What a difference one year can make. The chief of the nation’s top oil and gas lobby laid out the state of his industry on Wednesday in a presentation that reflected a remarkable turnaround for the sector.
One year ago, when President Joe Biden was elected and Democrats took control of Congress, the oil sector appeared to be in a crisis. Policymakers were promising to transition the nation away from fossil fuels, and the American Petroleum Institute’s chief executive Mike Sommers said his industry was ready for a fight.
These fights seem to have gone his way today, at least so far. Sommers was clear in his warnings against oil and gas development restrictions from last year, but his tone was less combative.
“In policy debates this year, it’s possible we’ll find more agreement than usual,” he said, “if only because American energy leadership itself solves so many problems our nation faces.” He added, “With supply-chain failures, and with inflation on the minds of many Americans, the last thing anyone wants to see is more upward pressure on costs that are felt by every family and business.”
If such agreement on policy can be reached, though, it may instead come because Sommers’ industry has won many of the policy battles it set out for itself a year ago.
Biden, on the campaign trail, promised to stop new oil and natural gas drilling on public lands. He also spoke out about eliminating billions of dollars worth of industry subsidies. Biden promised to shift away from oil and toward electric vehicles.
After a difficult year, the administration appears to have given up on its campaign promise to stop new leasing for oil-and-gas development. The president’s signature Build Back Better legislation, which includes sweeping climate provisions, has stalled in the Senate.
Biden said that negotiations continue on the bill, but key climate provisions, which threatened the oil industry, including a plan shift toward renewable energy, have been dropped. Others, such as the expanded tax credits available for electric vehicles, are still in doubt.
Some of the Biden administration’s biggest climate policy achievements are ones that the petroleum institute supported, including a proposed rule to cut methane emissions from oil and gas development. While the measure could provide substantial climate benefits, the rule would merely clean up the oil industry’s operations, rather than ramp them down.
Sommers spoke about his industry’s investments in carbon capture and storage technology, which he said will be “the way that we’re really going to address this challenge from an industry perspective,” and he welcomed the Biden administration’s focus on the technology. Biden’s bipartisan infrastructure bill passed Congress last year. It included more than $12Billion in funding for carbon capture, removal, and a large portion could be used to fund oil and gas companies.
Sommers stated that the Build Back Better legislation includes an expansion to a carbon capture credit, which his group supports and could provide tens or billions in benefits over the next decade if it is enacted.
Sommers said that he sees possible threats still ahead. Sommers said that the House of Representatives passed climate legislation. It also included a fee for methane emissions from industry, which his group would attempt to block in the coming months. Sommers also condemned an increase in royalty rates for companies extracting oil and natural gas from public lands.
While Sommers did not speak directly about electric vehicles, the petroleum institute released a report Wednesday that obliquely criticized the proposed increased tax incentives for electric vehicles, saying federal policies “should allow all vehicles and fuel technologies to freely compete on a level playing field to reduce transportation-sector emissions.”
Senator Joe Manchin, the West Virginia Democrat who has been the primary obstacle to enacting the Build Back Better bill, has reportedly opposed the legislation’s expanded electric vehicle tax credits.
The oil industry’s improving fortunes are not limited to Washington. One year ago, oil companies had their worst financial performance in recent times, as oil consumption was constrained by pandemic lockdowns. Analysts and oil executives believed that the pandemic was reshaping society enough to accelerate a peak of global oil demand. Some predicted that the United States would never see production levels rise to the level they were before.
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Today, profits are returning and production is rebounding. The U.S. Energy Information Administration stated Tuesday that it expects domestic oil production next year to surpass 2019 levels.
The long-term structural headwinds that climate legislation and technological disruption are causing to the oil industry continue to affect it. This is a major challenge for the industry. European oil giants—most of which are members of the petroleum institute—have been increasing investments in renewable energy and electric vehicles, in contrast to their American counterparts.
Sommers devoted much of his talk to climate change and his industry’s efforts to cut emissions. He repeated his group’s position that the oil and gas industry has done as much as any to help cut U.S. emissions by providing cheap natural gas to replace coal for power generation. Although the line is partially true, it overlooks the corresponding increase in methane and the need for natural gas transition to reduce emissions.
Sommers used government estimates and projections from the International Energy Agency to support the argument for increasing oil and natural gas production and investment. He forgot to mention that the same projections show that this course would send global temperature soaring beyond the goals of The Paris Agreement.
Sommers said he shared global leaders’ goals to cut emissions. But by making the case for continued expansion of his industry, he seemed to be betting those goals won’t be met.
Source: Inside Climate News