a day before the end of the year. But it was not fast enough for the administration, which wants a rapid increase to reduce prices.

The producers say they can not turn on the switch and return overnight to an era of “drill, baby, drill” of rampant growth that has driven the shard boom of the past decade.

One factor behind this reservation is Wall Street, which has been burned from huge losses as local oil companies have consistently flowed revenue to greater growth. Today shareholders demand returns.

Investors’ demands are met over those of the White House: e Cash amount According to S&P Global Commodity Insights, manufactured by operators this year is expected to be larger than the overall profits of the last two decades.

Still, the number of rigs and fracture fleet in the field has climbed since the depths of the epidemic, with U.S. negative oil prices forcing operators to hit breaks.

Moody’s estimates that private operators will increase capital expenditures by 49% this year, and increase output by 12%. In contrast, public companies will increase their capital expenditures by half the rate to a meager 3% increase in production.

Producers also say that rising input costs and supply chain limitations are preventing them from going back up overnight, even if they want to.

The price of frack sand, used by operators in the hydraulic fracturing process to blast open cracks in rock, has skyrocketed while mines closed during the plague take time to regain gear. The cost of drilling rigs has also skyrocketed, due to the general shortage in the market. Labor costs have also risen as many skilled workers have left the industry and are demanding premiums to return.

A bar chart of the main reason why public companies do not return to growth (% of respondents) shows that Wall Street will not allow manufacturers to break free in a drilling campaign

With American feverish people ignoring his rallying cry and the upcoming midterm elections, the president has few levers at his disposal to influence the price of fuel.

“In the near term there are few tools,” Meckler said. “We need to take action now to ensure that the United States is better prepared in the future. This includes ambitious measures to increase supply, diversify the supply chain, reduce demand through electricity and release carbon from the sector. “

Data simulation by Stephen Bernard and Patrick Mathurin

US oil producers ignore Biden’s rallying call to drill Source link US oil producers ignore Biden’s rallying call to drill

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