Joe Biden had an elegant nine-point energy plan when he campaigned for president. He started putting that plan into action on his first day at the White House with the cancellation of the famous Keystone XL pipeline and has since continued his tough stance on fossil fuels.
The argument that this harsh stance will, in fact, benefit oil producers has been made since the beginning of the campaign. It went like this: Biden’s fight for less oil and gas and more renewable energy will hurt US oil and gas producers, but it will not reduce American demand for oil and gas and therefore benefit industry, not just US industry. .
The argument makes sense and there is plenty of evidence: after canceling Keystone XL, Alberta’s oil producers increased the amount of oil they sent to US refineries by rail – a less secure method of transporting oil, by the way. Biden’s moratorium on new oil and gas leases on federal land was one of the factors that pushed oil prices up earlier this year. And the Biden government’s attitude towards Saudi Arabia may have contributed to the Kingdom’s decision to extend its voluntary cuts in oil production that contributed to the latest price hike.
This last point was made recently by the director of the Schork Group, Stephen Schork, to Fox News. Schork said that in addition to making it clear that oil and gas are no longer a priority for the government (except in negative terms), Biden’s treatment of Saudi Arabia has resulted in higher prices.
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“Looking closely at what we saw, the biggest impact that Biden had on bullish prices was the treatment he gave Saudi Arabia,” said Schork. “There was [a] surprise two weeks ago, when Saudi Arabia took a more hawkish view at the OPEC meeting, and oil prices soared after that surprise decision. “
But higher prices may just be the beginning of the US president’s problems with the oil and gas industry. In their energy plan, Biden’s team noted the creation of millions of new jobs in clean energy and infrastructure. However, there is not a word about jobs that could end up being lost in the oil and gas sector. Some of these jobs are certainly transferable from the oil and gas industry to solar and wind power, for example, as we saw during the 2014 oil price crisis. However, the question of whether all jobs will be transferable remains open.
“You are not hurting the big guys who are doing all the development. You are hurting these little ones who are dreaming where no one else thought there was oil and gas, ”a U.S. oil industry executive recently told the AP, commenting on President Biden’s crusade against the oil and gas industry. Related: Are analysts underestimating Chinese demand for oil?
In fact, this industry has grown in new and unexpected ways, thanks to the shale boom in recent decades. Where before independents were few and far between, the shale revolution led to a sudden increase in oil and gas independents, most of them, as the family property manager Kirkwood Oil & Gas quoted above said, too small to fight with the government.
Many in the industry have prepared for the crusade, however, AP reports also note. The report quoted a Devon Energy executive as saying to investors that Devon would “roll with its fists” and that it had stockpiled 500 drilling licenses. Devon is unlikely to be the only one prepared.
And yet, many small players will sink. This will lead to a decline in local oil production, especially when licenses start to run out. And that will naturally lead to even higher oil prices – and gasoline prices at the pump – for American consumers. Chances are that this will happen before demand starts to decline permanently as EVs and renewable energy generation become dominant over fossil fuel cars and power plants. This will be an unpleasant time for many, but in all fairness, no one said that the energy transition will be easy or cheap.
By Irina Slav for Oilprice.com
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