OPEC+’s decision this week to cut oil production — and now the looming threat of higher gas prices — has pushed Republican rhetoric into familiar territory: President Joe Biden’s green policies are costing Americans at the pump.
Republicans in Congress have criticized Biden’s attempts since taking office to curb new oil drilling in the United States and develop the country’s clean energy infrastructure. A fresh round of criticism came after this week’s OPEC+ decision.
In a interview with Fox Business, Senator John Barrasso of Wyoming said the Biden administration is “attacking American energy.” Alaska Sen. Lisa Murkowski said in a statement Wednesday that the administration must “reverse course and work with our energy producers, rather than against them” to bring down prices at the pump.
But energy experts tell CNN that recent attempts to open up new parts of the United States to oil drilling have failed primarily due to a lack of interest from the oil companies themselves, rather than the “green” policies of Biden.
New oil and gas exploration has fallen sharply around the world this year. Still battered by an oil price crash prolonged by the Covid pandemic, fossil fuel companies are now focusing on areas they know will make money, and much less on exploring new places to drill.
“I would say 60% of the financial markets say ‘no’ to them,” said Robert McNally, chairman of energy consultancy Rapidan Energy Group and energy adviser to former President George W. Bush. “It’s 30% they’re still afraid of another bust, and then 10%, ‘the politicians, they’re not going to make it easy for me.'”
There is perhaps no better evidence of this change than in the Arctic National Wildlife Refuge, which for decades has been a Republican hotbed for new oil drilling. Congressional Republicans successfully reopened ANWR to oil drilling in a 2017 bill, but when the lease sale took place in the final days of the Trump administration, only three companies offered offers, including one was the Alaska Public Energy Company. The other companies that bid ended up canceling their leases this year.
The sale of ANWR “was a complete failure,” said Erik Grafe, a lawyer at environmental law firm Earthjustice. “There were no oil majors bidding for leases.”
In May, the Biden administration canceled an offshore drilling lease sale in Cook Inlet, Alaska, due to “lack of industry interest”. The Cut Inflation Act will force the Home Office to offer it again by the end of the year, but there aren’t expected to be many offers, if any.
Oil and gas companies around the world are driving this trend as they lukewarmly approach new oil and gas exploration. The total area of new oil and gas leases has fallen to “almost historic lows”, according to an analysis by Norwegian energy company Rystad.
Rystad expects a total of 44 global lease sales to be completed in 2022, the lowest level since 2000. As of August, 21 lease sales had been completed globally, just half of what had taken place at the same time the previous year.
Aatisha Mahajan, vice president of upstream analytics at Rystad, told CNN that the downward trend in oil drilling was due more to corporate actions than government actions.
“Governments are doing their part,” Mahajan said. “Each government must think about its energy security. It is more often the interest on the side of the company, which is less.
There are many reasons why oil and gas companies are pulling back on new exploration, experts tell CNN, but chief among them is the financial landscape.
Fossil fuel companies and markets are still reeling from the economic downturn during the pandemic and the associated plunge in oil prices, according to Rachel Ziemba, energy expert and deputy principal researcher at the Center for a New American Security. .
Now they are trying to limit their risk by sticking to projects that are guaranteed to generate oil.
Investors are still “somewhat wary of new green lighting projects,” Ziemba said. “People mostly make the most solid projects.”
Ziemba pointed out that even this year, as countries scramble to block off energy supplies following Russia’s invasion of Ukraine, there hasn’t been a flurry of new leasing activity.
“Overall, I think there has been a structural change over five and six years,” Ziemba said. “There has been a shift with lenders, increasing concerns not only about geopolitical risk, but also pressure to fund new fossil fuel projects.”
Grafe said major banks and insurance companies are also warning oil and gas companies that drilling in the Arctic could be very risky — and in some cases flatly refusing to finance or insure the projects.
“There are a lot of financial institutions that recognize that it’s a bad bet to try to extract oil from the Arctic in particular,” Grafe said. Part of that is social and political pressure, he said. The other part is that the permafrost is melting, making the ground more unstable and harder to drill through.
While mainstream fossil fuel organizations like the International Energy Agency warn that the world must quickly back out of new oil, gas and coal projects to avoid catastrophic climate change, Rapidan’s McNally sees a shift in long term, small but growing, fossil fuels.
But even as the clean energy transition begins in earnest, McNally doesn’t believe the world is ready to ditch fossil fuels, or even that demand for fossil fuels will peak by the end of the decade. Instead, he told CNN he believes the global oil market is at the very beginning of another multi-year boom cycle, which he predicts will drive new rentals in Canada and the United States, as well as new explorations in South America and West Africa. .
“We’re going to realize that we need more investment in hydrocarbons,” McNally said. “Anyone who has opportunity, capital and political will, I think it’s all going to come back into fashion.”