Toomey: Biden Tapping Petroleum Reserve Won’t Work, OPEC Will Just Cut Production to Keep Prices High
Ian Hanchett 23 Nov 2021
On Tuesday’s broadcast of the Fox News Channel’s “Special Report,” Sen. Pat Toomey (R-PA) argued that President Joe Biden tapping the Strategic Petroleum Reserve won’t work to reduce gas prices because “the swing producers in OPEC can decide to just scale back what they produce to make sure that the prices stay high.” And that “you can’t begin the process of crushing supply and not expect to see a price spike.”
Toomey said, “[T]he very first thing…or certainly, one of the very first things this president did was shut down the Keystone Pipeline, a tremendous source of oil, suspending the ability to drill for oil and gas in places where we have oil and gas. And so, nobody should be surprised and I don’t think most Pennsylvanians are surprised that prices are going through the roof, supplies are shrinking. And now, the president goes around pleading with OPEC countries to increase their production, how ridiculous. And this isn’t going to work, this — the Strategic Petroleum Reserve. He releases some oil from that, the swing producers in OPEC can decide to just scale back what they produce to make sure that the prices stay high. You — fundamentally, you can’t begin the process of crushing supply and not expect to see a price spike.”
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https://www.breitbart.com/clips/2021/11/23/toomey-biden-tapping-petroleum-reserve-wont-work-opec-will-just-cut-production-to-keep-prices-high/
The Keystone XL Pipeline was under construction. Biden shut it down. With one stroke of the pen, he wiped out over 11,000 jobs directly involved in its construction, and the spinoff jobs in the service sector supporting those workers. For some small towns, a very promising source of revenue was lost overnight. There would also have been permanent jobs involved in operating the pipeline and in maintaining the facilities associated with that operation.
After years of trying to get the necessary permits, and fighting court cases brought by one environmental group or another, with miles of pipe stacked and ready, most of the permits in place, construction stopped.
We're talking a tremendous investment, some of it perishable as land and rights of way change hands, heirs inherit land the line would have crossed, and the goalposts were moved time and again.
In the end, the folks putting in the pipeline said "the Hell with it" and the project ended.
There are other Keystone pipelines in operation.
The XL didn't mean a huge movement of American oil, most of it was to transport Canadian Tar Sands bitumen to refineries near the Gulf set up for that sort of heavy crude (like we used to get from Venezuela). Some Bakken crude oil would have been mixed in to make it easier to pump, but that amount pales in comparison to the oil being moved through the Dakota Access Pipeline (some 1/2 million barrels of oil a day).
Right now, though, one of the key problems in the US industry is takeaway capacity for both oil and natural gas. In places where gas is a byproduct of oil production, and the infrastructure (there's that word, again) does not exist or is inadequate to carry the wellhead gas produced to plants where it is refined into methane, ethane, propane, butanes, and other condensed fractions, or if the plants themselves cannot handle the gas, that gas must be flared off.
With limitations on flaring, at some point it is more economical to NOT produce the oil and the associated gas for the costs involved in flaring. Thus, less oil, higher prices. Yes, these regulations and the last straw of red tape came from this Administration, if not off Biden's desk. The Saudis and others in OPEC+ did their damndest to produce enough oil to hurt the burgeoning American Unconventional oil and gas industry. The environmentalists lied about fraccing, drilling, and produced propaganda verging on hysteria claiming the industry was the source of great ills, they howled about how flaring gas was evil. They sued over seven (7) dead birds found in reserve pits on drilling locations. Reserve pits disappeared, replaced by upright tanks and closed systems with other means of drilled solids control. The industry response was to build more infrastructure, capture more of the wellhead gas and refine it, build pipelines to reduce rail car traffic, and to become ever more efficient and safe in its conduct of drilling and production operations, reducing costs.
When the Bakken Boom started (I was 'in' in 2000) it took a month to drill a 13000 ft. well, with some 4500 ft of it horizontal. Now, we drill a 21,000 ft. well in 9 days, with an average of 9500 ft. in the target horizon. Instead of one well on the drilling location, pad wells became the norm, with up to 24 wells in a single drilling/production pad, using far less land area, more centralized production facilities, fewer miles of feeder pipelines, and reducing the time for drilling rig moves from two weeks to 24 hours or less. We were good, but we got better--and still are improving, lowering the price needed to remain profitable from over $100/bbl to between $40 and $50, even shelling out 20% royalties and 11.5% production taxes.
But something Mr. Biden and others of his intelligence level would do well to remember is that low prices are the cure for low prices. This sort of behaviour predictably will lead to another shortage, higher prices, and yet another oil boom.
Piss away our SPR selling it to Asia, and it won't be there when we need it.
If he wants lower prices, all he has to do is take off the ridiculous limitations he has imposed.
