Mr. President, Stop Begging For Oil & Unleash Texas
IN THIS ISSUE:
1. Biden Should Stop Begging Saudi Arabia For Oil
2. President Biden’s Failed Energy Policies
3. U.S. Oil Production Plunged From 2019 Levels
4. The US Has More Oil Reserves Than Saudi Arabia
5. Biden Continues To Deplete Strategic Oil Reserve
Overview – Biden Should Stop Begging Saudi Arabia For Oil
It has been widely reported that President Biden made a plea to Saudi Arabia to increase oil production earlier this year in an effort to get oil prices down ahead of the mid-term elections. The irony is, Saudi Arabia and a few other OPEC+ members responded by cutting oil production by 2 million barrels per day. That’s an embarrassing presidential snub if ever there was one!
The question is: Why is the president of the United States going to other countries asking them to increase production when he could more easily go to Texas and North Dakota which could accomplish the same thing? There is only one answer, in my opinion: he doesn’t want to.
Texas alone produced a record 1.78 billion barrels of oil in 2020, despite the COVID lockdowns. In January 2021, President Biden announced sweeping new executive orders which halted oil drilling and new production on federal lands with the sweep of a pen on his first day in office. He could simply reverse those policies and boost domestic oil production quickly – again, if he wanted to.
The truth is, liberals want Americans paying high energy prices, except when national elections come around. The libs want high energy prices so Americans will accept their “green energy” policies. It’s as simple as that. But with the mid-term elections looking like a disaster for the Democrats, President Biden is trying to get gasoline prices down before November 8.
Today we’ll talk about the situation in the energy markets and why President Biden doesn’t need to be begging the Saudis to increase oil production. We can do it domestically with some simple changes to our energy policies implemented by President Biden.
President Biden’s Failed Energy Policies
Today’s letter is not intended as a “Bash Biden” piece but there is no denying his policies have resulted in sharply higher energy prices which have hurt all Americans. The national average price of a gallon of gas was $2.53 when President Biden took office. As we all know, however, gas prices soared to $5.00 a gallon in June of this year. While gasoline prices have since come down significantly, currently at $3.85 a gallon, they are still more than $1.30 per gallon over where they were when President Biden took office.
National Average Price For Gallon Of Gasoline
Source: US Energy Department; chart courtesy of GasBuddy.com
Before the presidential election in 2020, oil and gas companies raced to secure government permits to drill on federal lands in the waning months of the Trump presidency. They were concerned, with good reason, that Biden would follow through on his campaign promises.
To date, Biden is the only president in modern history not to have held a single oil and gas lease sale on federal lands, despite clear direction from Congress to do so quarterly.
While the Department of Interior is being forced by court order to hold a lease sale this quarter, it increased fees by 50% and decreased the amount of available acreage for drilling by 80% -- even as it cuts fees and red tape for renewable “green” energy production.
Timelines to approve permits to drill on already leased land ballooned from the Trump administration’s average of 108 days in 2019 to 182 days under the Biden administration. Meanwhile, scores of permits are now being held up by litigation initiated by extreme environmental groups allied with the White House.
Offshore, the Biden administration has not completed a single energy lease sale. In contrast, President Trump held eight in his single term, and former President Barack Obama held 29 lease sales in his two terms.
US crude oil production in 2021 during Biden’s first year in office was 9% below 2019 levels and, incredibly, even below 2020 levels when the worst of the pandemic shock took place. Where the 2020 outlook anticipated production of 13.2 million barrels per day in 2021, the reality was only 11.2 million barrels per day.
There were half as many onshore rigs operating per month in 2021 as in 2019. While preliminary data for 2022 shows onshore rig counts are increasing but are still lagging far behind pre-pandemic levels. Offshore, average rig counts fell drastically in 2020 and have remained flatlined through today.
Source: US Energy Department; chart courtesy of The Heritage Foundation
In summary, the oil production happening in the US today is largely due to federal lease sales under Trump, Obama and previous presidents, and production is being done largely on private and state lands, despite the Biden administration’s long-term agenda. One has to wonder where oil prices and supply and demand might be today without the Biden administration’s anti-fossil fuel policies.
U.S. Oil Production Plunged From 2019 Levels
US daily oil production turned sharply lower in 2020, initially due to the COVID pandemic when many drilling rigs were shut down, and later due to the Biden administration’s restrictive energy policies.
According to the US Energy Information Administration, the current level of daily crude oil production in 2022 is around 11,600 barrels per day. As you can see below, while production has started to recover this year, it is still well below the peak in 2019. While there was nothing anyone could do to prevent the COVID pandemic, it is clear production would be significantly higher were it not for the onerous Biden energy policies described above.
U.S. Daily Oil Production (Thousands of Barrels Per Day)
US Energy Information Administration; chart courtesy of MacroTrends
As you can also see in the chart above, oil production exploded during the Trump, Obama and Bush administrations. The rise during President Trump’s years in office was the fastest on record.
The sharp rise in US oil production in recent years has been largely made possible by fracking and horizontal drilling, but it was also due to the energy-friendly policies of these previous presidents, including President Obama who at least didn’t stand in the way.
Saudi Arabia, by comparison, produces just under 11 million barrels of oil per day, according to Saudi Crown Prince Mohamed bin Salman. Speaking at a conference in Jeddah this summer he said: "We have an immediate capacity to increase production to 12 million barrels a day and with investments, production can go to 13 million barrels per day after which the kingdom will not have any additional capacity to increase production." That is interesting.
So, to conclude this section, the US remains the largest daily producer of oil at roughly 11.6 million barrels per day, followed by Saudi Arabia at nearly 11 mbd and Russia at 10.9 mbd.
The US Has More Oil Reserves Than Saudi Arabia
The United States currently holds more recoverable oil reserves than Saudi Arabia or Russia, with shale oil accounting for roughly half of the US estimate. Total oil reserves for the US at 264 billion barrels now exceeds the totals for top oil exporting countries, with Saudi Arabia at 212 billion barrels and Russia at 256 billion barrels.
Texas is undoubtedly the largest oil-producing state in the United States. In 2020, Texas produced a record total of 1.78 billion barrels of oil. Texas is home to the most productive US oil region, the Permian Basin, which is located around the Midland/Odessa area, and routinely accounts for at least 50% of total onshore oil production in the US. A distant second is North Dakota, which produced about 431.2 million barrels of oil in 2020.
The oil and gas consulting firm Rystad Energy estimates total global oil reserves at 2,092 billion barrels, or 70 times the current production rate of about 30 billion barrels of crude a year. While that sounds like a huge number, with the anticipated continued growth in the world population, it is estimated we will deplete known global oil reserves before the end of this century.
Biden Continues To Deplete The Strategic Oil Reserve
The Strategic Petroleum Reserve (SPR), the world's largest supply of emergency crude oil, was established in 1975 primarily to reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program.
The federally-owned oil stocks are stored in huge underground salt caverns at four sites along the coastline of the Gulf of Mexico. The sheer size of the SPR – with authorized storage capacity of 714 million barrels -- makes it a significant deterrent to oil import cutoffs and a key tool in foreign policy.
The SPR is not always full, however. President Biden has authorized the sale of 180 million barrels of oil from the SPR this year, with the final 15 million barrels set to go out before the end of December. According to the Energy Department, that will put the SPR down to apprx. 400 million barrels, still over half of its capacity.
President Biden has authorized these sales, he says, in the hopes of getting oil and gas prices lower. While oil and gas prices have come down significantly since the peak this summer, most oil analysts don’t believe this was largely due to releases from the SPR. I agree.
President Biden says he will replace the oil sold from the SPR when crude prices drop to $72 to $67 per barrel. The price for West Texas Intermediate crude oil is $86 as this is written. It remains to be seen if the price will get back down to the president’s target for replenishing the 180 million barrels he sold.
Biden’s oil sales from the SPR are only the fourth time large releases have been directed by the president. Normally, sales are directed by the Energy Department and usually in emergency situations such as hurricanes, floods, etc. I have criticized President Biden and presidents before him for raiding the SPR for political purposes. But the media has largely given Mr. Biden a pass on this one. Oh well…
Very best regards,
Gary D. Halbert