US President Joe Biden began his term in early 2021 by rescinding the presidential permit for the Keystone XL pipeline, making clear his goal of promoting clean energy solutions at the expense of oil and gas. In the fall of 2021, the Biden administration was already calling on the OPEC+ group to produce more oil than expected to help American households see some relief at the pumps, where gas prices have hit a seven-year high. .
The apparent clash of energy policies has once again underscored the fact that the last pre-pandemic year 2019 was not the year of peak oil demand as some had suggested at the start of 2020, given that global oil consumption surged back in 2021 as economies rebounded, lockdowns were lifted and the United States saw record demand. Total implied oil consumption in the United States reached a record 23.191 million bpd for the week ending December 10. The previous record was set during the week ending August 27 last year, which reached new highs of 22.820 million bpd.
Oil demand roars back
As it lobbied to promote green energy and impose a moratorium on new oil and gas drilling on federal lands, the Biden administration was faced with high gas prices — a pain for the ratings. any president’s endorsement – due to rebounding US and global oil demand and international crude oil prices.
The US administration’s struggle has been one of the best examples of the dilemma that most world leaders have faced in 2021 and will continue to face for years, if not decades, to come: the need to ensure a affordable energy, including from fossil fuels, while advances in energy transition and technologies allow green energy to displace a significant portion of oil and gas demand. The energy crisis in Europe, which has contributed to rising energy commodity prices in recent months, has shown that oil and gas will continue to play a crucial role in meeting growing global energy demand. It also served to show that renewables cannot replace fossil fuels overnight, and that the transition and all the aspirations to net zero won’t happen for decades.
Governments pushing for long-term green energy sources is an admirable undertaking, but households/voters tend to appreciate short-term solutions to high gas prices and soaring energy bills and of heating.
US Shale disappointed with Biden
The US administration has sought to do what it can to bring down the highest gasoline prices in America. It hasn’t seen spectacular success since the summer of 2021. That’s mainly because international oil prices are usually the main driver of gasoline prices in the United States, and oil has had a great run. last year, Brent Crude prices hit an annual high of $86 a barrel. at the end of October, before falling back around $80 in recent days.
“This duality — the quest for more oil to keep the economy moving while simultaneously pursuing low-carbon alternatives — was a recurring theme for 2021,” notes Houston Chronicle correspondent Dan Graeber.
The theme continues in 2022, especially after the US administration pleaded with OPEC+ at the end of 2021 to help it reduce high gasoline prices, instead of looking to domestic industry first, which is based on vast reserves of oil and gas.
The U.S. shale sector, however, appears reluctant to reinvest too much in drilling new wells, seeking to reward shareholders after years of poor returns for investors. The U.S. oil industry is also frustrated with the Biden administration’s neglect and proposed policies that burden the sector and make domestic oil production more expensive while increasing dependence on foreign oil, including producers to lower environmental standards.
U.S. shale has not been happy with the administration’s continued engagement with OPEC+ on oil supply, when there is – and it is abundant – in America.
“I think first of all you, you stay at home, you ask your friends and you ask your neighbors to do it. And then if we can’t do it, you call other countries,” Vicki Hollub, CEO of Occidental, told CNBC in November.
Related: White House praises OPEC for production decision
Since then, the administration has announced plans to release 50 million barrels of oil from the U.S. Strategic Petroleum Reserve (SPR) in an effort to lower gasoline prices and has continued to call – and to congratulate – OPEC+ for adding more supply to the market each month.
“We welcome OPEC Plus’s decision to continue increasing production,” White House press secretary Jen Psaki said this week after the group decided to add 400,000 barrels. per day to its oil output in February in a widely expected move to continue easing cuts each month.
“Our goal is to ensure that supply meets demand,” Psaki said during a press briefing.
This goal of having an affordable and reliable energy supply now while working for more renewable sources in the longer-term energy mix should give the administration food for thought on how it has treated its own oil and gas industry. over the past year and from where the world’s largest oil consumer, America, sources oil to meet demand.
By Tsvetana Paraskova for Oilprice.com
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