OKLAHOMA CITY – The price for gasoline is up nationwide as American consumers feel the squeeze from global sanctions against Russia.
Last month, Oklahoma Gov. Kevin Stitt wrote a letter to President Joe Biden days after Russia invaded Ukraine, urging the administration to embrace domestic oil and gas production and halt the importation of Russian energy products. The first-term Republican demanded that Biden rely on energy-producing states like Oklahoma to step up domestic production, a call echoed by other state leaders like Sen. Jim Inhofe.
“Every administration since 1973, Republican and Democrat, prioritized American energy independence – until yours,” Stitt wrote. “The recent events in Ukraine are yet another example of why we should be selling energy to our friends and not buying it from our enemies.”
The U.S. is not a major buyer of Russian oil, nor does it import any gas from the country. Still, in early March, the U.S. banned the import of Russian oil, liquefied natural gas and coal, citing the nation’s “strong domestic energy infrastructure” as a reason why the country could take the step to reduce its dependence on Russian energy.
But more than a month since Stitt’s letter and the administration’s initial moves against Russian energy imports, the Oklahoma Energy Resources Board, a group funded by oil and gas producers, told the PBS NewsHour it has not seen a significant increase in production in the state.
Before the ban, the U.S. relied on Russian oil and petroleum products for less than 8 percent of its imports. In contrast, European countries have a much deeper dependency on Russian oil, accounting for about one-third of its total major energy imports, including oil and gas.
According to data from the U.S. Energy Information Administration, the U.S. currently produces more energy than it consumes, which would also classify the nation as “energy independent.”
U.S. dependency on oil has spanned over a century and a half, and although Russian imports are currently banned, the country still imports from several different countries, including Canada, Mexico, Saudi Arabia and Colombia.
When announcing the ban on Russian energy, Biden said his administration was working on a “long-term strategy” with European countries to help reduce their dependence on Russian energy. But the pathways toward that goal may be complicated when the current administration also wants the U.S. to also move away from fossil fuels altogether and when oil and gas companies, responding to rising gas prices, call for more domestic production.
Pipelines run to Enbridge Inc.’s crude oil storage tanks at their tank farm in Cushing, Oklahoma. Picture taken March 2016. Photo by Nick Oxford/Reuters
Industry experts, energy analysts and local leaders say there’s no easy way to crank up production quickly in Oklahoma — the nation’s fourth most productive oil region and a top producer of natural gas, according to the EIA’s profile of the state.
The U.S. consumption of oil dropped at the beginning of the COVID-19 pandemic as people started working from home and avoided travel. That made the price of oil plummet, said local economist Steve Agee, a dean for the school of business at Oklahoma City University.
Agee said, as COVID protections lift, people “are consuming much more energy right now.”
“But the oil and gas industry is in a bit of a lag at the moment because they are still recovering from the low oil prices, which is why you are seeing the price of gasoline going up,” he said.
Oil producers tend to increase the number of rigs drilling only if crude oil prices make production profitable. When prices increase, rig additions may accelerate. When prices fall, rig additions may slow, Agee said.
Oklahoma reached a total of 50 active rigs in the state in early April, which is more than triple the amount it had in January 2021, but less than a quarter of the 215 active rigs in September 2014, according to data from Baker Hughes, a company that supplies oilfield services, products and industry analytics.
Nationally, the total rig count is up 257 rigs or 59 percent more than this time last year.
Even though the rig count has steadily climbed nationally, weekly increases have mostly been in single digits and oil production is still far below pre-pandemic record levels, according to Baker Hughes data.
Brook Simmons, president of the Oklahoma Petroleum Alliance, said the demand for oil and natural gas is exceeding supply, which drives the higher price and provides Oklahoma the opportunity to participate in that recovery.
“Oklahoma can have a vital role to play in U.S. energy security,” Simmons said. “We play a critical role in terms of domestic oil and gas production in the United States and that is a good thing for the state from both an employment standpoint and an economic activity standpoint.”
Debate about rising gasoline prices coupled with concerns of inflation have turned the oil and gas industry into a political hot potato.
In a House hearing Friday, Democrats criticized the executives of several major oil and gas companies for refusing to step up production.
Weeks after a spike in gas prices after the Russian invasion of Ukraine, crude oil prices have dropped. However, gas prices at the pump remain higher than $4 a gallon.
Rep. Frank Pallone Jr., D-N.J., chair of the Energy and Commerce Committee, blamed the companies for wanting to keep their pockets lined with profits, adding that “Big Oil is refusing to increase production.”
Six major oil and gas companies testified before a House committee in a hearing on April 8. They fielded questions over the high gas prices and faced charges from House Democrats that they were price gouging. Video by PBS NewsHour
Executives pushed back on this claim from Pallone and other Democrats. Chevron Chief Executive Michael Wirth said that the company had “no tolerance for price gouging.” Darren Woods, chairman and CEO of Exxon, said no single company can set the price of oil or gas. “The market establishes the price based on available supply, and the demand for that supply,” he said.
There are multiple factors driving up gas prices that exist beyond Biden or the companies’ control, including the emergence of the coronavirus and the war in Ukraine.
The energy sector was hit hard by pandemic problems such as industry labor shortage and supply constraints. An increase in production, as a result, would require more workers, materials and money, according to Agee.
To complicate matters, Agee said Wall Street investors have become more hesitant about pouring money into fossil fuels due to industry volatility.
“It’s a boom-or-bust industry,” Agee said. “The oil markets, it’s a commodities game so it’s going to have some ups or downs, but when the price of oil is $120 a barrel, that’s a boom.” Latest data show that crude oil is currently over $100 a barrel.
Agee said many of the bigger companies are using this current boom to pay down debts instead of drilling more.
Everett Waller works as chairman for the Osage Mineral Council, an elected governing body that handles the affairs of the Osage Mineral Estate, which has half a million acres and more than 13,000 producing wells within the Osage Nation of northeastern Oklahoma.
Waller said the council has seen a slight increase in permit requests to drill in Osage territory, having processed five permits since the start of April.
But Waller said he believes Oklahoma can be a key to ending any foreign dependency on oil and natural gas.
“America needs America’s oil, and they need the Osage oil,” Waller said. “Our production should be here, not just on our reservation but across the nation.”
Waller said the slowdown in oil production in Oklahoma caused all the major companies to take a beat to analyze when and how best to return to the state.
“I think everyone’s been holding their breath because of COVID and that adventure capitalists have stayed out until they know exactly what’s going to happen,” Waller said. “Everyone gets a little gun shy after shooting or getting shot at.”
Oil and gas producers cited other industry hurdles that are keeping larger companies from fully jumping back in.
Jeff Ritenour, CEO of Devon Energy, Oklahoma’s largest oil and gas company, said the company will refrain from increased expansion despite the massive increase in oil prices.
“Even if there was a call for us to dramatically grow production beyond the growth that’s already planned for, this year just isn’t in the cards,” Ritenour said.
Agee said smaller companies are potentially more flexible to be able to increase production right now due to the lack of investor oversight.
“The costs are all up,” Agee said. But the potential upside is too hard to pass up.”
President Joe Biden announces the release of 1 million barrels of oil per day for the next six months from the U.S. Strategic Petroleum Reserve, as part of administration efforts to lower gasoline prices, during late March remarks at the White House. Photo by Kevin Lamarque/Reuters
Oil and gas industry experts have also said that the Biden administration has been hostile to the industry. Biden terminated the Keystone XL pipeline last year and promised a major push for clean energy, pledging a 65 percent cut in U.S. greenhouse gas emissions by 2030.
But Biden has pushed back against industry leaders. The president said his policies have not made the U.S. less prepared to withstand the impact of the ban on Russian energy imports, but contended that the responsibility is on U.S. oil and gas companies to use their current permits and begin drilling.
“It’s simply not true that my administration or policies are holding back domestic energy production,” Biden said during his announcement of the Russian oil ban. “They have 9,000 permits to drill now. They could be drilling right now, yesterday, last week, last year. They have 9,000 to drill onshore that are already approved.”
In 2021, oil and gas drilling increased under Biden. The Interior Department approved permits to drill on public and tribal lands last year at a rate that surpassed the Trump administration. In recent months, however, the number of approvals have since dropped, E&E News reported.
Simmons said the difference in the Biden administration and the Trump administration in regards to energy philosophy comes down to two philosophies.
“The previous administration viewed the potential of not only energy abundance but energy dominance as a national tool and as a geo-polictical tool,” Simmons said. “The current administration takes the opposite approach and views the oil and gas industry not as an asset but as a hindrance.”
The Biden administration continues to prod oil and gas companies in the U.S. to lower prices, citing the industry’s $80 billion in profits in 2021. Biden has also called on Congress to enforce fees on companies with idle wells on federal leases.
But Simmons said the president’s comments point to a difference in beliefs between his administration, and oil and gas producers.
“What we have is a climate orthodoxy movement and that is built around a system of beliefs that the future is going to be darker than it is today because of hydrocarbons,” he said.
And for Simmons, this means there’s a lack of “realization and appreciation for the petroleum age that we live in.”
More than a week after Russia’s invasion of Ukraine – and as gas prices climbed – there was another urgent warning about the climate crisis.
According to an April 4 report from the U.N.-appointed Intergovernmental Panel on Climate Change, nations need to implement “rapid and deep” emissions reductions to drive down pollution in order to hit international climate goals.
A main source of the emissions, too, was the fossil fuel industry, the report said. Fossil fuels, including oil, gas and coal, are the dominant form of energy utilized in the world and account for about 75 percent of current human-caused CO2 emissions. In total, about a quarter – 24 percent – of the world’s greenhouse gas emissions came from industrial sources in 2019.
In order to reach net-zero emissions by 2050 and avoid 1.5 degrees Celsius (2.7 degrees Fahrenheit) of warming, part of the global strategy should be to move away from fossil fuels and shore up renewable energy, the report said.
“The cumulative scientific evidence is unequivocal: Climate change is a threat to human well-being and planetary health,” the report’s more than 200 scientists concluded.
However, Biden’s recent response to the high gas prices, including calling for more production, puts it at odds with his past campaign promises and the climate scientists’ urgent message.
“President Biden campaigned on bold and ambitious goals to tackle the climate crisis and environmental injustice,” Kelly Sheehan, the Sierra Club’s director of energy campaigns, told Bloomberg News. “Supporting the push to expand gas exports and lock in decades of fossil fuel production is directly in conflict with these goals.”
The Oklahoma Petroleum Alliance said huge strides have been made in the industry to reduce emissions and become more environmentally friendly.
But the IPCC report broadly countered that notion, stating that the impact was less than the increase in air pollution caused by industry activities trying to stay relevant with worldwide economic growth.
“Emissions reductions in CO2 from fossil fuels and industrial processes, due to improvements in energy intensity of gross domestic product (GDP) and carbon intensity of energy, have been less than emissions increases from rising global activity levels in industry, energy supply, transport, agriculture and buildings,” the report said.
Left: A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma. Photo by Nick Oxford/Reuters
By Kevin McGill, Associated Press
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