US urges domestic oil producers to raise output

President Joe Biden's administration is offering its strongest public support yet for domestic oil producers to boost output and drill on existing leases, while definitively ruling out the possibility it will reinstate a decades-old ban on crude exports.

US energy secretary Jennifer Granholm told oil executives today the administration was not "standing in the way" of oil and gas production and supported increased output. She noted that the administration has approved drilling permits on federal land at a faster pace than the prior administration, while pursuing other policies that could bring down retail gasoline prices that in the week ending 13 December were still just 10ยข/USG shy of a seven-year high.

"Consumers as you know are hurting at the pump," Granholm said at a meeting of the National Petroleum Council, a group of high-level oil executives that offer advice to the US energy secretary. "I hope you will hear me say that please, take advantage of the leases that you have, hire workers, get your rig count up."

The change in tone comes amid growing frustration from US oil executives, who have bristled at what they see as a lack of support from the administration. Biden in one of his first acts in office blocked the 830,000 b/d Keystone XL pipeline and spent this summer unsuccessfully asking Opec+ to accelerate plans to boost output. US independent producer Pioneer Natural Resources' chief executive Scott Sheffield last week said he has yet to meet another oil executive who has received a call from the administration asking them to increase drilling.

But the administration has become increasingly vocal in saying it supports domestic production, as voter frustration over fuel prices becomes a growing threat to Democratic passage of a $1.85 trillion budget package. US senator Joe Manchin (D-West Virginia) has cited high inflation rates as a reason to slow work on the budget bill, which includes hundreds of billions of dollars in support for clean energy.

No export ban plan

Granholm said it would make "little sense" for the administration to stand in the way of oil and gas production as the US recovers from the effects of Covid-19, echoing remarks that US deputy energy secretary David Turk made last to industry officials last week. She also more definitively ruled out the possibility that the administration would reinstate a ban on crude exports, something the White House said last week it was not considering. Granholm said she had heard from industry officials last week that it was important to take "off the table" the uncertainty of a potential crude export ban.

"I have heard you loud and clear, and so has the White House, and we wanted to put that rumor to rest," Granholm said.

US crude production reached 11.7mn b/d in the week ending on 3 December, the highest output levels since May 2020, according to the US Energy Information Administration. But domestic production is still down from record-high levels of 13mn b/d in the months before the pandemic heavily reduced demand. US oil executives say that a demand by shareholders to prioritize profits over output growth have been the primary driver of their investment decisions, rather than policies set by the administration.

The administration has made other attempts to lower gasoline prices for consumers. Biden has asked the US Federal Trade Commission to look at whether "illegal conduct" is contributing to higher gasoline prices. Biden also accelerated the sale of 18mn bl of crude from the US Strategic Petroleum Reserve, and last week agreed to loan out 4.8mn bl of crude from the strategic reserve to ExxonMobil.