Oil prices could surge to $150 per barrel unless the U.S. increases exploration

10/23/2023 / By Richard Brown

Continental Resources Inc. (CLR), a petroleum firm led by billionaire Harold Hamm, has warned that oil prices could surge to $150 per barrel unless the U.S. government takes more action to promote exploration.

CLR CEO Doug Lawler stated that oil production in the Permian Basin, much like other shale regions, may peak without increased exploration. Without such efforts, he anticipates oil prices reaching $120 to $150 per barrel, causing a significant impact on the industry.

During Hamm’s American Energy Security Summit in Oklahoma City, where pro-oil presentations were made, various shale executives urged the Biden administration to adopt consistent policies that facilitate increased drilling. They emphasize that failing to do so will result in constrained energy supplies and higher costs.

However, the shale executives clarified that they have no plans to dramatically boost crude production despite the oil price approaching $100 for the first time in over a year. U.S. shale production has been declining, even after reaching an all-time high in July, and government analysts predict another monthly decrease in October.

Even if oil surpasses $100 per barrel, Continental maintains a prudent investment approach, aligned with its cash flows, rather than pursuing maximum production. Benchmark U.S. crude futures have risen by 12 percent this year, exceeding $90.

Biden admin’s energy plans blasted on both sides

The Biden administration’s plan to significantly reduce offshore oil and gas leasing is facing criticism from both the fossil fuel industry and environmentalists. Energy companies argued that it would lead to higher fuel prices, while environmentalists contended that it contradicted efforts to combat global warming. (Related: Biden’s declaration of war against oil, gas meant to destroy economy of major red state: Texas.)

This dual criticism highlights the administration’s challenge in managing U.S. oil extraction policies as it aims to balance national energy security with the imperative to “reduce greenhouse gas emissions” and “combat climate change.”

Biden had pledged during his campaign to halt new federal leasing, but legal challenges have obstructed this goal, and concerns about rising gasoline prices, which could impact his reelection prospects, have arisen.

The Biden administration’s Department of the Interior recently unveiled a congressionally mandated five-year plan for offshore oil drilling, featuring only three sales, all in the Gulf of Mexico. This marks the lowest number of sales in any five-year plan since they were first published in 1980.

Erik Milito, president of the National Ocean Industries Association representing offshore oil and gas developers, criticized the plan. He asserted that it would raise gasoline prices, eliminate jobs on the Gulf Coast and increase U.S. reliance on oil imports. In comparison, previous five-year offshore lease programs have typically included between 11 and 41 sales.

Environmentalists also expressed their disapproval, emphasizing that it is imprudent to commit to decades of new fossil fuel extraction given the advanced stage of the climate crisis, particularly following record-breaking summer temperatures.

The Gulf of Mexico contributes about 15 percent of U.S. crude oil production. The time frame between leasing an area and oil production typically ranges from four to 10 years.

The Interior Department justified the minimal number of oil lease sales as a means to expand the offshore wind program, which is now linked to fossil fuel leasing under federal law. The Inflation Reduction Act, a significant climate change law passed in the previous year, mandates oil and gas lease sales as a prerequisite for new offshore wind power auctions.

Biden views offshore wind power as a vital component of his plan to decarbonize the U.S. economy by 2050. However, the American Petroleum Institute, a leading U.S. oil industry trade group, contended that the United States was relinquishing its role as a global energy production leader.

Other critics, including the U.S. Chamber of Commerce and Sen. Bill Cassidy (R-LA), viewed the decision as detrimental to American energy workers and a concession to foreign oil producers.

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