Home NewsBusiness News Ukraine war ups pressure for US oil; industry faces hurdles

Ukraine war ups pressure for US oil; industry faces hurdles

by WOOWinvest
0 comment
Ukraine war ups pressure for US oil; industry faces hurdles


In fields in northern Montana, industry veteran Mac McDermott watched crude prices slump to more than $120 a barrel from $75 in January, as the pressure of Russia’s war in Ukraine mounted, and then the coronavirus outbreak in China. It fell again when virus fears sparked a global panic. slow down. McDermott said his family business would moderately increase drilling if oil prices stabilize.

But he spent the next few months on the sidelines, trying to get enough workers to monitor the roughly 100 wells the company operates. These include some wells that have been idle during the pandemic, which he has been trying to bring online since last year.

President Joe Biden’s move to ban Russian oil imports over his invasion of Ukraine has been met with demands from Republicans to boost U.S. production in response to high oil prices.

The White House has also called for more drilling, citing war as it shelved Biden’s campaign promise to limit drilling on public lands because of climate change.

However, the political rhetoric about rapidly ramping up U.S. crude production runs counter to the reality of the industry: Not enough workers to expand rapidly, underfunding to invest in drilling, and concerns about today’s high oil prices, according to industry representatives, analysts and analysts won’t last. State officials.

“Making more domestically would be great,” McDermott said.

“(But) it’s so volatile. … We haven’t had any sources of funding for years. If we drill, the funding will have to come from existing production. It’s a risky business.”

Republicans from energy states have overcome logistical constraints in the industry, blaming Democrats and Biden for slow U.S. oil growth.

Senators Ted Cruz of Texas and Steve Daines of Montana called for “unlocking” American energy and opening up more public lands for drilling.

Daines accused Democrats of using Russia’s oil ban to cover up a so-called “ban all oil” plan.

The U.S. doesn’t import much Russian oil, and the Biden administration has effectively stopped selling new oil or gas from federal lands and waters.

But it has approved nearly 4,000 new drilling licenses on federal lands, and the company has thousands more in inventory. White House spokesman Jen Psaki said companies should use the licenses to “get more supply from the ground.”

Federal energy reserves account for about a quarter of U.S. oil, with the rest coming from private, tribal and state lands.

With oil futures briefly dipping below $0 a barrel in the first year of Biden’s presidency, overall pumping rates have slowly risen as the industry emerges from the pandemic.

Analysts say the hurdles to boosting U.S. oil are surmountable, but will take months to resolve, and a big increase likely won’t happen until the end of this year or early next year.

“It’s going to be a slower growth for a field like ours,” McDermott said. “Everyone in the industry will say, if our prices are consistent, then you know what you’re getting for a long time and it’s easy to make business decisions.”

In the short term, the world is looking for other sources.

Oil prices tumbled after the United Arab Emirates said last week it would urge OPEC to consider raising oil production. Saudi Arabia alone has about 2 million bpd of additional capacity on standby, said Rice University energy researcher Jim Crane.

By comparison, total U.S. production last year was about 11 million barrels per day.

Even under favorable conditions — strong prices, political pressure and less cautious shareholders — U.S. companies’ production could increase by more than 1 million barrels per day by year-end, according to Robert Johnston of Columbia University’s Center for Global Energy Policy. .

Some of the largest U.S. reserves are located offshore in the Gulf of Mexico. However, large platforms used in deep bay waters take years to finance, build and put in place.

Andy McConn of energy analysis firm Enverus said the near-term crude boost must come from already-developed onshore oil sources, such as the Permian Basin in New Mexico and Texas, as well as North Dakota and Mongolia. Bakken, Dana. by industry and government agencies.

Even in these areas, there is no way to simply turn on the faucet right away. The most accessible reserves have been drilled, McConne said.

“There are not many easy outcomes,” he said.

As the industry shrugs off the effects of the pandemic slowdown, some oil-producing regions have begun to rebound, particularly the Permian Basin — the country’s busiest oil belt with 45,000 drilled holes in the past decade, according to the Energy Information Administration. oil wells.

Other fields that could see expansion include Oklahoma’s Mid-Continent region and Colorado’s DJ Basin, McConne said.

Operators in the Permian Basin say growth has been steady since last spring. By January, they were producing more than 5 million barrels a day.

However, this time the mood is different. “It’s not a baby drill mentality like it used to be,” said Stephen M. Robertson of the Permian Basin Petroleum Association.

A variety of factors are moderating the production boom, he said, including price volatility, labor issues and longer wait times to manufacture parts and ship supplies. Even the custom cowboy boots that some workers love are hard to come by.

“It’s not just a factor that tells the industry what to do. It’s not just high prices,” Robertson said.

If the conflict in Ukraine persists, prices remain high and logistical hurdles are overcome, the company could move into relatively untapped territory, including Wyoming’s Powder River Basin and Utah’s Uinta Basin.

But it will not attract thousands of workers like the boom that has swept these regions over the past decade, overwhelming housing and other services and turning rural communities into industrial hubs.

Larry Scott, an engineer who has worked in the oil industry for decades and now represents part of the Permian Basin as a Republican in the New Mexico legislature, said oil and gas companies still have to overcome labor challenges.

“You can’t speed things up if you can’t find qualified people to do it,” he said.

You may also like

Leave a Comment

Our Mission is to help you make better trading decisions by providing actionable investing content, comprehensive tools, educational resources and assist you in making more money in the stock market.

Latest News

Newsletter

Subscribe my Newsletter for new blog posts, tips & new photos. Let's stay updated!

@2022 – All Right Reserved. Designed and Developed by WOOW Invest

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy