A recent article by OilPrice outlined how, even though U.S. shale production is increasing, it is doing so at a much lower rate when compared to the boom before 2020. Similarly, this production growth is much slower than was expected even a few months ago. In another unfortunate turn of events for Americans already facing high energy prices, the U.S. shale oil boom seems to be over.
Over the course of the year, the U.S. Energy Information Administration (EIA) has downgraded its forecasts for crude oil production in 2022 and 2023. Though the EIA expects the annual average production to set new records, the administration has consistently decreased its expectations since the year began. According to the November short-term energy outlook, the EIA expects U.S. crude oil production to average 11.7 million barrels per day (bpd) in 2022 and 12.4 million bpd in 2023. However, these projections reflect a 21% decrease in production.
These downgrades are a combination of multiple factors, namely, inflation, the war in Ukraine and supply chain disruptions. However, one of the most important aspects impacting producers’ supply has been the administration’s lack of material support for their projects and sector.
The Biden administration has continued to send mixed messages to domestic energy companies, often blaming them for price gouging, encouraging more taxes on their industry, and using regulatory tools and agencies to block new projects. The CEO of Hess illustrated the damage this has done to our position in the global energy markets, saying recently, “shale was thought of as a swing producer, the Saudis and OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer.”
If the administration does not take immediate action to reverse course on their own inaction regarding the domestic oil and gas sectors, then more downgrades are to be expected in the near future. In that case, the U.S. will continue to be beholden to Saudi Arabia, unable to fully supplement our allies’ energy needs in Europe, and feel the price of continuing energy volatility. The administration should be investing in domestic energy infrastructure so that pipeline constraints do not hamper supply and demand.