Posted on 03/06/2021 5:04:45 AM PST by EyesOfTX
The U.S. oil and gas business is already in a modest boom, and the Biden Administration will be powerless to stop it from growing.
Here’s an excerpt from a piece I wrote yesterday:
The history of the oil and gas business in the United States is that every time the “experts” all line up to declare it to be dead, it finds a way to come roaring back. This scenario has played itself out at least half a dozen times across my own 42-year career in the business or writing about it.
Well, guess what: It appears to be happening again. I was about to say that it appears to be about to happen again, but the truth is that the domestic oil and gas industry has already staged a significant comeback from the depths of its COVID-19-induced depression last summer. Take the Enverus Daily Rig Count as an example: On September 1, 2020, that metric showed the number of active drilling rigs in the U.S. sat at just 276 rigs, depressingly near its all-time low. As of today, that number has risen to 460 active and working rigs, a 2/3rds increase in just six months.
As well, the Primary Vision count of active U.S. frac spreads had recovered all the way to 175 as of February 12, more than double the count of just 85 as of August 28 of last year. That count fell all the way to just 41 active spreads during the disastrous arctic freeze event that struck Texas, Oklahoma and other shale states in mid-February, but had recovered back to 140 as of the last available count on February 26.
Granted, these rig and frac spread numbers remain well below the highs of late 2019/early 2020, but they still represent a remarkable turnaround from the depths of the depression in just half a year. This becomes especially impressive when one considers that it has been achieved amid continuing mediocre financial results from big shale producers and ongoing tightness in the financial markets related to the funding of major shale-related projects in the U.S. While those financial factors continue to place pressure on corporate producers to focus on cutting costs and elevating investor returns, as we have discussed several times in the past, the natural inertia within companies that are still run by engineers and geo-scientists – rather than investment bankers and accountants, as so many are now – is still to drill more wells. Healthier commodity prices only serve to magnify that natural internal inertia.
We certainly do have healthier commodity prices now. Goldman Sachs GS -0.6%, one of the bellwethers for those who like to pay attention to future oil price forecasts, recently raised its forecast for the mid-year West Texas Intermediate price to $72 per barrel. It is key to note that that increased estimate was published on February 22, well before the OPEC+ group surprised markets on Thursday by agreeing to essentially maintain its status quo on current production and export levels through the end of April.
Given that that announcement has already resulted in an increase of 10% in the price for WTI as of this writing Friday morning, Goldman and other price forecasters could have another increased estimate for WTI coming in the near future. In fact, Goldman Sachs raised its projection for 3rd quarter, 2021 Brent prices to $80 on Friday morning. “Key will be the potential shale supply response, although the latest earnings season suggests investors are still a long way away from rewarding growth,” the bank said. It simultaneously raised its forecast for 2022 U.S. shale production by 300,000 barrels per day.
[End]
Link to the Full Piece
PlayUnmute Fullscreen VDO.AI But what about Biden’s energy policies, you might ask. What about that Keystone XL decision? What about that moratorium on new leasing on public lands? What about all the additional regulations to come?
Yes, all those policies designed to slow the domestic oil and gas industry down will have an impact, no doubt. But let’s look at how those moves will and will not impact the shale-based oil boom that is already growing:
KeystoneXL executive order – This presidential order that effectively cancels the northern leg of the KeystoneXL system would in and of itself have little, if any impact on a nascent oil boom in the Lower 48. The Keystone system’s purpose is pretty singular: To facilitate the import of large volumes of Canadian crude into the United States in a safer and more environmentally-sensitive way than bringing it in by truck or rail. It is not designed to carry large volumes of U.S.-produced crude, and would have no impact on America’s various shale plays. Moratorium on new leasing on federal lands and waters – This could become more impactful should it be extended beyond its current 1-year term to last throughout Biden’s full 4-year term in office. This is solely because about half the lands in New Mexico’s part of the prolific Permian/Delaware Basin are owned by the federal government. Otherwise, America’s shale plays – especially those that focus on oil production – overwhelmingly lie on privately-held lands in places like Texas, North Dakota and the eastern half of Colorado. New regulations by EPA/OSHA/DOI and other federal agencies – No question there will be a raft of such new regulatory actions coming into effect in the coming years. For the oil industry, this will make the EHS/Safety/Regulatory Compliance departments big growth areas within companies and trade associations. It will also be a very good time to look for government relations jobs within the industry. But again, many of the regulations we’re talking about here would apply only on federal lands and waters, and the industry has proven to be quite resilient in dealing with major new regulatory actions that apply nationwide. As a result, we will see companies by and large be able to quickly adopt their business practices, finding innovative new ways to comply with the new regulations. They will be a nuisance for sure, and result in slightly elevated costs of doing business, but such regulations will not be able to halt the nascent boom that is building. So, while the Biden Administration will no doubt continue to come at the industry with actions designed to limit its ability to do business, taken together they will be able to somewhat mute the boom that is building, but won’t be able to stop it.
Bottom line: as long as the OPEC+ agreement holds together and those countries remain willing to withhold some of their oil production, America is headed for another oil boom. In fact, we’re already in it.
That is all.
He will try to stop it.
Thanks for your posts and expertise.
Just think of the bills,introduced by Occasional Cortex,can be passed in the next couple of years.Just think of the Executive Orders that Feels Up/Heels Up can issue...orders that would take years to challenge in the Federal courts. Just think of all the lawsuits that "Earth First" can file before Osama Obama appointees.
Need I continue?
It’s the commies who are trying to wreck the USA.
Oil boom is fueled by higher oil prices, making more exploration economical. It is called supply and demand.
The question we need to ask is whether a questionable "oil boom" under the anti-fossil fuel policies of the Biden administration will translate into lower fuel prices for the consumer.
You cannot impose policies that increase the price of a barrel of oil and expect the consumer to benefit! It won't happen!
“He will try to stop it.”
He WILL stop it, if he can get control of the courts. So far, he hasn’t accomplished that, despite the best efforts of Lin Wood and his Republican followers to give him that power by handing the Senate to the Democrats to ‘teach the GOP a lesson’. So now the filibuster (and with that Biden’s inability to pack the courts) hangs by a thread in Senate. We’ll see how long that lasts...
Remember the oil boom caused by Jimmy Carter in the late 1970s? The Alaska Pipeline, which had been stopped by “greenies”, was suddenly given the Green Light to go ahead.
Oil prices shot up but the Gov’t said the oil companies could not charge the higher price for oil per barrel, but had to sell at old prices. Only NEW wells drilled in the late 1970s could charge the new higher price.
I have it from several men in the oil drilling business that the companies then shut down the old wells, and drilled new wells next to them to get the higher price.
“Curses! Foiled again! We’ll not get to $4.00/gal if production picks up due to higher prices! Stop this cycle!”- Biden
I’m heavily invested in bitumen, because you can’t pave a highway, runway or driveway with hopeychangium, no matter what they suggest!
“....despite the best efforts of Lin Wood and his Republican followers to give him that power by handing the Senate to the Democrats to ‘teach the GOP a lesson’.”
I don’t believe you understand that it would not have mattered one whit whether all pubes showed up to vote. The steal was in even if it hair-lipped hitler.
Just go out and park on a rural overpass of any major interstate highway and count the number of big rig 18-wheelers that pass under it in any given hour.
They ALL run on diesel. Every train, ship and aircraft all run on fossil fuel with minor exceptions as well as the majority of light vehicles.
Liberalism is a chronic, no-cure mental disease that will destroy this nation and her People IF not stopped.
As the Canadian born former governor of Michigan vows to stop it threatening if it does not stop. Threatening what I don’t know.
Like the 30 x 30 land grab threat. Just how? Over taxation?
Won’t keep him from trying...
Fingers crossed on that prediction. About 10 years ago a nascent oil company in Texas paid the heirs to my grandfather's old East Texas farm a big signing bonus and agreed to a 25% royalty for a 3 year lease. We heard that they were going to drill the first year.
Well, they did pay the signing bonus but after that, nothing. It was our understanding that the oil was down deep, but that was not a deterrent, at least at first. I suppose with the advent of fracking, really deep drilling became impractical. (?)
Obama caused the last boom and Biden is Obama II. I took advantage of Obama’s policy and Biden will be just as good for the investor class. The boom is happening and consumers will be damaged while the wealthy get richer, just as it was under Obama.
Democrats always bring about the opposite of what they say they want.
“I don’t believe you understand that it would not have mattered one whit whether all pubes showed up to vote. The steal was in even if it hair-lipped hitler.”
Damn! I was hoping to make 3 Lynn Wood comments in a row this morning and not get any responses. Because, if that happens, then I’m done with him and the Georgia runnoffs.
As to your comment - Trump didn’t think so, otherwise why the two trips there and imploring Republicans to vote? Seems to me that if Trump really thought the same as Lynn Wood, he would have called for a boycott of that election (and I would have nothing to bitch about).
To put it another way, if you want to boycott an election you see as fixed, it helps to have the leader of your party on board.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.