At a time when global crude oil prices are at multi-year highs, the attitude of the U.S. federal government and oil industry giants is really “ice and fire”.

President Biden played a “band operation”: first, the “unprecedented” large-scale oil storage release plan of 180 million barrels of crude oil was released in full to make up for the shortage of crude oil supply to control oil prices, and then announced the tender to purchase 60 million barrels of crude oil this fall To replenish inventories, it is hoped that by ensuring future demand, the industry will be encouraged to increase production now, thereby reducing oil prices.

But compared to the president’s “tricks”, the shale oil industry appears “very calm”. Not only did they fail to start construction day and night under the government’s call, they even allowed production to decline without saying anything, and their capital investment was far from comparable to the last time the oil price hit 100.

At the time included $Shell PLC (SHEL.US)$ , French energy giants Total (TTE.US)$ , BP (BP.US)$ , ExxonMobil (XOM.US)$ and Chevrolet Big oil companies, including Long (CVX.US), have total capital expenditures of $158.7 billion, nearly double their current spending.

Oil majors have opted not to continue investing to boost supply after taking huge profits from oil prices, preferring instead to pay out cash to shareholders through dividends and share buybacks.

Shareholders: We want cash, not oil

The nine largest U.S. oil producers said this week that they distributed a total of $9.4 billion to shareholders in the first quarter, about 54 percent more than their investments in new developments, according to the Wall Street Journal.

Limited capital spending in some regions, tight supply chains and harsh winters have all weighed on shale supplies, leading to only modest gains in shale output so far this year, analysts said.

Producers including Pioneer Natural Resources (PXD.US) , Marathon Oil (MRO.US) , Apache Petroleum (APA.US) and Devon Energy (DVN.US) said , their first-quarter U.S. domestic oil production will fall by 2%-8% in the previous quarter.

The companies also said they would not change their spending plans in pursuit of growth, noting that their dividend yields are higher than most companies in the S&P 500.

Compared with the S&P 500’s decline of about 14% this year, the energy sector has gained 45%. Most oil companies lure investors with growing shareholder payouts, which in turn reward companies with more stability in their spending plans.

Oil and gas company Coterra Energy told investors that of its $961 million in free cash flow in the first quarter, $663 million was distributed to shareholders through dividends and share buybacks. Pioneer Natural Resources similarly noted that 88% of its free cash flow during the period went to shareholders. In addition, Marathon Oil mentioned that its reinvestment rate in the oil business is only 27%.

Amos Hochstein, President Biden’s energy security coordinator, said in a March interview with the Atlantic Council that while oil majors like Chevron said they would increase investment spending in the U.S. to boost production, other companies did not . Willing to make that commitment, even if oil prices rise, don’t want to increase drilling because their shareholders resist such a decision “under the pretext of fiscal responsibility or fiscal discipline.”

Pioneer Natural Resources CEO Scott Sheffield told investors he expects U.S. oil production to rise by as much as 600,000 barrels per day this year, but EIA and other analysts forecast a 1 million barrel increase, which overestimates shale The state of oil companies in a restricted environment.

According to Bloomberg’s analysis, large oil companies are currently strictly controlling capital expenditure budgets, and promises that this position will remain unchanged in the next few years. Large-scale projects typically take at least five years to come on stream, and given that well production continues to naturally decline each year, any lag in production today will drive further production away in the future.

But oil industry executives take a different view, arguing that higher production will only inflate the cost of oilfield equipment, steel and labor, eroding profits that companies should distribute to shareholders.

Clay Gaspar, chief operating officer of Devon Energy, pointed out that various equipment prices have risen by at least 15%, and if oil producers significantly increase production, rig prices may be 40%-50% higher than last year, and at this time “the company Profits will really start to erode.”

Under the low-carbon economy, the future demand of oil is a mystery

In addition, global concerns about climate issues have made future oil demand a mystery, and years of pressure from investors and politicians have peaked in the last two years. All of the oil majors have committed to some form of zero-carbon target by mid-century, with BP and Shell aggressively positioning themselves as “long-term away from oil and gas”.

Santander analyst Jason Kenney said:

Any decision to support or add to a new fossil project today could be at risk in a few years.

He added that climate change, technological developments such as electric vehicles and the government’s fast-paced carbon emissions policies are the main risks for whether to invest billions of dollars in new projects.

Against this backdrop, investment in the oil and gas industry fell 30 percent in 2020, while spending last year totaling $341 billion was 23 percent lower than before the pandemic, the International Energy Forum said in its report.

IEF Secretary General Joseph McMonigle warned:

Two years in a row of massive underdevelopment of the oil and gas industry will be key to the rise and volatility in energy prices over the next decade.

Barrett, energy analyst at asset manager Janus Henderson, said:

Investors and politicians have long told the industry that we need less oil, and company executives keep that in mind… If the world needs an extra 1 million barrels a day to cushion price gains, I’m not sure it will start from where is it from.

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