What's Risky about Energy Production?
A recent LTE "Biden's war on American energy" March 26th, made a couple of claims that are often cited in conservative media. Let's review two statements.
1) " In 2019, we were energy-independent. Now we needlessly face high energy prices that could go higher. "
Energy independence occurs when our domestic consumption of energy (measured in quadrillion British thermal units, or quads) is less than our energy production. This did occur in 2019 when energy consumption declined to 100.2 quads while production rose to 101 quads. (Energy, by the way, is comprised of crude oil, natural gas, coal, nuclear, and renewable energy (hydro, wind, solar, biofuels, and biomass).
However, we were NOT energy-independent in terms of crude oil production since we consumed roughly 20 million barrels daily while only producing 12 million barrels.
Since crude oil is a global commodity, oil prices are set by global supply and demand. Want to shield Americans from higher oil prices? We would have to reduce our consumption of oil (ex. electric vehicles) while encouraging oil producers to increase supply; both of which President Biden is doing.
2) "The 9,000 permits the White House keeps touting is misleading at best. Thousands of those sites can’t be developed as they are held up in litigation. "
Before drilling can occur, a leaseholder has to get a federal permit. As of the end of 2021, there were 9,173 approved federal permits. Once approved, producers have to put a drilling plan together, work with state and private landowners for rights of way, and secure drilling rigs. It's a costly investment.
It's not uncommon for thousands of permits to go unused in any presidential administration. However, the calculus for moving forward has changed due to the economic impact of COVID.
Douglas Holtz-Eakin, an economist and president of the American Action Forum, a center-right think tank, said firms are trying to assess the durability of the global rebound. "They have to be sure that the costly investment (and time) that it takes to turn a lease into a producing well is worth it.""
"They are under pressure from the financial community to pay more dividends, to do more share buybacks instead of the proverbial 'drill, baby, drill,' which is the way they would have done things 10 years ago. Corporate strategy has fundamentally changed."
So it's not litigation that's the problem, but reluctance by oil producers to make the investment.