By: Michael Dekker – Tulsa World – With oil and gasoline prices setting new records on a daily basis for weeks, there is no foreseeable end, and possibly much worse pain to come at the pump — and at grocery and other stores, local industry leaders said.
“I don’t think it’s going to get much better, that’s for sure,” said Dewey Bartlett Jr., president of Keener Oil and Gas Co., and a board member and former director of the Oklahoma Energy Producers Alliance.
The national average price of regular unleaded surpassed $5 per gallon for the first time on Thursday, according to gasbuddy.com, a fuel price-tracking service.
A multitude of factors, including Russia’s invasion of Ukraine, a relatively stable but limited oil supply, limited refining capacity and high demand have all led to prices well beyond the highest set in 2008, analysts said.
“It is not just an American challenge, it’s a global challenge,” said Heather Boushey, an economist and member of President Joe Biden’s Council of Economic Advisers, during a conference call Monday with journalists from Southern and Southwestern states.
Of the global market, she said, “as long as we are dependent on it, we will always be at the whim of autocrats that want to wage war in other countries without apologies.
“That is why from day one the president has been focused on energy independence,” she told the Tulsa World after being asked about high gas prices.
“That means doing what we can to manufacture clean energy in this country because that is really the way that we are both going to get prices down in the long-term and not be subject to the whims of this global marketplace.”
Local industry leaders and Republicans strongly disagree.
They blame the Biden administration’s energy policies and say fossil fuels remain the primary and only current, viable source for global energy needs.
What both sides do seem to agree on is a limited amount of oil that currently can be produced.
Tom Atkinson, founder and owner of Okie Crude Co., a Tulsa-based oil and gas producing company, said there is only a “margin” of about 2 million barrels of oil per day, globally.
“That is extremely thin,” he said. “We don’t have very much elasticity in supply.”
That lack of ability to increase supply, combined with high demand, has caused prices to skyrocket, he said.
Atkinson said that after a 2009 oil slump, many oil rigs and equipment were “cannibalized,” and that it would take 18 to 24 months to get many of them back up and running.
His company operates about 100 wells in Oklahoma, Texas, Louisiana and Montana, he said.
Patrick De Haan, head of petroleum analysis at GasBuddy, said a reduction in refining capacity is another reason prices have skyrocketed.
“You can have as much oil as you want, but there is only a finite amount of refining capacity,” he told the Tulsa World by phone.
During Monday’s conference call, Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and another member of Biden’s Council of Economic Advisers, also addressed the Tulsa World about gas prices.
“We … have tried to talk to international producers as well as domestic producers to get them to increase the supply, and respond to price signals that are instructing them very much to do so,” Bernstein said.
Both Bartlett and Atkinson said neither they nor their organizations, have been approached by anyone in the Biden administration.
Asked if he would welcome such an outreach, Bartlett, a former Tulsa mayor said, “Absolutely.”
“To me, it stuns me that they have not reached out to the industry,” Bartlett said, “To ask the question of what needs to be done in order to increase domestic and oil and natural gas production. That has not happened.”
We can’t get the rig count back to where we were because a lot of people have left the industry,” he said. “You can’t just turn on a switch.”
“Both the major and minor players in the industry … they know the problems and they can point out what they are,” Bartlett said.
Last month, the U.S. House — divided almost entirely on party lines — approved legislation to crack down on alleged price gouging by oil companies and other energy producers.
The bill backed by House Democrats would give Biden authority to declare an energy emergency that would make it unlawful to increase gasoline and home energy fuel prices in an “excessive” or exploitative manner. The bill directs the Federal Trade Commission to punish companies that engage in price gouging and adds a new unit at the FTC to monitor fuel markets.
ExxonMobil, Chevron and other major oil companies announced surging profits totaling more than $40 billion in the first quarter of the year, a fact Democrats repeatedly cited in floor debate. Many of the companies are spending billions on stock buybacks and dividend payments to investors.
“In my opinion it’s … a cheap-shot argument,” Bartlett said.
“Our system is built upon paying the market price. When the administration is all hell-bent on keeping prices up … then they say ‘Let’s make the process high so we can force a change into electric cars,’ or whatever it might be. Divert attention,” he said.
“They say, ‘They (oil and gas companies) don’t care about the rest of the country.’ That’s not true,” Bartlett said.
“Oil and gas companies do not control prices. The prices are controlled by markets. They want to blame us and it’s not fair,” he said.
“Nobody was saying anything when prices hit rock bottom a couple of years ago and the industry was really suffering. Nobody was saying anything to me when I was having to lay people off.”
Bartlett pointed out that the current sky-high prices also have affected the industry itself because diesel is used for engines in oil wells, as well as in semi-tractor trailers to transport oil and gas.
“I don’t gloat over these high energy prices. I know it hurts people and the people who work for me,” Atkinson said.
Bartlett also said that because of a perception that the Biden administration wants to “kill oil and gas,” many industry leaders are unwilling to take financial risks to increase production.
“We’re talking about hundreds of millions of dollars. It’s a lot of money for us. Do we want to spend that money on drilling when the president of the United States has said he wants to get rid of the industry? That makes it tough,” Bartlett said.
Boushey during last week’s conference call, also said Biden has “encouraged firms that have leases to use them, to drill on them.”
But Bartlett said: “You may have the lease, but there are a bunch of hoops you have to jump through. You have a bunch of red tape in order to get permits in order to drill.”
As high as the price of oil has been heading — benchmark U.S. crude oil for July delivery eclipsed $122 per barrel on Wednesday — Atkinson said he would not be shocked if it reached $200 per barrel in the coming months.
“That’s more than scary territory,” Bartlett said.
“If it did go up to $175, to $190 or to $200, that would trigger a very big recession in my view,” he said.
Asked what would happen to gas prices if the price of oil reaches those levels, De Haan said: “You don’t want to know.”
De Haan, who has been at GasBuddy for 13 years, said that until a few months ago, he could not have imagined current gas prices so high.
“Never,” he said. “It’s like on a nice March day in Oklahoma, and a warm front comes through, and then suddenly you have tornadoes all around you. The environment is just juiced for gas prices to surge.”
Bartlett said prices aren’t likely coming down anytime soon because the U.S. has just started the summer travel season.
“It’s going to take a downturn in demand,” he said. “It’s going to take people changing how they drive, and sometimes driving less. It’s going to take people to change their driving habits.”
He said if there is a drop in demand, it won’t likely occur until the fall.
“Once demand starts to go down, there should be a pretty good drop” in prices, he said.
“If that’s going to happen it will probably be sometime in the fall. I’d say probably late fall,” Bartlett said.
“I just hope we get back to some kind of equilibrium that’s fair for everyone,” Atkinson said.
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