Energy Policy: A Phone Call Away

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It’s crazy how quickly things can change. A few months ago, the U.S. oil and gas industry was shunned by policymakers and investors alike. Today, however, soaring high commodity prices, a declining economy, a war in Europe and a looming election have changed all of that. Suddenly, the Biden administration is asking the domestic oil and gas industry to boost production to meet our own needs and those of our allies in Europe. Certain members of Congress are even accusing the industry of holding back production to keep prices higher.

Look no further than actual words for evidence of the shift in rhetoric. On a trip to Europe late last year, President Biden stated, “… the idea we’re going to be able to move to renewable energy overnight and not have—from this moment on, not use oil or not use gas or not use hydrogen is just not rational.” U.S. Special Presidential Envoy for Climate John Kerry said recently that “gas is going to be a key component in the energy transition.” In March, U.S. Energy Secretary Jennifer Granholm said. “… we need more supply ... right now, we need oil and gas production to rise …” Quite the turnaround from what administration officials were saying during the first several months of 2021.

So, what changed?

First, there is the pain at the pump. U.S. consumers are angry about gasoline prices that have nearly doubled in a little over a year. High energy prices are affecting nearly every aspect of the U.S. economy and are contributing to high inflation. While oil and gas production has recovered in the U.S., the Biden administration has taken actions that impact oil and gas leasing on federal lands and waters as well as pipeline development. As a result, energy companies and their investors and financiers are concerned about the viability of long-term investments in fossil energy projects all across the energy value chain.

Additionally, the Russian war on Ukraine has resulted in a rapid loss of Russian barrels from western markets and is cutting off the supply of Russian gas in Europe at a time that the continent was already suffering from high energy costs. The impact in Europe has been devastating to manufacturers and consumers alike. The average German, for instance, will pay 6,000 more euros this year for energy than they did last year.

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Amid tighter supplies and higher energy costs impacting our allies and American businesses and consumers here at home, in late March President Biden announced in Europe that the U.S. would deliver 15 MMcm of additional LNG through the end of the year. Also in late March, President Biden committed to withdrawing roughly 1 MMbbl/d from the Strategic Petroleum Reserve (SPR), placing an additional 180 MMbbl of oil into the market.

While the U.S. is capable of delivering on those two commitments, in both instances the decisions were made without serious input by, or consultation with, the industry. That is an unfortunate trend, as the industry is a critical source of knowledge on how to best supply the market. Furthermore, the SPR decision will put a serious dent in the nation’s crude stockpile and thereby decrease our energy security.

If we are truly going to meet our commitments to ensure reliable and affordable energy for Americans and our allies over the long term, we must address government policies that have caused serious problems along the petroleum value chain. In short, we need a plan or a roadmap, and a commitment rather than a reluctance to consult with industry. The U.S. government has a long tradition of collaborative studies and planning alongside industry on how to meet our nation’s energy needs, including through entities such as the National Petroleum Council. Surely this is a time where such cooperation is sorely needed, and the industry wants to help.

It is clear that many in Washington do not understand the complexities of the energy value chain. At the same time, there has been much talk recently about the need to address the energy transition and energy security at the same time along parallel tracks. This is a vast improvement over the contentious talk about energy policy we have grown accustomed to and could provide an opening for constructive dialogue and lasting solutions. Industry is ready and willing to work collaboratively to address these problems.

All the government has to do is pick up the phone and ask.