Sidebar: Sunday School 4/10/22

One of the things that drives me nuts is how no one challenges the talking heads when they toss stuff unsupported nonsense out into the universe. A perfect case in point? The discussion on Fox News Sunday on "how national security and energy policy go hand-in-hand."

Dana Perino asked Britt Hume if he thought "President Biden will get to a place where he will figure out a way to buck the progressives and move forward to allow us to drill more here at home?"  Here's how his response started (I added the emphasis).

Well, I think he and his party are pretty much enthralled to the Green Movement and his energy policies to date have reflected that, and they have obviously -- are restraining the potential of American energy production, which would be at this point I think it's fair to say -- ... that we need more of everything. 

"More of everything" is the 'all of the above' policy. It acknowledges the need to increase our use of renewables, as well as our continued reliance on fossil fuels including coal, natural gas, and oil - "certainly for now and for the near future," Hume said on Sunday. Here's more of his response.

And I don't think the president is ready to go there, they will blame the oil companies for not producing enough and so on. We've heard that many times before, and they blame the oil companies for higher gas prices and all the rest of it. But the best way to get gas prices down is to throw open the regulatory barriers and let the United States energy industry go, which it certainly can...

If we did that, he said, we could supply countries in Western Europe with energy to make up for what they're not going to be getting anymore from Russia. And that would "cut off the flow of Western funds into Vladimir Putin's war chest." Perino said Hume's answer "makes sense to me. We'll see if it makes sense to them going forward." 

Of course, it makes sense to Perino and Hume: if we're cutting regulations, everything will be fine, right? Well, no; what Hume's selling, the oil industry isn't buying.

Last month there was a gathering in Houston called CERAWeek. I stumbled on it, looking for info on this issue. According to its website,  

For forty years, CERAWeek has been providing an integrated framework for understanding what’s ahead for global energy markets, geopolitics, and technology. Participants include senior executives, government officials, thought leaders, academics, technology innovators and financial leaders.​ 

Among the speakers last month? Energy Secretary Jennifer Granholm, who did as Hume suggested: she asked for increased production: 

We are on war footing and we have to respond. We have to increase short-term supply...The message right now, and I hope investors are listening, is that we can’t have one element holding back when you see what is happening every night. At this moment, we all have to give.

Here's where it gets interesting; there's this great reporting from Freightwaves.com, which covered CERAWeek (emphasis added).

Even as Secretary of Energy Jennifer Granholm was using the platform of a major energy industry conference to call on the nation’s oil producers to ramp up production, what was being said during other sessions made clear that was not likely to happen. 

The increasing U.S. industries’ strategy of restrained output and investment was on display last week at two separate panels at CERAWeek. It’s a game plan that has implications not only for the price of oil in the short and medium terms, but also for the transportation industries that serve it.

And it wasn't just one person saying production wouldn't be ramped up - it was several people.

• Scott Sheffield, CEO of Pioneer Natural Resources, one of the largest producers in the shale fields of the U.S., said "We’re not going to chase growth like we all did.” His comments came during a panel discussion on 'balancing growth and investor returns in the North American shale market.' The plan? Keep growth rates at 5%.

Unfortunately, government estimates are for slightly over 7% growth, to help replace the four million barrels of Russian oil a day that's no longer available.

• On the same panel? Tim Leach, an EVP at ConocoPhillips, who said that “accelerating investment in an inflationary environment is never a good idea,” and he added, a “long-term view is 'what creates value for our shareholders'.” 

• On a different panel, Chad Michael, president of an energy-sector investment bank, said that among investors, there's "an expectation of returning significant amounts of cash flow." And he said "the business model is mid-single-digit growth, because that is what investors want."

He said, they can't do much more because of labor and supply chain issues, something Granholm acknowledged in her remarks, too. The article did note that Biden's goal of moving away from fossil fuels has an impact on investing, but everyone knows the industry is not going anywhere anytime soon.

• Raoul LeBlanc, a VP at S&P global, suggested that in the face of calls for more production, the industry needs to ask "just how reasonable is it to step on the accelerator?' The current impact won't last forever." 

Why didn't anyone mention a prohibitive regulatory environment? Here's more on that, again from the Freightwaves.com reporters.

HOUSTON — A key State Department official used an appearance at energy industry event CERAWeek to take on what he said were “myths” about the Biden administration’s energy policy... 

The official was Amos Hochstein, Senior Advisor for Global Energy Security at the State Department. 

Hochstein disputed the view that the administration “is somehow holding back or is responsible for the industry not being able to produce a rising amount of oil.”

Production is up since Biden took office, but in recent weeks it's been holding steady; during that time, pressure on everyone to stop using Russian oil, and on the industry to replace it, increased.

When Hochstein has spoken with oil industry officials, he said he has asked them if the Biden administration had taken steps that are restricting production. “The bizarre thing is they told me it is not true,” Hochstein said. “The industry said there is no bottleneck for added production.” 

Rather, he said, issues outside the federal government's control, including labor shortages and problems with the supply of fracking sand, are hurting production. 

What's that all about? According to a report from Reuters (emphasis added)  

Sand supplies are so tight that it is slowing the pace of work for some oil drillers, and higher costs for sand are eating into the bottom line for others....

Hmm...what on earth is going on here? Well, sand that cost in the low teens at the beginning of the pandemic, and rose to $20-$25 per ton, and now they're at $50-$70 a ton - something industry consultants called "unheard of in the industry's modern history." 

And what's hampering the sand market? Labor and delivery - as in, they're short-handed getting the sand out of the ground, and there are shortages in the trucking industry, too. Which, if you think about it, is pretty much the issue across the board, right? 

So, back to Hume and Perino, and the rest of the talking heads, no matter what side of the oil rig they sit on. I get that they're paid to offer opinions, and that most of them are anti-Biden (for a whole host of reasons). But at some point, someone with a microphone is going to have to stop talking about the politics of everything, and start talking about reality. 

Everyone knows gas prices are high, but most people don't know why; they'll listen to Hume and think that it's a regulatory issue. Or, they'll listen to someone else say it's price-gouging, or extreme profit-taking at the corporate level. And they'll all be at least partly wrong - some more wrong than others. Getting these folks to take time out of their endless discussions on the political implications of this stuff to talk about the real problems and real solutions we need seems a bridge too far.

If the politicians won't be honest with us, and the talking heads won't, and the 'news' people won't, we're going to keep taking one step forward and two steps back. 

Is that really what we want? And if the answer to that is yes, what the hell is wrong with us?