Sign Up for FREE Daily Energy News
Canadian Flag CDN NEWS  |  US Flag US NEWS  | TIMELY. FOCUSED. RELEVANT. FREE
  • Stay Connected
  • linkedin
  • twitter
  • facebook
  • youtube2
BREAKING NEWS:

Vista Projects
Copper Tip Energy Services
Hazloc Heaters
Copper Tip Energy
Vista Projects
Hazloc Heaters


Commentary: White House Request is Like Asking for Blood from a Stone – Irina Slav


English Español 简体中文 हिन्दी Português
These translations are done via Google Translate

By Irina Slav

More from Irina Slav

“When the White House started calling around in a panic, they thought shale oil production could grow sharply in the near term — like in a matter of months or quarters. They were shocked to learn that that’s like asking for blood from a stone. It’s almost impossible.”

The above are comments by Rapidan Energy’s head Bob McNally, made to the Financial Times following President Biden’s apparently frantic attempt to get U.S. oil companies to pump more. And they are the kind of comments that can give you a headache.

There are degrees of ignorance, and different kinds of ignorance as well. The most benign, so to speak, is age-related ignorance. The younger you are, the more ignorant because you simply haven’t had time to learn as much as someone twice your age.

The most malign kind of ignorance, and the one that tends to manifest itself at the highest degree as well is the deliberate, obstinate refusal to learn something. It is the direct refusal to acknowledge that something even exists. And it is the sort of ignorance that is being demonstrated by both the Biden administration and their European Union friends.

President Biden’s “rallying cry”, as described by the FT, to the oil industry is one example of the above, shall we say, condition. It interestingly coincided with the U.S. president berating Exxon for posting huge profits, accusing the company — and the whole industry — of taking advantage of the oil supply shortage.

“Exxon made more money than God this year,” Biden apparently said, as quoted by Reuters, and expressed his dissatisfaction with the fact both the supermajor and its fellow industry players were using this money to buy back shares instead of drill more wells.

In case Biden’s approach to the oil industry sounds contradictory to anyone it’s because it is. But it is more than just contradictory, as Rapidan Energy’s McNally noted: it is dangerously ignorant. Why dangerously? Because some kinds and degrees of ignorance can hurt you, for instance, by losing you political power.

“Why aren’t they drilling? Because they make more money not producing more oil,” President Biden also said during a recent speech. “Exxon, start investing and start paying your taxes.”

The president was probably shocked to learn that no company, even Exxon, can flip the investment switch in a day and that wells don’t drill themselves at the flick of a president’s finger. What may have come as even more of a shock would be the fact that, for now, the White House, unlike the Kremlin, cannot tell the country’s biggest oil companies what to do.

But focusing exclusively on the U.S. president is unfair and cruel. So let’s turn to Biden’s energy wingwoman, Jennifer Granholm, who, in her own words, drives on sunshine.

In an interview with ABC earlier this year, the U.S. Energy Secretary said she drives a Chevy Bolt, which she charges from solar panels installed on her garage. Apparently, at least according to her comments, Chevy Bolts and solar panels just spring into existence without the need of energy input, most of its from fossil fuels.

GLJ
GLJ

The interview was released in March. Also in March, Secretary Granholm addressed the U.S. oil industry with the words that “we are on a war footing,” adding “That means you producing more right now, where and if you can”.

If anyone feels confused, you’re not alone. First, the top energy official of the United States praises the technological advancements that have allowed her to charge her electric car with energy from the sun in the comfort of her own home and espouses the job-creating advantages of the energy transition, and only a few days later calls for more oil production.

A month later, Granholm actually said U.S. oil production was already rising and would make up in full for the 1 million bpd in lost Russian supply in April. Indeed, per the EIA’s latest weekly petroleum status report, the four-week average to June 3 was 11.9 million barrels daily. That was up from 10.95 million a year earlier. But it was unchanged from six weeks earlier.

The status quo is unlikely to change in any meaningful way six weeks from now, too, judging by the signals the industry is sending. It’s not about returning cash to shareholders only, by the way, which is another thing those in Washington have chosen not to hear. The industry is complaining of shortages, of supply chain snags, and, perhaps shockingly for those urging it on to drill, rising production costs.

Yet let’s assume all these problems were solved, never mind how. Let’s assume oil companies could update their budgets in the blink of an eye. Let’s assume the only thing holding them back from drilling was their own unwillingness to drill and let’s also assume the White House could force them to reconsider this unwillingness.

According to what I’ve heard from industry insiders, it takes several months to put a shale oil well into operation. This website agrees, putting the average at three to five months from start to finish, based, however, on the above assumptions.

Now let’s forget about the assumptions and come back to reality, where drillers are dealing with a shortage of everything and, according to some reports, they are running out of sweet spots, meaning cheap-to-drill sites.

Yet some in the industry are now facing additional federal taxes of 21%, courtesy of a senior Senate Democrat. The drive to punish oil companies for making money from the current market imbalance produced its latest idea earlier this week, when the chair of the Senate Finance Committee, Ron Wyden, proposed a 21% surtax on oil companies that report a profit margin of over 10%.

This surtax, if approved, would bring the tax burden for these companies to a total 42% and, I’m sure, would incentivise them to spend more on additional production because it makes flawless sense.

The hard reality is not that difficult to grasp. You cannot drill a well if you do not have the equipment you need to drill it with or the people to drill it. You can’t frac a well if you don’t have the frac sand you need to frac a well. And with people like the secretary-general of the UN calling oil and gas investment “delusional” you’d probably think twice about such investments. These facts are really extremely simple.

It is precisely this simplicity of an unpleasant situation that leads me to believe that the U.S. administration, exactly like its European friends, and like Antonio Guterres et al, is consciously filtering the more unpalatable aspects of reality out and focusing on a version of reality it wants to see. And this is perhaps the most dangerous kind of government there can be.



Share This:



More News Articles


GET ENERGYNOW’S DAILY EMAIL FOR FREE