Source: Wall Street News
Author: Zhou Xiaowen
U.S. oil prices are still breaking records, but the oil industry is unmoved by Biden’s call.
By Saturday, the average U.S. gasoline price hit a record $5.004 a gallon (about 3.79 liters), according to the American Automobile Association (AAA). Among them, the oil price in California is more than 6 US dollars / gallon, the highest in the United States.
At the same time, led by energy costs, the US CPI in May hit a new 40-year high year-on-year, up 8.6% year-on-year, hitting a new high since December 1981. The energy price index rose 34.6% year-on-year, the largest year-on-year gain since September 2005.
Continued high oil prices and the approaching midterm elections have forced U.S. President Joe Biden to take a further call.
On Friday, Biden slammed oil company ExxonMobil for not producing more oil and advocated for increased taxes on oil companies:
“Exxon has made more money than God this year.”
“They have 9,000 drilling licenses, but they don’t drill. Why don’t they drill? Because they don’t need to produce more oil to make more money.”
Benefiting from the surge in crude oil prices, Exxon Mobil’s revenue in the first quarter of this year reached $87.7 billion, a year-on-year increase of 52.7%, and its profit was $5.48 billion, a year-on-year increase of 103%.
The White House has released a record amount of crude from the strategic national stockpile in an effort to stem the rise in oil prices and has urged the oil industry to ramp up production. But U.S. oil production was about 11.6 million barrels per day last month, still well below the pre-pandemic peak of nearly 13 million barrels.
And for the president’s call, crude oil producers said they “can’t help.”
Soaring input costs and supply chain constraints have prevented producers from resuming production overnight, even if they wanted to.
Prices for frac sand, which is used to blast fractures in rock, have surged as wells shut down during the pandemic take a while to get back up and running. In addition, many skilled workers have left the industry, and labor costs have risen.
Another reason for the silence from crude traders is Wall Street. After the shale oil boom of the past decade, today’s huge investment can no longer be exchanged for equal returns.
Ratings agency Moody’s estimates private companies will increase capital spending by 49% this year and output by 12%. By contrast, capital expenditures for public companies would increase by half, and output would rise by just 3%.
Even the wells and fleets that have grown during the pandemic have come largely from smaller private operators, who are not under the same shareholder pressure as the larger operators.
Editor/Jeffrey
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