Big Oil does not dance to the tunes of the government. a period. | OilPrice.com

Several days ago, President Biden caused a media frenzy when he threatened oil companies with unexpected taxes and “other restrictions” if they did not stop returning money to shareholders and began investing that money in more oil production.

The industry has responded, via the American Petroleum Institute, with yet another iteration of the fact that the oil market is a global market, and producers do not have complete control over prices because it is also a free market.

And oil producers, big and small, did not respond to the US president’s recent attack on him. The industry simply continued what it had been doing since the oil price rebound: returning cash to shareholders and carefully planning its spending.

Bloomberg’s Javier Blas summed up the situation in an eloquent comment that essentially reminded everyone that this same administration, now calling for more oil, pledged just two years ago to reduce US oil drilling as much as possible. And that this administration, along with other powerful institutions, was the same that convinced the oil industry that there was no point in including strong production growth in their long-term plans.

The Financial Times also published an analysis with the same message this week: Too many agencies wanted the oil industry to stop expanding its business by increasing oil production. What we see now are the logical consequences of this behavior.

The Financial Times noted that the International Energy Agency has not warned that oil demand growth will peak by the mid-30s, and the US president wants oil companies to spend billions on what will effectively become stranded assets in a few years. Related: Saudi Arabia cuts oil prices in Asia

Of course, the IEA has been known to have been wrong before, and it wasn’t that long ago. The agency published the now infamous roadmap to net zero in May 2021 and said we would need no more oil and gas exploration after that year.

Just a few months later, in its October oil market report, the International Energy Agency directly called for more investment in oil and gas due to tight supply amid a stronger-than-expected recovery in energy demand.

The IEA may be wrong, as it often is, but Wall Street is another story entirely. According to the Financial Times, banks want oil companies to keep returning cash to shareholders rather than investing it in new production.

Shareholders themselves would certainly agree: They spent years watching how much cash was pumped into relentless production growth, and then they saw prices drop, even though it was only for a short time. The price crash in 2020 was very real and very painful.

Besides, shareholders, especially in the big oil companies, exert another type of pressure on companies: ESG pressure. It wasn’t a whim that all the major oil companies devise plans, goals, and net-zero strategies on how to get there. Although environmentalists keep accusing them of just laundering their business, Big Oil is expanding into low-carbon energy and electric vehicles, and that also means big spending.

Doing a 180-degree rotation and redirecting more money to oil and gas exploration is sure to make some investors unhappy, and the oil industry has already had enough problems with unhappy investors, especially those on an active curve.

Although the industry may need to remind the Biden administration that shareholders own the oil companies and not the White House, it remains a fact, and an important fact, that any company seeks first and foremost to keep its owners happy.

Earlier this week, Halliburton’s CEO said the era of “exponential” growth in US oil and gas is over. “We will see increased investment, but quite frankly, nothing close to what we saw from 2008 to 2014,” Jeff Miller said at the ADIPEC conference in Abu Dhabi, adding: “Companies have been spending at 120 percent of their cash flow and it cannot continue for long. Unnamed “.

“I believe they have a responsibility to act in the interests of consumers, their community and their country to invest in America by increasing production and refining capacity,” President Biden said of oil companies in his Monday speech.

In fact, the plain truth is that they do not have any of these responsibilities. Oil companies have responsibilities to shareholders, creditors, and employees. It is the government’s responsibility to act in the interest of consumers, communities and the country.

The Biden administration has not done a very good job. It was too slow to realize that its stated plans to destroy the oil industry might backfire before long. Now, everyone is paying the price for this slow realization. Everyone but the oil companies, who buy back shares, increase dividends, pay off debt, and are on the production growth front.

By Irina Slough for Oilprice.com

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