Oil and natural gas are global commodities – their price is a result of supply and demand. Geopolitical disruptions like Russia’s brazen invasion of Ukraine cause unpredictability and extreme volatility in global energy markets.
International conflict and inflation at home are serious issues, and our industry is working hard to meet the moment, while ensuring that we are responsibly producing and providing energy to the market in a way that meets current demand and future projections.
Domestic production supports national security, economic security, and global environmental goals. But, in order for domestic production to help us fully realize these goals, it must be done in a way that meets market demand, rather than reacting to volatility that could cause oversupply.
As demand continues to grow, so does our current and planned production. US oil production grew last year and output could rise as much as 900,000 barrels per day in 2022. In the Permian Basin, our most prolific oil-producing basin, record high oil production was just reached this month. The Marcellus, the most prolific natural gas basin in the country, is also at record high production.
This production doesn’t happen with the flip of a switch. The oil and gas industry is heavily regulated by local, state, and federal agencies at every step of the process. It takes months of planning, permitting, and preparation for a company to drill and complete a well before that oil or natural gas comes onto the market. The process includes a multitude of steps – including (but not limited to): acquiring a lease, designing the well and associated facilities, submitting necessary permits, conducting analysis of the potential impact on the air, water, species, historical and cultural sites, permitting and building associated pipelines and electrical infrastructure, and the numerous government agencies reviewing the various permits for approval.
The complex process for drilling and completing a new well in the United States takes time and significant resources, even without the challenges we face from supply chain disruptions and labor shortages.
Because the White House is facing political pressure to address record high inflation and rising energy prices at home, they have started calling for oil and gas companies to “produce more.” Additionally, some Members of Congress are now targeting our industry with new investigations, taxes, and fees.
Targeting our industry in response to rising gasoline prices with false narratives does not change the law of supply and demand. And it does not reduce the pain that Americans are feeling at the pump and in their home heating costs.
There is a great deal of uncertainty right now about everything from storage levels to additional sanctions to how OPEC producers will respond to increased American production. Inflationary costs, labor shortages, and supply chain disruptions are further hindering increased production. In fact, projections show inflationary pressures could lead to 15-20 percent in additional capital spend just to keep current oil and natural gas production levels and could go even higher.
The men and women of the oil and natural gas industry are committed to providing America and the world with reliable energy. Rather than targeting our industry with false narratives, the Administration and Congress should work with us on long-term solutions that support stable energy prices.
First and foremost, the Administration can insert some stability into the market by publicly signaling its support for American made oil and natural gas’ role in our country’s energy portfolio. Not just for the next 60 days, but for the long run. While we understand the need for a diverse energy supply, it is clear that global demand for oil and natural gas is not going anywhere anytime soon. Independent analysts and bipartisan leaders have been saying that for years. Now it’s time for the White House to communicate clearly that there is a role for American made oil and natural gas—produced under the highest standards in the world– in the global energy mix.
Additionally, the Administration’s current policies should be reviewed and recalibrated so that energy infrastructure investments can be made and export facilities can get built. We need pipelines to transport what we produce, and we need export facilities to send it to our allies. We need to see a change in the policies that are making it harder to get energy to where it’s needed the most.
We don’t set the price of oil or natural gas, but we do make long-term decision based on timing, capital, and the regulatory environment. The best way to ensure we have stable supply and prices now and into the future is by working with our industry on smart policies and sensible regulations that allow us to produce ever-cleaner oil and natural gas to meet domestic and global demand.
