President Joe Biden’s ban on imports of Russian oil and natural gas has the Texas energy industry hoping for renewed support for domestically produced energy.
“President Biden’s decision to ban Russian energy imports means domestic production is now more important than ever,” said Ed Longanecker, president of the Texas Independent Producers & Royalty Owners, in a statement. “Texas producers stand ready to meet growing demand for oil and natural gas.”
The U.S. imported roughly 8% of its oil and petroleum products or 8.5 million barrels of oil from Russia in 2021, according to the Energy Information Agency.
Consumers, who have already been hit with rising gas prices, will feel the impact of the Russian ban.
For Brigette Cardenas, a mother of three boys who works for the Mansfield Independent School District, the increasing price of gas will mean less going out to eat, more car pooling and picking and choosing which events now fit in the budget.
“Last night, I had half a tank of gas and I saw our local gas station was priced at $3.89 per gallon, but I thought I’d wait until morning,” she said. “This morning it was $4.09. I should have filled up last night.”
Supply constraints driven by the then-escalating Ukraine-Russia tensions, infrastructure threats in the Middle East and the Organization of Petroleum Exporting Countries (OPEC+) failing to hit its monthly output targets pushed crude oil prices to seven-year record highs in January, according to a report from McKinsey & Co.
“The Ukraine situation has exacerbated supply-demand imbalances which were already pushing up oil prices,” said Ray Perryman, president and CEO of Waco-based The Perryman Group. “As the global economy recovered from the pandemic, demand rose faster than supply kept up. Now, prices are rising even faster as a significant portion of the global supply of fuels is threatened and the U.S. has cut off imports from Russia.”
In the short term, Perryman said, rising prices for gasoline and other fuels will affect north Texas and the rest of the United States. According to the EIA, Texas accounted for 43% of the nation’s crude oil production and 26% of its marketed natural gas production in 2020.
“Over time, however, we may see enhanced development of U.S. oil and gas assets including those in north Texas and elsewhere across the state,” he said.
On March 7, the national average price of gasoline in the U.S. broke the existing record, hitting an all-time high of $4.104 per gallon, according to GasBuddy, a Boston-based fuel-saving platform. The previous all-time high was set back in 2008 at $4.103 per gallon, just prior to the recession and housing crisis.
“It’s a dire situation and won’t improve any time soon. ,” said Patrick De Haan, head of petroleum analysis at GasBuddy in a news release. “The high prices are likely to stick around for not days or weeks, like they did in 2008, but months. GasBuddy now expects the yearly national average to rise to its highest ever recorded.”
Gasbuddy officials, citing seasonal factors including increased demand for gas, refinery maintenance and the switch to summer blend gas, along with geopolitical tensions, could push prices toward $4.25 per gallon by Memorial Day.
Any increases in oil and gas development likely means more investment and potential profits for the Texas energy sector, though some in the industry don’t see the current situation as a positive one.
“We don’t want to see prices like this,” Cody Campbell, co-chief executive officer at Double Eagle Energy in Fort Worth. “It’s just not good for the consumer and it’s not good for our industry in the long term.”
“A few months of high prices don’t help us that much,” he said. “What we’re looking for is long term stability in the prices, so that we can do our own planning and make our own investments appropriately. It’s not something we want to see at all.”
Double Eagle is an oil and natural gas exploration, development and production company that primarily works in the Permian Basin in west Texas.
Another big player in the Permian Basin is Irving-based Pioneer National Resources, which last year purchased Fort Worth’s DoublePoint Energy for $6.4 billion, snapping up plenty of undeveloped acreage in west Texas.
Production increases in the Permian Basin are already underway. In February, the U.S. Energy Information Association said oil output in the Permian Basin in Texas and New Mexico will average 5.3 million barrels per day this year and increase to 5.7 million barrels per day in 2023.
Campbell, whose company has several operations in the Permian Basin, said he and others in the industry have been concerned about the failure for supply to keep up with demand for some time.
“We have been pretty concerned about all the volatility, but at the same time feeling like we’ve been warning people about this issue for years now and been somewhat ignored,” he said. “And because of just the way that the policy regime has been, and because of the overall climate, that’s been sort of biased against oil and gas producers, we just don’t have enough production now to prevent a problem like this from happening.”
Campbell and the industry will do all they can to make up for any lost production. “But this is just almost an inevitable outcome of the sort of policies that we’ve had in this country for the last several years now,” he said.
TIPRO’s Longanecker agreed.
“The Biden Administration should encourage more domestic oil and natural gas production, including restarting leasing on federal lands and positioning U.S. liquefied natural gas as the alternative to Russian gas for our global allies,” he said.
In a statement issued just prior to Biden’s recent State of the Union, the American Petroleum Institute, an oil and gas industry trade association, said the country has a strong domestic energy industry. The statement also said that, for a period in January, the U.S. exported more liquified natural gas to Europe than via Russian pipeline deliveries.
At the same time, API cited several recent administration decisions introducing significant uncertainty negatively impacting American energy investments.
“We commend the administration’s focus on addressing climate change and share the goal of reducing emissions across the economy, but we cannot let that objective detract from the clear and present need for continued responsible investment in oil and natural gas development,” said Mike Sommers, API president and CEO in the statement.
Double Eagle’s Campbell said capital has not been as available for oil and gas exploration and development because many potential investors have reduced oil and gas investment due to environmental, social and governance criteria that often reduces or eliminates fossil fuel investments.
“And then, a lot of the infrastructure that we need, like pipelines and LNG export terminals, those types of things have been blocked by different environmental groups,” he said.
Longanecker also called for the Federal Energy Regulatory Commission to remove impediments for developing U.S. energy infrastructure and to expedite pending applications to expand operating capacity at three already approved liquified natural gas export facilities, several of which are in Texas.
Perryman said those liquefied natural gas exports could be used to wean other countries from Russian oil and gas.
“The geopolitical risk of relying on Russia for fuels has become readily apparent, and measures should and likely will be taken to try to mitigate the situation in the future,” said Perryman. “Supporting the development of energy sources in the United States and other allied nations helps ensure natural gas supplies to heat homes in Europe and elsewhere, for example.”
Perryman said that while non-fossil fuel-based energy sources are growing, the current situation shows that “conventional fuels will remain essential to meeting future needs.”
Campbell believes the U.S. needs to rethink its overall approach to energy.
“We’re going to have to recognize that the American oil and gas industry is something that we really need, and we need it not just for economic reasons, but we need it for national security reasons,” he said. “The energy transition may eventually occur, but for decades to come, there’s still going to be a very large need for oil and gas.”
Bob Francis is business editor for the Fort Worth Report. Contact him at firstname.lastname@example.org. At the Fort Worth Report, news decisions are made independently of our board members and financial supporters. Read more about our editorial independence policy here.