As the situation between Russia and Ukraine escalates again, international crude oil prices rise sharply towards US$100 per barrel, and the prices of diesel, gasoline and heating oil, which are closely related to American life, also rise collectively, pushing inflation to a nearly 40-year high.
US WTI crude oil price
The Organization of the Petroleum Exporting Countries recently rejected U.S. President Biden’s request to accelerate production increases, leaving U.S. domestic shale oil fields as the only way to quickly respond to supply shortages. Normally such a scenario would trigger a U.S. oil exploration boom, but not this time.
Many influential U.S. shale oil companies, including Pioneer Natural Resources Co., Devon Energy Corp., and Continental Resources Inc., have recently committed to increasing production in 2022. It is limited to 5%, which is far lower than the 20% before the outbreak of the new crown pandemic.
Pioneer CEO Scott Sheffield said: Whether it is an oil price of $150, $200, or $100, we will not change our plans to increase production. Even if Biden wants us to increase production, the industry is not going to do it.
Sheffield explained that Pioneer prefers to execute stock buybacks rather than acquire other oil fields. “The company will focus on profitability, returning funds to shareholders and avoiding oversupply situations like a decade ago.”
Devon Energy CEO Rick Muncrief said in a phone interview: We have experienced the illusion of market prosperity, so we will be very cautious when increasing production. We are in the recovery phase from the pandemic and we will slowly increase production over time, but never overnight to the extent that the market needs.
According to IHS Markit Ltd. According to the data, publicly traded independent exploration companies like Pioneer and Devon account for more than half of the approximately 10.5 million barrels of daily output from oil fields in the lower 48 states. If they invested all the profits from oil prices into new drilling, they could easily increase domestic production by 2 million barrels per day.
While experienced independent explorer CEOs like Muncrief and Sheffield are more cautious, many companies have joined the aggressive push to increase production, such as ExxonMobil and Chevron, which each aim to increase shale oil production by 25% this year. % and 10%.
U.S. crude oil production
The market expects U.S. shale oil production to return to pre-pandemic levels by 2023, but without cooperation from independent exploration giants, this may not be enough to derail oil prices from the upward trajectory in the short term.
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