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The US goes for more oil and gas output

President Trump’s enthusiasm for more oil and gas output was well known and understood when he was in office.

| 6 min read

With his encouragement and expansion of licences US oil output rose from around 3.2 bn barrels of oil in 2016 to 4.49bn barrels in 2019 just before COVID-19 lockdowns hit, according to figures from the US Energy Information Administration (EIA).

That was a rise of 38%. His policy was designed to keep energy prices down and to foster US industrial growth on the back of relatively low energy prices. Mr Trump promises more of the same should he win in November, based on a policy of “Drill baby, drill” as he puts it.

President Biden also increased US oil and gas

What is less commented on is the fact that under President Biden there has also been the grant of a large number of additional drilling licences. US oil output hit a new high last year of 4.7bn barrels, an increase of 5% above Mr Trump’s highest output year.

In 2024 so far US output has been in excess of 13 million barrels a day (m b/d), well ahead of Saudi Arabia and Russia jostling for second and third positions. This is not what President Biden’s green supporters wanted. They have been critical of some of his decisions, especially the one to allow more exploitation of federal lands in Alaska. They thought he would protect the state-owned wilderness. Drilling in a 23 million acres reserve area on Alaska’s North Slope is not what they wanted.

President Biden gave in to oil and gas lobbies because the gasoline price in the US rose too far too fast and was causing general discontent with high inflation and his wider economic policies. He reflected the reality that a large economy in search of growth, and in need of energy to cater for the needs of citizens and the many new arrivals across the border, still needs to draw on plenty of fossil fuel. The world’s largest economy is not yet able or willing to switch enough of its needs from oil and gas to renewable electricity.

The World’s second largest economy, China, backs the net zero aspirations but continues on its course this decade of using more coal, oil and gas to sustain its growth and keep its many exporting industries competitive. Add in India and other developing countries needing to step up their fossil fuel use, and we have a picture where this decade world demand for fossil fuels remains high.

The world is going to need plenty of oil and gas this decade despite net zero policies

Forecasts of likely energy use for the next few years suggest that world output of oil and gas will remain around or a little above 100 m b/d. This will require substantial investment in new fields to supplement declining ones and replace exhausted ones. Natural gas, too, will be in high demand as people and businesses seek to use it as a transition fuel to heat homes and factories.

The plan to electrify is taking time, as the world remains short of renewable electricity capacity. The world has both to shift from generating a lot of its current electricity from fossil fuels to renewables, and then also needs to greatly increase the total amount of electricity generated to allow people to switch to electric cars and heaters. Electricity accounts for around one fifth of current energy, so there needs to be a massive increase if fossil fuels are to decline sharply.

In the longer term, oil and gas demand falls, but not to zero

BP has forecast estimates for the run-up to 2050 based around three different scenarios offering different paces of progress towards net zero.

  • Their three estimates vary with electricity making up between 30% and 50% of total energy by 2050.
  • Fossil fuels fall from their current 80% share to somewhere between 20% and 60% depending on the speed of change.

It is proving difficult to get onto the fast track scenario given the inbuilt support for continued use of gas- and oil-derived products. BP also sees a possible substantial role for hydrogen-based fuels by 2050, which will require large amounts of renewable electricity to split the hydrogen from water.

OPEC loses some traction in the present oil market

Back in today’s oil market OPEC providers are still cutting their possible output to try to keep oil prices higher. Increases in US production in recent years have made this more difficult for them, and the advent of a Trump-led faster-growth policy would make it more difficult again.

In 2023 the EIA reports an average of 12.9 m b/d from the US, 10.1 m b/d from Russia and 9.7m b/d from Saudi Arabia. Canada, Iraq and China produced a bit over 4m b/d each. There are limits to how low Saudi Arabia will be willing to take its production, and some difficulties keeping the OPEC plus coalition together. The rise of US production has weakened OPEC’s position in the world oil market. The banning of Russia from many western markets has also complicated the picture, though Russia seems to have rerouted much of its output to the China-led bloc that is happy to buy it, to India, and to other customers.

Conclusion

We anticipate a continuing substantial role for oil and gas this decade with new sources (led by the USA) offsetting some of OPEC’s attempts to get prices higher. Were Mr Trump to win the US Presidency there will be a faster rise in US output and cheaper energy in the US as a draw for further industrial investment.

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The US goes for more oil and gas output

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