White House, oil industry spar anew over drilling as gas prices surge

·7 min read
Vanessa Leroy

WASHINGTON — White House and oil industry officials are fighting anew over increased drilling as a solution to energy concerns as gas prices rise ever higher amid the conflict in Ukraine.

President Joe Biden, who has made reducing the use of fossil fuels central to his time in office, has accused the U.S. oil industry of not doing enough to pump out more oil, saying companies are sitting on thousands of unused permits and putting profits ahead of ramping up production.

“The CEOs of major oil companies have said they’ll increase investment and production. They have the capacity to do it. They have over 4,000 opportunities. They say there’s nothing the U.S. government needs to do to incentivize them,” Biden said during remarks during the Democratic National Committee’s winter meeting in Washington, D.C. “My message is: It’s time — in this time of war, it’s not a time of profit. It’s time for reinvesting in America, and they hear it.”

Representatives of U.S. oil producers, meanwhile, have countered with a list of moves they say the administration needs to take, including easing the process for drilling on federal lands and encouraging private investment in oil projects. So far, they say the administration isn’t taking any steps to help them boost U.S. production.

“The rhetoric has changed to some degree" from the beginning of the administration through last fall, "but the policies have not,” said Frank Macchiarola, senior vice president of policy, economic and regulatory affairs for the American Petroleum Institute, the lobbying organization for the largest U.S. oil companies. “I think the administration needs to reverse course on those series of policies that they put in place early on and take a hard look at the benefits that oil and natural gas provide the United States.”

Industry experts say it would take at least six months to a year before new drilling on federal land would produce additional supply and have an effect on prices. Still, Republicans have seized on the argument to try to blame Biden for the price of gas ahead of the midterm elections in November.

This week, ahead of the president's remarks, the White House and the oil industry sparred over the use of current permits for federal drilling. The White House said nearly 60 percent of federal land leases issued were currently not pumping oil and 9,000 approved drilling permits are not being used, suggesting the administration didn’t need to take any further action on federal drilling.

The American Petroleum Institute pushed back, saying that developing a lease to the point where it can produce oil can take years and can get delayed by legal challenges. In some cases, a company finds a lease isn’t commercially viable so chooses not to drill on it.

Industry experts say there are a range of issues that have held oil companies back from drilling more, aside from the federal bureaucracy. While U.S. oil production has been coming back after demand tumbled during the pandemic, major oil companies have curtailed investment in new projects amid pressure from investors to return more capital to shareholders instead in the form of dividend and stock buybacks.

Smaller oil producers say they have had trouble getting private investment because of pressure on investors not to fund fossil fuel projects and concerns over new regulations that could be coming around fossil fuel investing.

“The administration is correct in that there is no easy fix to this, even if they opened federal lands for drilling and opened some of the offshore leasing that is going to take a long time to bring any kind of production to the market, that is not a short term fix,” Steven Agee, an economist specializing in energy policy at Oklahoma City University who previously worked in the oil and gas industry. “However, in the longer run I can see why the industry would like to open up, especially federal land, but I know the environmental groups are against that.”

Republicans have sought to blame Biden’s policies for consumer pain at the pump as they head into the midterm elections where voters say one of their top issues is rising inflation. The White House has been altered its messaging around gas prices to focus blame on Russian President Vladimir Putin, after prices surged even higher following the Russian invasion of Ukraine and Biden’s decision to cut off Russian oil imports.

Biden and the oil industry have been in opposition since his first day in office, when the president signed executive orders pausing new leases for drilling on federal lands and canceled the Keystone XL pipeline.

But as gas prices remained persistently high through the fall and inflation became a top issue for voters, Biden administration officials began holding meetings in the fall with U.S. producers, giving the industry some leverage in the administration.

"This is really a problem for (the White House) because they have declared war on the fossil fuel industry, they are trying everywhere to squeeze the fossil fuel industry and the fossil fuel industry has been on the defensive," said Aseem Prakash, director of the Center for Environmental Politics. "Now the fossil fuel industry wants to hit back, this is their moment so give us more permits to approve the Keystone pipeline. But if they do this the climate people start screaming at them. It’s a real problem they are in."

Still, the White House hasn’t wavered from its climate change-focused agenda, and is being pushed by environmental groups to do even more to limit domestic production. A White House official said the administration sees a shift to clean energy and electric vehicles as the best way to address high gas prices over the long term.

"In the long run, the way to avoid high gas prices is to speed up — not slow down — our transition to a clean energy future," the official said. "When we have electric cars powered by clean energy, we will never have to worry about gas prices again. We’ll create a lot of jobs and bring down costs across the board."

Instead, the administration has looked mostly outside U.S. borders to boost the supply of oil and drive down prices. Biden administration officials traveled to Saudi Arabia several weeks ago to discuss a number of issues, including oil production, the White House said Monday. Biden officials also made a recent trip to Venezuela, a major oil producer, where they discussed “a range of topics,” said White House press secretary Jen Psaki, who declined to specify if oil was among those.

U.S. producers say the administration should be doing more to increase production at home and be less reliant on foreign sources, although the percentage of U.S. energy use dependent on imports has declined dramatically since the 1970s and now makes up a fraction of energy consumption. The U.S. gets half of its oil imports from Canada, and about 8 percent from Russia before Biden cut off exports from that nation.

“We all agree we need to make progress towards solving climate change, but when we don’t recapitalize the American industry all it does is shift that production to Russia and OPEC, those greenhouse gas emissions don’t go away — they just get shifted from another country,” said Kathleen Sgamma, president of the Western Energy Alliance, which represents smaller oil producers.

The average number of monthly permits approved by the Biden administration for drilling on federal land dropped 26 percent last year — though the Biden administration still issued more permits on average than the Trump administration did during its first three years, according to an analysis by Public Citizen, one of the statistics the administration has looked to highlight as the debate gains steam.

“We have actually produced more oil, it is at record numbers, and we will continue to produce more oil,” said press secretary Jen Psaki on Monday. “There are 9,000 approved drilling permits that are not being used. So the suggestion that we are not allowing companies to drill is inaccurate. The suggestion that that is what is hindering or preventing gas prices to come down is inaccurate.”