Let's talk about energy fundamentals that have a pervasive impact on us as consumers, industry participants and Americans.
The recovery of oil and natural gas markets so far in 2021 has reached a pivotal moment. There's currently a divergence between demand, which has nearly returned to its historically strong 2019 levels, and investment - and consequently production - required to fuel the U.S. and global economies.
As a result, the U.S. has returned to being a petroleum net importer this year, at times needing a million barrels per day or more from global oil markets, which has contributed to lower inventories and the highest prices since 2014.
As consumers, we have ultimately felt the impact at the pump.
With U.S. natural gas, drilling activity has fallen despite prices having recently increased to levels that have historically motivated a strong response. The fallout from the 2020 COVID-19 recession - financial and workforce constraints, compounded by policy uncertainties - has increasingly divided the domestic industry: those producing to serve a relatively slower-growing domestic market versus those with capabilities to export to premium global markets.
As industry participants, this changes the game from developing resources for commercial transactions at domestic trading hubs to one involving integrated and potentially international supply chains, as supply chains have broadly come under pressure due to uneven recoveries from last year's recession.
As Americans, these developments have challenged the momentum of the U.S. energy revolution - the strong jobs and economic benefits it has brought - and raised prices at the same time as the costs for houses, vehicles, food, health care, and many other goods and services have also risen.
Critically, industry-wide investment in natural gas and oil fell in the second quarter of 2021 to $37.4 billion, its lowest level on record and roughly half the pace as during the Great Financial Crisis of 2008-2009, based on company financial reports to the U.S. Securities and Exchange Commission.
Meanwhile, the backlog of large capital projects - including pipelines, refinery and petrochemical plant expansions, oil and gas storage and processing facilities as well as export terminals - fell by nearly 40 percent and more than $110 billion in July 2021 compared to a year earlier, by API's estimates.
Restrictive domestic energy policies compound these challenges.
We've come through a period of unprecedented market dislocation, and the industry has been remarkably resilient. But it's hard to get companies to make long-term investments in natural gas and oil when the Biden administration is signaling that it wants to move away from fossil fuels.
If we restrict energy in the U.S. - as the administration threatens to do by pausing new oil and natural gas leasing on federal lands and waters - it can have a detrimental impact on the consumer and fails to recognize the fact that oil and gas will supply needed energy for decades to come. If we take pipelines that are vital to producing areas and increasing the diversity of supply out of service, that can have a real cost today and suggests it could be hard to supply the needed energy to consumers in the future. If we tell everyone that fossil fuels have no place in the energy mix and focus on a single technology, that assuredly affects investments and company commitments to invest in their U.S. businesses.
The Obama administration knew the U.S. needed an all-of-the-above energy strategy, and we still do today. There's little doubt the Biden administration is acting purposefully to shift consumers away from fossil fuels, but it doesn't have a plan to ensure consumers can afford it. The White House's pleading with OPEC to come to the rescue this summer didn't make sense - even to OPEC. It's an import-more-oil strategy that could seriously harm U.S. energy security and push American jobs overseas.
The U.S. energy revolution has been a once-in-many-generations structural change, based on world-leading technologies. Let's recognize and embrace the need for responsible U.S. development and its essentiality to an energy transition that's compatible with U.S. economic, energy security and national interests.
For more information, visit www.api.org, or contact Dr. Foreman at ForemanR@api.org or (202) 682-8530.
