Ahead of US President Joe Biden’s July 15-16 trip to Saudi Arabia, the American Petroleum Institute stepped up its attacks on policies it sees as deleterious to domestic oil and gas production and urged the Biden administration to take a long-term perspective on US energy needs.
The group contends that a “misguided policy agenda” has worsened inflationary pressures and added headwinds to the US oil and gas sector’s efforts to meet growing energy demand while reducing emissions. More troubling, the group says, is that the administration appears content with snubbing US energy producers in favor of foreign governments.
“Instead of supporting American energy leadership and encouraging investment in American energy production, President Biden will meet with Saudi officials to plead with OPEC to increase production,” API President and CEO Mike Sommers told reporters on a July 14 call.
While he agreed that “maintaining a constructive dialogue” with Saudi Arabia was important, given their key role in global oil markets, Sommers contended that a meeting with US producers would have demonstrated a greater resolve to increase oil supplies than looking overseas.
National Security Advisor Jake Sullivan earlier in the week told reporters that energy security was part of the “broad agenda” to be discussed on Biden’s trip to the Middle East.
He declined to expound on potential discussions with OPEC countries regarding increasing oil production but offered “we do believe there is a capacity for further steps that could be taken, and we will see how that unfolds as we go.” He also took issue with a reporter’s characterization that there would be “no progress on energy” with Saudi officials. “I’m not going to get ahead of what happens both on this trip and in the weeks that follow,” he said.
Those talks with Saudi officials are slated to have big stakes for oil market stability, the future of the OPEC+ alliance, longer-term supply, and regional security risks.
Crude oil futures were testing five-month lows July 14 on recession concerns. At 1712 GMT, NYMEX August WTI was down $5.11 at $/b and ICE September Brent was $4.47 lower at $/b.
Although oil prices have eased since Biden’s trip was booked in June, the US Energy Information Administration recently warned that the potential for oil price volatility remains high.
US energy strategy
Frank Macchiarola, API’s senior vice president of policy, economics, and regulatory affairs, stressed to reporters July 14 that the US needs a long-term energy strategy that allows more US oil and gas to fulfill demand that will continue for decades.
The administration’s consideration of fuel waivers to allow continued use of certain winter blended gasoline this summer while commendable would only have a marginal effect on prices at the pump that diminishes as the summer proceeds, he said, adding that energy security cannot be viewed from a one- or two-month lens.
“On the margins and in the short term, there are small things that can impact prices, but the American people are looking for a long-term vision,” he said. “We’ve offered a plan and are willing to collaborate with [the administration] and with Congress to help find solutions.”
API laid out that plan, referred to as “10 in 2022,” last month and includes 10 policies for spurring domestic oil and gas production that the group argues would restore US energy leadership and make a significant dent in the global supply and demand mismatch that sent fuel prices soaring.
Lifting development restrictions on federal lands and waters, accelerating LNG export approvals, ending permitting obstruction on natural gas projects, and advancing tax credits for carbon capture and hydrogen projects are among the proposed policies.
‘Mixed messages’
Sommers lamented that the White House has, in his view, thus far ignored an invitation from API and 27 other energy associations to tour major US oil and gas facilities and producing basins.
He said that “mixed messages” from the White House have been of grave concern to US oil and gas companies and are a factor that has chilled investment.
“On one hand, they’re asking for more supply, but [on] the other hand continuing to talk about how this industry needs to go away within a very short period of time,” Sommers said. “And that does not unlock the kind of investment that we need to have if we’re going to continue growing production and advancing this industry forward.”
A visit by Biden or a member of his cabinet to some of the key US oil and gas production basins would go a long way toward demonstrating government support for the sector after hitting operators with a slew of policies that the industry sees as discouraging production, he said.
It “would be a signal to American consumers and the investment community that this is an industry that we should be continuing to invest in for American energy security,” Sommers asserted.
The international community also has its eye on the president’s dealings with foreign oil-producing countries.
Asked about expected US-Saudi discussions on oil production, Mohamed Nasr, Egypt’s lead climate negotiator, said: “We have to accept that. This is why we are pushing on the idea of decarbonization. Even if things are being delayed, still actions need to be taken toward decarbonization.”
During a webinar the Middle East Institute hosted July 14, Nasr acknowledged that compounding energy, geopolitical, food, and financial crises will loom over negotiations at the next round of global climate talks to be held in Sharm El-Sheikh, Egypt, Nov. 7-18.
He urged energy-intensive industries like the oil sector to step up their individual and collective efforts to reduce their emissions, with a focus on achieving the Paris Agreement’s goal of capping global warming to below 2 degrees Celsius.
Source: Platts
