API: U.S. Must Invest In Domestic Oil Production, We Agree!
The American Petroleum Institute (API), a trade association representing the oil and gas industry, believes ramping up domestic production and turning to U.S.-made energy is the answer to the global supply and demand imbalance hitting Americans at the pump and impacting the broader economy.
The American Petroleum Institute claims that energy demand is outstripping supply while inflation is the highest it has been in 40 years. In this landscape, fuel prices have soared. However, the U.S. is “blessed with abundant natural gas and oil that is the envy of other countries,” supporting more than 11 million U.S. jobs.
Keeping energy security at the forefront and given global circumstances, API believes that it is time for an “energy awakening,” which would enable the natural gas and oil supply chain along with the government at all levels to “open a new era of working together to ensure that essential energy resources are unlocked; to encourage investment opportunities and accelerate infrastructure development; and to strengthen global energy security, affordability and reliability.”
Furthermore, the American Petroleum Institute underlines that Washington policymakers must “confront the global mismatch” between demand and supply that has driven higher fuel prices by supporting greater U.S. production. Therefore, to address this growing crisis, Congress and President Biden “must support energy investment, create new access and keep regulation from unnecessarily restricting energy growth.”
On Sunday, 7 July 2022, the U.S. Senate passed the Inflation Reduction Act of 2022 (IRA) by a party-line 50-50 vote and the bill now heads to the House of Representatives for consideration later this week. API pointed out that what began as the $4 trillion ‘Build Back Better’ plan raises approximately $739 billion in taxes while providing around $370 billion for new federal spending or tax incentives for numerous energy and climate programmes.
While this bill could open the door to more federal onshore and offshore lease sales and expand credits for carbon capture, the American Petroleum Institute underscores that policies that raise taxes and discourage ongoing investment in U.S. oil and natural gas are “ill-advised.”
Commenting on the Inflation Reduction Act, Mike Sommers, API President and CEO, remarked: “This package falls short in addressing America’s energy needs. While we’re encouraged that the bill will likely open the door to more federal onshore and offshore lease sales and will expand and extend tax credits for carbon capture, we remain opposed to policies that raise taxes and discourage investment in U.S. oil and natural gas.
“Glaringly absent in the bill is permitting reform, which is required for America’s infrastructure needs and to bolster critical oil, natural gas and renewable supplies to meet our current and future energy demand. We urge Congress to take up and pass permitting reform without delay.”
In light of this, the American Petroleum Institute encourages a “comprehensive plan for critical investment” in American oil and natural gas and associated infrastructure, which provide nearly 70 per cent of America’s energy needs. A bill based on such an approach would result in the increase of American natural gas and oil supply consistent with API’s goals detailed within its 10-point-plan.
As a result, this would ensure that “essential energy resources” are unlocked to encourage investment opportunities and accelerate infrastructure development while “strengthening global energy security, affordability and reliability.”
Within its 10-point plan to unleash U.S. energy, API says that the Department of the Interior (DOI) should lift development restrictions on federal lands and waters while Congress should authorise critical energy infrastructure projects to support the production, processing and delivery of energy.
Furthermore, the Biden administration should revise the National Environmental Policy Act (NEPA) process by establishing agency uniformity in reviews, limiting reviews to two years, and reducing bureaucratic burdens placed on project proponents in terms of size and scope of application submissions.
This plan calls for accelerating LNG exports and approving pending LNG applications; unlocking investment and access to capital; and rescinding steel tariffs that remain on imports from U.S. allies as steel is a critical component of energy production, transportation, and refining.
Moreover, the plan underlines that Congress should expand and extend Section 45Q tax credits for carbon capture, utilisation, and storage development and create a new tax credit for hydrogen produced from all sources. API says that future federal agency rulemakings should continue to allow U.S. refineries to use the existing critical process technologies to produce the fuels needed for global energy markets.
In addition, the plan outlines that an end should be put to permitting obstruction on natural gas projects while Congress and the Biden administration should support the training and education of a diverse workforce. This is to be done through increased funding for work-based learning and the advancement of STEM programmes to nurture the skills necessary to construct and operate oil, natural gas and other energy infrastructure.
According to API, the United States – beyond OPEC+ – is “one of few places in the world that could bring additional production within a relatively short period.”In light of this, Sommers says that President Biden should “tap U.S. oil production, rather than traversing the globe and committing billions in foreign aid and other concessions.”
While the Biden administration’s goal is to increase renewable energy, rather than fossil fuels, the American Petroleum Institute emphasises that the “path to decarbonisation likely cannot occur unless consumers also have affordable energy.”
As pointed out by Rystad Energy, an energy intelligence provider last month, recent global gas price surges are driving increased investment by U.S. exploration and production companies looking to capitalise on competitive breakeven costs. Rystad’s research confirms that a well-documented European supply shortage amid efforts to ease reliance on Russian gas is pushing prices on the continent ever higher.
The U.S. natural gas production is expected to hit an all-time high in the coming months, racing past 100 billion cubic feet per day (Bcfd), helping feed global demand as the world faces a severe supply shortage.