In a move that likely angered his environment-conscious base, the White House has issued a muted request for U.S. oil companies to increase crude oil production in the wake of high crude oil and gasoline prices.
Though words are different than deeds—and President Joe Biden’s deeds have been decisively anti-fossil fuel expansion—a White House official told U.S. oil companies on Tuesday that they could increase production if they want.
“Prices are quite high, the price signal is strong. If folks want to produce more, they can and they should,” White House National Economic Council Deputy Director Bharat Ramamurti said in an interview today.
While the words fell short of an official request to U.S. oil companies to increase production, it is decidedly different from ignoring U.S. oil companies’ production plans altogether while asking OPEC+ to do the heavy lifting when it comes to oil production—to no avail, no less.
Ramamurti also dispelled the notion that the U.S. Administration was somehow curtailing crude oil production.
But U.S. oil companies have long held that while the Administration hasn’t directly restricted U.S. output, the energy policies flowing out of the White House have put a damper not only on the attitude involving crude oil production but has made it far more difficult for oil companies to ramp up.
The White House has received a lot of pushback in recent days for not tapping what many see as at least a partial solution to the headache that is high oil prices—U.S. shale.
Oil companies such as Devon Energy have said they have been perplexed that the White House has not called on them directly to ramp up oil production. And Ramamurti’s comments today still do not rise to the level of asking U.S. producers for more oil.
By Julianne Geiger for Oilprice.com
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The reason is that the sweet spots in the shale plays have already been utilized forcing shale oil drillers to move to less productive and more costly to produce spots. Another reason is declining well productivity and rising costs of production. And a third reason is that shale oil producers have less access to capital expenditure as before the pandemic because investors want a good return on their investments rather than a rising unproductive production.
Still, shale oil drillers’ failure to raise production significantly has far less to do with capital discipline and far more to do with inability to do so.
The maximum shale oil production could rise is estimated at 200,000-300,000 barrels a day (b/d) to 11.2-11.3 million barrels a day (mbd) in 2022. This is a minuscule drop in the ocean in the face of accelerating rise in oil prices.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London