The world today is facing amazingly complex issues: high inflation, war on the European continent, a prolonged pandemic, supply chain meltdowns, food shortages, political turmoil, the threat of climate change and skyrocketing energy prices. While the degree to which these crises can be managed by public officials varies significantly, energy pricing is one area where government action can indeed make a difference, for better or worse.
Let’s take a closer look at what the government is and is not doing to help us meet today’s energy challenge. In March, the Biden administration began the largest release ever of the Strategic Petroleum Reserve (SPR) by committing to withdraw 1 MMbbl/d for six months. Although the notion of flooding the market with additional oil might make for a good headline, the reality is that the SPR exists to supply the U.S. with oil in the case of a national emergency. SPR releases are merely increasing our vulnerability to an actual supply emergency at home without offering any relief at the pump. To that end, by May, the SPR dropped to the lowest level since 1987.
Meanwhile, in response to the loss of Russian gas supply to Europe, the U.S. committed 15 billion cubic tons (Bct) of LNG to Europe through the end of this year and an additional 50 Bct through 2030. If we follow through and put the right policies in place to make it happen, and the investment capital follows, Europe and the U.S. will greatly benefit. Yet, despite pushing the U.S. oil and gas industry to increase production and communicating support for American energy exports to allies in Europe, the administration continues to send mixed messages.
For example, while the president and his senior advisers urge industry action, his Envoy for Climate, John Kerry, recently took the opportunity to push back against “this new revisionism suggesting that we have to be pumping oil like crazy, and we have to be moving into long-term [fossil fuel] infrastructure building, which would be absolutely disastrous,” accusing “vested interests” of exploiting the war in Ukraine.
While recent actions like authorizations for increased LNG exports are a welcome change, the administration is still not taking the steps necessary to significantly boost domestic production to meet domestic and global demand. In fact, on the whole, federal policies enacted thus far are doing precisely the opposite.
After pledging to end oil and gas leasing on federal lands and waters during the campaign, in addition to indefinitely withdrawing specific marine areas off Alaska from future leasing, imposing a moratorium on drilling in the Arctic National Wildlife Refuge and making millions of acres off limits to oil and gas development in the National Petroleum Reserve-Alaska, in his first week in office the president instituted a “pause” on all new federal oil and gas leasing.
Watch Jack Belcher in the latest installment of Energy Policy Watch, a partnership between Hart Energy and Cornerstone.
Not surprisingly, 18 months into the Biden administration, we have yet to see a plan for the next five-year offshore oil and gas leasing program, with Interior Secretary Deb Haaland recently saying she would release a draft plan on June 30, the day that the existing five-year plan expires. As a result, it is now likely that 2022 will be the first year since 1958 that no new federal offshore leases will be offered. It also placed a pause on onshore Bureau of Land Management oil and gas leasing for over a year. Consider that production on federal lands accounts for 24% of total U.S. oil produced and 11% of natural gas.
[Editor’s note: The Biden administration released a new proposed offshore oil and gas leasing plan on July 1, which could include anywhere from zero to 11 lease sales. The release of the proposal is only the second part of a three-step process to finalize “whether or how many” lease sales will be held in the five-year plan.]
Make no mistake, an all-of-the-above approach to energy that includes renewables is needed. President Biden’s June 6 invocation of the Defense Production Act to boost domestic manufacturing of solar panel components, building insulation, heat pumps and equipment like electrolyzers, fuel cells and platinum group metals and power grid infrastructure will contribute to our overall energy security. However, they will do nothing to address rising fuel prices or anticipated shortages in electricity this year or in the near future. To meet our current challenges and ensure more affordable gas for our cars and electricity for our homes and businesses in the months and years ahead, we need immediate solutions and clear policy signals that will boost our domestic supply of oil and gas.
The policies currently in place are not anywhere near conducive for boosting domestic energy production, combating high prices and supporting long-term energy exports to America’s allies. Instead, they are a continuation of policies and rhetoric that have thwarted investment by financial institutions into our oil and gas sector.
It does not have to be this way, and it is not too late to make a course correction. The path to lower U.S. energy prices and greater energy security begins and ends right here at home.
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