US administration urges domestic oil producers to raise output

The US administration is offering its strongest public support to domestic oil producers for boosting output by drilling on existing leases. It is also ruling out the possibility of reinstating a decades-old ban on crude exports.

Lately, US Energy Secretary, Jennifer Granholm told oil executives the administration was not "standing in the way" of oil and gas production and supported increased output. She noted that the administration has approved drilling permits on federal land at a faster pace than the prior administration. It is also pursuing other policies that could bring down retail gasoline prices that went close to seven-year high.

"Consumers as you know are hurting at the pump," Granholm said at a meeting of the National Petroleum Council, a group of high-level oil executives that offer advice to the US Energy Secretary. "I hope you will hear me say that please, take advantage of the leases that you have, hire workers, get your rig count up."

The change in tone comes amid growing frustration from US oil executives, who have bristled at what they see as a lack of support from the administration. Biden in one of his first acts in office blocked the 830,000 b/d Keystone XL pipeline and spent this summer unsuccessfully asking OPEX Plus to accelerate plans to boost output. Chief Executive of US independent producer, Pioneer Natural Resources, Scott Sheffield last week said he has yet to meet another oil executive who has received a call from the administration asking them to increase drilling.

But the administration has become increasingly vocal in saying it supports domestic production, as voter frustration over fuel prices becomes a growing threat to Democratic passage of a US$1.85 trillion budget package. US senator Joe Manchin has cited high inflation rates as a reason to slow work on the budget bill, which includes hundreds of billions of dollars in support for clean energy.

Granholm said it would make "little sense" for the administration to stand in the way of oil and gas production as the US recovers from the effects of COVID-19, echoing remarks that US Deputy Energy Secretary, David Turk made to the industry officials last week. She also more definitively ruled out the possibility that the administration would reinstate a ban on crude exports, something the White House said last week it was not considering. Granholm said she had heard from industry officials last week that it was important to take "off the table" the uncertainty of a potential crude export ban.

"I have heard you loud and clear, and so has the White House, and we wanted to put that rumor to rest," Granholm said.

US crude production reached 11.7 million barrels per day (bpd) during the week ended on December 03, 2021, the highest output levels since May 2020, according to the US Energy Information Administration. However, the domestic production is still down from record-high levels of 13 million bpd in the months before the pandemic heavily reduced demand. US oil executives say that a demand by shareholders to prioritize profits over output growth have been the primary driver of their investment decisions, rather than policies set by the administration.

The administration has made other attempts to lower gasoline prices for consumers. Biden has asked the US Federal Trade Commission to look at whether "illegal conduct" is contributing to higher gasoline prices. Biden also accelerated the sale of 18 million barrel crude oil from the US Strategic Petroleum Reserve and last week agreed to loan out 4.8 million barrel crude from the strategic reserve to ExxonMobil.