March 2022 Vol. 77 No. 3
Editor's Log
Editor's Log
By Robert Carpenter, Editor-in-Chief
By the time this article is published, who knows what will have happened with the Russian war on Ukraine. Our prayers are for a peaceful and positive resolution for Ukraine and the Western World, and an end to the criminal actions of the despot Vladimir Putin.
As the invasion rolled into its seventh day, I viewed various talking heads in the news commenting on energy implications. Much of the rhetoric from all sides centered around the need to essentially attack Russia’s money source – oil and gas – in order to dismantle quickly the Russian economic machine. More than 40 percent of the Russian spending is derived from energy products.
Alas, President Biden’s State of the Union Address did an effective Texas Two-Step dance around that subject. I assume at this particular point in time, Biden and his advisers consider attacking Putin’s oil and gas money train just too risky a proposition.
Also, admittedly, oil and gas prices were already at a 10-year high before the Ukrainian crisis started pushing prices up even more. With U.S. inflation at a 40-year high, substantially driven by energy prices, doing anything to restrict the free flow of oil and gas would most likely drive prices even further and continue upward pressure on domestic inflation.
The U.S., after gaining energy independence a few years ago, has again become a major importer of foreign energy, even though domestically we are awash in reserves. Shockingly, among our imports are 570,000 barrels per day from Russia. As a result, our leadership is afraid of playing the energy card to truly send Russia into disarray.
Further, even with high prices, U.S. producers are in no hurry to ramp up drilling. Fresh on their minds is that just two years ago, oil prices retreated into the negative. Wall Street has also been reluctant to invest in conventional oil and gas companies.
Much of this is due to the vehement demands of liberal politicians and various green initiatives to halt further development of any oil and gas projects. Their rallying cry is for green energy – now – no matter the cost. Well, we’re feeling the cost now and most of the American Public doesn’t like it.
A primary – and effective – tactic against the U.S. energy markets is to block pipeline construction through a variety of court filings, lawsuits and, increasingly, regulatory harassment. Biden’s appointees in various federal agencies continue to find ways to support extremists in gutting the domestic energy industry.
Lawsuits and regulatory backtracking reviews have even targeted existing pipeline operations for possible shutdown. Under that backdrop of bitter diatribe, vicious attacks, and now Federal challenges, it’s no wonder conventional energy firms are very careful about investing further in drilling projects, even shifting business models in other directions.
Even so, Canada had the courage to ban its Russian crude imports. Kudos to Germany for launching a retaliatory salvo at Russia’s energy industry early in the crisis, when it nixed regulatory approval of Nord Stream 2, the much-debated new Russian gas pipeline designed to deliver even more gas directly into Germany.
Two of the major energy arteries for Western Europe come through the Ukraine, placing supplies to Western Europe further at risk. As of March 2, about 70 percent of the 4 million barrels per day of Russian oil usually transported by ship, has not been able to find buyers. Even with releases of strategic oil reserves, there will remain a substantial shortfall of oil in the world for an unknown period of time.
Of course, OPEC+ offers no help. Meeting on March 2, the organization, which has largely remained neutral to Russia’s atrocities, routinely decided to stay its course of slowly increasing small quantities of oil to the world’s markets, per its long-term plan.
The ultimate irony is that the U.S. had – perhaps still does have – the capacity to be the ultimate energy “white knight” for the world. Granted, even if incentivized to increase production, it would take energy companies three to eight years to develop a conventional production field. But the wildcard remains the ample supply of shale in the U.S.. Effective shale fields can be fully operational in a matter of weeks. We have a once-in-a-lifetime opportunity to wean Europe off Russian oil/gas immediately.
There were four LNG plants ready to start construction in January 2020, but all are still in limbo, victims of the pandemic and then the 2021-‘22, crushing lack of support from our nation. Think of the energy we could be shipping to Europe right now if those plants had been built on schedule – just another example of our energy capacity if properly supported and nurtured.
An overlooked bonus is that if we could eliminate coal as a fuel in the world, switching to natural gas would subsequently eliminate 80 percent of air pollution. Just imagine the climate value of such a move until a truly effective, plentiful and economic alternative can be discovered. If only we had the will.
While we pray the Ukrainians are rescued from Putin’s tyranny, this change to the world’s energy direction needs to be established now, for the future.
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