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Jason Herrick, who owns an oil company in the US state of Texas, is quickly pumping more black liquid, hoping to make more profits with higher prices.
But despite all his efforts, Herrick expects the revenues of the company owned by his family to decline this year, and for the third year in a row.
His family-owned company, Pantera Energy, hasn’t invested in ramping up production in years, after it ran out of money when energy prices fell sharply at the start of the pandemic – and at one point fell below zero.
His company, like many American and international oil companies, is currently facing many obstacles due to the scarcity of supplies and manpower needed to operate the project.
“Our job is to try to produce as much as we can, and we have done that,” Herrick says.
It is just one indication coming from the United States – the world’s largest oil and gas producer – that the high energy prices that many households suffer from will remain so for the foreseeable future.
Since the beginning of 2021, oil and gas prices have doubled or more, with demand rising again in the wake of the global COVID-19 shutdown in 2020.
The war in Ukraine, which prompted countries in the West to shun Russian energy supplies, also fueled that rise.
Amid this huge price increase, US oil production is expected to rise by about one million barrels per day.
But this increase is only 10 percent, not enough to meet the rise in demand, and in no way amounts to the response of the United States during the last time that prices rose in this way, in 2014, when American oil production jumped by 20 percent The shale oil revolution was at its most intense.
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The modest response reflects the constraints that bind companies, from high expenses to the scarcity of necessary raw materials and equipment, as well as the human element, as well as long-term questions raised by investors about the amount of oil and gas that the world will need before it begins to move away from fossil fuels that pollute the environment, as part of efforts to confront the dangers Climate change.
Mike Wint, an engineer with oil exploration company Lone Star Productions, says his company has several new projects planned, but has been unable to find the steel pipes it needs for those projects, delaying production and increasing costs.
“We are going to dig in as fast as we can, but we have all these supply and demand issues, and that has put suffocating restrictions on the market,” Went adds.
Climate change headwinds
Tre Cowan, an oil and gas analyst with Energy Economics and Financial Analysis, says the challenges facing North American companies are unprecedented.
While many small private companies, such as Net, are still working on increasing production as much as possible, the major companies are still going according to the investment plans they set before the massive price hike, as they preferred to distribute the majority of the sudden profits they achieved to shareholders instead of investing them. in increasing production.
This approach is a major shift, which analysts say reflects the pressures on companies from the stock and financial markets, as the issue of climate change has changed the way the energy sector is viewed.
Investors are putting pressure on companies to share profits now rather than direct them toward long-term investments, says Raoul LeBlanc, vice president of S&P Global Ratings, given the uncertainty surrounding global demand due to the world’s trend away from fossil fuels.
“The market is worried about the possibility of diminishing demand, which will lead to deterioration of assets. If there is no long-term value of the assets, this means paying exorbitant dividends to shareholders.”
With prices expected to remain high, LeBlanc says, companies are likely to boost investments, at least slightly.
“It will not be as much as it was during the period of economic growth,” he continues, but “the Ukrainian war has highlighted the fact that we still live in a world dominated by fossil fuels. The idea of transformation has not been abandoned. [نحو مصادر طاقة متجددة]But the calculations have been recalculated to take into account our short- and medium-term needs.”
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On the political front, the recalculation has raised concerns that US President Joe Biden, who has made fighting climate change a central campaign focus, may not push as much for environmental laws that reduce greenhouse emissions and accelerate the transition to renewables.
Although he continues to advocate investment in renewable energy, most of his ambitious proposals still face legislative obstacles, and there is no sign of a breakthrough in this regard.
While Republicans blame his environmental agenda for rising energy prices, and polls suggest his popularity is falling, the US president has signed agreements aimed at boosting US natural gas exports, approved the use of oil from national reserves, and granted hundreds of permits to drill on state-owned land.
“We see that the Biden administration is reluctant to implement its commitments on climate change,” says Robert Rozansky, an analyst at the Global Energy Monitor, which studies energy.
This shift is not limited to the United States.
Western leaders, including Biden and British Prime Minister Boris Johnson, have turned to Saudi Arabia and other oil-producing countries for their help. Analysts say that these countries have the ability to increase production without the need for major new investments.
In Canada, which is the fourth largest oil producer after the United States, Saudi Arabia and Russia, the liberal government has resumed talks aimed at implementing long-stalled projects, such as one aimed at exporting natural gas to Europe.
“It’s a 180-degree shift in attitudes,” says Alfred Sorenson, chief executive of LNG firm Pieridae Energy, which had to abandon plans for an LNG extraction facility in Nova Scotia due to unavailability of investors.
But the company is now hoping to revive its plans after the government hinted it might be ready to provide more support.
It is not clear whether a change in the direction of the political wind can overcome market fears, especially given the ongoing popular opposition to oil and gas infrastructure such as facilities and pipelines, which may lead to projects being held hostage to court battles for years.
“Politicians and industry are now promoting the idea that we should save Europe with our oil and gas,” says Gunvalden Claassen, a lawyer with the environmental legal charity EcoJustice in Canada.
“We are resorting to solutions that date back to the twentieth century…and we already know that those solutions will not work.”
He adds that the natural gas facility that Pieridae intends to build, for example, will not be ready to ship natural gas before 2027, and therefore will not be able to contribute significantly to facing the current crisis.
“For energy security to be achieved in Europe, Canada and the United States, sustainable energy sources must be developed. This is something that can be achieved, should be achieved, and must be achieved.”