US demands shale industry does ‘whatever it takes’ to ease oil crisis

The Biden administration has ratcheted up pressure on US shale producers, telling them they should be doing “whatever it takes” to increase supply and tame oil prices that have soared following Vladimir Putin’s invasion of Ukraine.

Amos Hochstein, the state department’s special envoy and co-ordinator for international energy affairs, dismissed as “nonsense” industry claims that White House policies are holding back drilling and instead blamed Wall Street investors he said were hungry for returns.

Hochstein seized on comments from industry executives who have said their investors are wary about a new round of drilling campaigns for fear that the increased investments will eat into profits and capital returns.

“If there’s anyone that’s standing in the way, according to them, it’s their financial backers, who are insisting on dividends and fiscal discipline in the face of a war in Europe, and the highest prices we have seen in a couple of generations,” Hochstein told the Financial Times in an interview on the sidelines of the CERAWeek energy conference in Houston.

Hochstein added: “And that’s not a US government problem. If there’s a bottleneck it is on Wall Street. They should call their financiers and tell them there’s a war going on. The American public is paying the price.”

Global oil prices soared again on Tuesday after the US government announced it was banning imports of Russian petroleum to punish Moscow for its invasion of Ukraine, with Brent settling at $127.98 a barrel — up more than 50 per cent from the start of the year. US petrol prices have also hit a new high.

Despite the price surge, US oil production of about 11.6mn barrels a day remains well below the levels struck before the pandemic oil crash forced companies to shut operations and slash capital spending.

However, Hochstein said oil executives were being “disingenuous” by blaming the White House for their own decisions not to increase drilling. His comments illustrate the White House’s growing frustration with American oil producers, who have said the Biden administration is responsible the sector’s slow recovery from the 2020 oil price crash.

Shale executives have complained that the administration’s freeze on leases for drilling on new federal lands, its early rejection of the Keystone XL pipeline from Canada, and Biden’s promise to “transition from oil” have chilled the sector.

Investors have also piled pressure on an industry that burnt through hundreds of billions of dollars in shareholder capital during debt-fuelled production binges before the crash, insisting operators pay back capital instead of pouring it into new drilling campaigns.

While production has risen in recent months, especially in Texas, lobbyists continue to push for more supportive policy from the Biden administration.

“The only thing missing here is that stable regulatory environment . . . a policy environment that actually encourages American energy leadership rather than discourages it,” Mike Sommers, the head of the American Petroleum Institute, told the FT in Houston this week.

Hochstein dismissed complaints about Biden’s decision to pause new leasing to drill on federal lands, one of the industry’s foremost complaints, as “nonsense”.

“They have thousands of leases and more than 90 per cent of production in the United States happens on non-federal lands,” he said. “The United States government is not standing in the way of additional oil and gas production — categorically.”

“I’ve been in direct touch with energy companies across the spectrum . . . None of them have told me that they need something from the US government,” Hochstein said. “I ask them all, ‘Is there something I can do right now? The answer’s ‘no’.”