We are facing an energy crisis.
As most of you know, inflation hit a 13-year-high in July and prices are expected to rise by 4.7% just this year. While some say the inflation levels we are seeing are temporary there are some major concerns that this will be a long-term problem. Yet few are talking about how it is significantly impacting the oil and gas industry.
Oil prices have been skyrocketing over the past year, rising more than 50% to top $80 a barrel at one point with projections calling for $100 a barrel by September. Many factors have contributed to the spikes. How did we get here and what can we do about it?
There are many contributing factors to why we are seeing these spikes in inflation, especially in the oil and gas sector. Originally, the Organization of the Petroleum Exporting Countries (OPEC) agreed to curb its output and extended most oil output cuts into April, offering small exemptions to Russia and Kazakhstan, after deciding that the demand recovery from the coronavirus pandemic was still fragile despite a recent oil price rally.
Then OPEC’s leader Saudi Arabia said it would extend its voluntary oil output cut of 1 million barrels per day (bpd). That news combined with increasing demand pushed oil prices back towards their highest levels in more than a year with Brent trading up 5% above $67 a barrel as the market had expected OPEC+ to release more barrels.
Earlier this year it was reported that almost one-quarter of the country’s tanker trucks as of April were idled because there’s no one to put behind the wheel. According to National Tank Truck Carriers, trucking’s driver shortage already exceeds 50,000 drivers. But the trucking industry’s workforce shortage is not limited to drivers. We are looking at shortages of mechanics, dispatchers, administrative staff, inspectors and design-certified engineers who can inspect and repair cargo tank truck trailers.
The reason for this is twofold. Right now, the U.S. is seeing our highest rate of retirement due to lockdowns that forced the baby boomer generation into early retirement and the expansion of unemployment benefits that disincentivize workers to return to the labor market. Not to mention, according to economists, Biden’s bans on Keystone XL Pipeline and drilling on federal lands has also contributed to the rise in fuel prices amid the summer driving season.
Overall, U.S. gas prices are currently 42 percent higher than they were a year ago and are at their highest since 2014. When adjusted for inflation, current gas prices are getting close to what they were during the oil crisis of 1970. And now, there are new concerns about the possibility of gas shortages.
Combine OPEC production with record government spending, unemployment insurance benefits squeezing the labor market, and Joe Biden’s crackdown on energy production in the U.S., it is no wonder we are seeing gas prices hit a seven-year high!
Thankfully, OPEC and its allies have agreed to boost oil supply starting in August. We are expected to see the OPEC+ countries ramping up their total output by some two million barrels by the year’s end. The monthly production increases would then continue next year.
Friends, we have the power to turn this inflation ship around. We need to decrease government spending, end the unemployment insurance extensions, roll back Biden’s restrictions on U.S. energy production, prevent additional lockdowns and prop up the oil and gas industry.
The natural gas and oil industry is essential to economic recovery in other sectors, like manufacturing, agriculture, industrial and more, as well as opportunities for job creation.
As economic activity, travel patterns, and consumption continue to grow post COVID-19 economic shutdowns, the U.S. Energy Information Administration expects global oil and liquid fuels consumption to surpass 2019 levels in 2022. The oil and gas industry accounted for nearly 8% of the U.S. GDP in 2019 and generated an additional 3.5 jobs elsewhere in the U.S. economy for each direct job in the U.S. natural gas and oil industry. A strong U.S. oil and gas industry is what will set the tone to curb inflation and get our economy back on track.
We need to put an end to any proposals that include Green New Deal components that negatively impact our oil and gas sector.
Right now, there are many energy proposals floating through the halls of Congress that include unrealistic renewable energy mandates – mandates that harm American families.
Destroying fossil fuel production in areas such as the Permian Basin and mandating unreliable solar and wind will cause unprecedented energy insecurity in two ways: 1) making domestic energy unreliable 2) depending on unreliable countries, above all China, for solar panels, wind turbines, and batteries. Wind and Solar are variable energy sources that are not as reliable and efficient. By increasing our reliance on renewables such as wind and solar American’s are more vulnerable to blackouts.
For example, Germany pays 3X US prices to get 1/3 of electricity from solar and wind. The United Kingdom’s rising prices are causing more people to die of cold, with "energy poor" people trying to stay warm by huddling in libraries and buses all day.
Democrat policies that mandate a switch to unreliable renewable energy make us further beholden to China. Rather than cancel pipelines as the Biden Administration has done with the Keystone XL, we should embrace additional pipelines being built as this further secures our national security and is the safest way to transport oil and natural gas. We need to be able to supply the global community with our energy sources and help build the infrastructure necessary to use our resources as opposed to be outfitted by our adversaries – namely China and Russia.
Further, with the current extension of the Highway Bill set to expire on September 30 Speaker Pelosi has threatened to delay consideration of the Infrastructure package until the Senate passes a $3.5 trillion budget reconciliation bill.
Before the House adopts a budget resolution, Members of Congress should be able to review a detailed scope of the spending levels and revenue raisers. These specifics are crucial, given the combined threat of rising inflation, national debt, and the trillions recently, and appropriately, allocated to the Covid-19 emergency. We must also have the national resources to respond to any new waves of the pandemic.
There is no doubt that to keep our oil and gas industry strong one thing is clear. We need to stop the Biden administration’s policies that are aimed at killing the domestic oil and gas sector.
His policies have led to 1) the restriction of American energy production. 2) Wall Street influencing woke CEOs NOT to invest in the energy sector. 3) dramatic increases in gas prices which were already spiking due to inflation. 4) restriction of the modes of transportation for energy. AND in the President’s budget, they said they're not going to fund any Corps of Engineers projects that help move or subsidize hydrocarbons—pipelines, harbor dredging. Some estimates are that that's about 40-50% of the Corps of Engineers’ budget that they're going to redline.
They are restricting energy production and restricting supply.
It is a double whammy for the industry and for working families. It drives up prices and it kills really jobs in the energy sector by the thousands.
The bottom line is, to be a world leader in energy and we need to reverse these policies as quickly as possible.
