Joe Biden had a neat nine-point energy plan when he was running for president. He began putting this plan into practice on his first day at the White House with the cancellation of the infamous Keystone XL pipeline and has continued his tough stance on fossil fuels ever since.
The argument that this tough stance will in fact benefit oil producers has been waged since 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 won’t reduce US demand for oil and gas, so it will benefit the industry, just not the American industry.
The argument makes sense, and there is plenty of evidence: after the Keystone XL was canceled, Alberta oil producers increased the amount of oil they sent by rail to US refineries – a less safe way to transport crude oil, by the way. Biden’s moratorium on new federal land oil and gas leases was one factor pushing up oil prices earlier this year. And the Biden government’s stance on Saudi Arabia may have contributed to the Kingdom’s decision to expand the voluntary cuts in oil production that contributed to the latest price hike.
The latter point was recently made by the director of the Schork Group, Stephen Schork, to Fox News. Schork said that Biden’s treatment of Saudi Arabia had not only made it clear that oil and gas were no longer a priority for the government (except in negative terms), but had also led to higher prices.
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“In the first place from what we’ve seen, the biggest bullishly impact Biden has had on prices is his treatment of Saudi Arabia,” said Schork. “There was [a] surprise two weeks ago when Saudi Arabia took a more aggressive view at the OPEC meeting, and oil prices soared after that surprise decision. “
But higher prices could only be the beginning of the US president’s troubles with the oil and gas industry. In its energy plan, Biden’s team noted the creation of millions of new jobs in clean energy and infrastructure. However, there is no word on the jobs that could eventually be lost in oil and gas. Some of these jobs are certainly transferable from the oil and gas industry to, for example, solar and wind, as we saw during the oil price crisis of 2014. Still, the question of whether all jobs are transferable remains open.
‘You don’t hurt the big boys who take care of the entire development. You’re hurting these little guys who dream where no one else thought there was oil and gas, ”a US oil industry director recently told the AP, commenting on President Biden’s crusade against the oil and gas industry. Related: Analysts Underestimate China’s Oil Demand?
Indeed, this industry grew in new and unexpected ways thanks to the shale wave of the past decades. Where formerly independents were rare, the shale revolution sparked a wave of oil and gas independents, most of whom, as family-owned land manager Kirkwood Oil & Gas said above, were too small to fight with the government.
However, many in the industry were preparing for the crusade, the AP reports said. The report quoted a Devon Energy director telling investors that Devon “would roll with the punches” and that it had stockpiled 500 drilling permits. Devon is unlikely to be the only one prepared.
And yet many small players will go under. This will lead to a decline in local oil production, especially as permits are running out. And this, of course, will lead to even higher oil prices – and gas prices at the pump – for US consumers. Chances are that this will happen before demand starts to decline permanently, as electric vehicles and renewable energy generation become dominant over cars and fossil fuel power plants. This is going to be an unpleasant time for many, but honestly, no one has said that the energy transition will be easy or cheap.
By Irina Slav for Oilprice.com
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