"For the fossil fuel industry, the Russian invasion of Ukraine and resulting spike in oil prices have given them an opportune PR moment to hammer home some of their key messages: that environmental policies from the Biden administration are hurting production and that the industry should be allowed free rein to produce as much oil as possible. But the realities of this current price spike are far more complicated—and they come after a decade when much of the industry actually struggled with poor financial performance due to overproduction.
“There’s never been a time when the divorce between hype and reality in oil and gas has been greater,” Clark Williams-Derry, an energy analyst at the Institute for Energy Economics and Financial Analysis"
"Earther: So what is the industry doing in Washington [DC], if not pushing for more production?
Williams-Derry: They are securing tax breaks, they’re securing favors. They want to secure more support for LNG exports in other parts of the world. That’s great for oil and gas companies; that’s bad for U.S. consumers. Just like we did with oil, we’re tying domestic gas prices to volatile international trends. We’re exporting LNG, we’re importing volatility and high prices. What they’re looking for is political favors that improve the finance of the industry without necessarily unleashing production. Right now, they’ve got all the cash they need. They’re printing money with every barrel of oil. They could sink that cash into more production, but they don’t want to."
“They’re milking this moment now because they like the money.”
"Williams-Derry: The energy transition is going to be happening as a matter of national security, and it’s going to be focused, I think, largely on Germany. High prices plus Germany’s example could accelerate the transition elsewhere in the world. This is why the industry right now is spinning so hard. It’s really somewhat afraid of the trends that have been unleashed by high prices. One of the key talking points from the industry is: “Lift the heavy hand of regulation from us and set us free. Under Trump we were doing great, under Biden—not so much.” None of that is true.
You look at stock prices during the 2010s, stock prices were collapsing. The industry was spending far more on drilling than they were spending on oil and gas. It was a financial shitshow. It was the worst place to put your money. Oil used to be 10%, 11%, 15% of the S&P 500, but as the fracking boom advanced, oil became 2% of the S&P 500.
Imagine you have a financial advisor, and this person says, I’ve got a great idea: take your money, split it into two piles, put one half under the mattress, let’s take the other pile into the backyard and set it on fire. That would have returned 20%, 30% more than betting on the oil and gas industry. Investing in oil and gas, through the beginning of covid when prices went negative, was like lighting your money on fire. And the industry was getting everything it wanted from Washington. The problem is that everything it wanted from Washington was more production, more production led to low prices, low prices led to a tidal wave of red ink."
“There’s never been a time when the divorce between hype and reality in oil and gas has been greater."
gizmodo.com
www.weforum.org
blogs.worldbank.org
theconversation.com
www.bloomberg.com
