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geoff: As the year comes to a
close, gas prices in the U.S.
Are at their lowest point of
2023.
And not coincidentally, domestic
oil production is at a record
high.
William brangham looks at what's
behind the big changes, and the
implications.
William: Geoff, the average
price of gas is $3.12 a gallon,
far below the nearly $4 a gallon
highs this fall.
At the same time, the U.S. Is
producing an unprecedented
amount of oil, some 13.5 million
barrels a day.
Moreover, big energy companies
are merging, as they try to get
more production out of the
permian basin in Texas and new
Mexico.
Exxon plans to buy shale giant
pioneer natural resources for
nearly $60 billion.
And Chevron plans to buy Hess
for $53 billion.
This record production of oil,
and these big mergers, come at
the very same time when the U.S.
Government is trying to wean the
nation off of fossil fuels,
because using them is
dangerously warming the planet.
Clifford Krauss is the national
energy correspondent for the new
York Times and he joins me now.
Cliff, great to have you back on
the program.
Explain to us, how did we get
here?
From this plummeting oil market
during the pandemic, to now
these record highs?
Clifford: Great to be with you
again William.
Really, the story begins about
15 years ago with fracking.
Where suddenly the United States
became a production powerhouse.
And it has had its ups and
downs, but in the last year or
so there has been almost an
unprecedented increase in
production.
Actually, the most sense 2014.
And so, at this point the united
States, as you mentioned, is
producing about 13.5 million
barrels a day, and we are
heading towards 14 million
barrels a day.
That is more oil than any
country in the world.
That is a record for the united
States.
And it may well be the record
for any country in the world.
And now after Saudi Arabia, we
are exporting more oil than any
member of OPEC save Saudi
Arabia.
William: Is that just a function
of companies ramping up
production?
Is it as simple as that?
Clifford: No, it isn't.
It's very interesting.
The very large companies, the
Exxons, Chevrons, have tried to
be very disciplined.
They don't want to repeat the
mistakes of the past, where they
would pump a lot of oil when
prices were high only to see the
price collapse.
And of course that is what they
don't want to see.
And so while they have been
disciplined, the smaller
companies, financed by private
capital mostly, they are
basically pressing on the gas,
so to speak.
And we are producing more oil
from these small producers.
And this looks like it will
continue.
Actually, what happened was with
the Russian invasion of Ukraine
when the price of all the
commodities, but especially oil
and gas, went up, these
companies got a signal from the
market to start pumping more.
And that is exactly what they
have done.
William: As you have mentioned,
I know we export a great deal of
that oil, but is all of this
domestic production also
responsible for the drop in gas
prices, which I take it also
became a bit of a surprise?
Clifford: It is.
There's an abundance of oil
going to our refineries.
But also, remember that our gas
prices are linked with global
oil prices.
And those prices are going down
for a variety of reasons.
Both demand and supply.
Demand from China and Europe has
been low.
Production is not only up in the
United States, it is up in
Canada, Guyana, Brazil, and a
few other producing countries.
So although OPEC plus is cutting
back on the production, that is
more than compensated by the
United States and other
producers that are not in OPEC.
William: Let's talk a little bit
about these two big mergers.
Are these, as some critics
argue, the last gasp of the
fossil fuel industry trying to
squeeze every last prophet?
-- Profit?
Or is it a bet by these
companies for a bright and
robust future for fossil fuels?
Or is it something else?
Clifford: I see it as being
something else.
The oil companies realize --
this is not just our oil
companies, the American oil
companies, but the international
state owned oil companies --
that probably oil demand in the
United States and the world is
going to plateau and come down.
And so, the cheapest barrels are
the barrels that will survive on
the market.
Saudi Arabia is the cheapest.
Actually, the permian basin is
pretty cheap as well.
And when these companies
consolidate and merge, because
of the economics of scale, the
economies of scale, they are
actually saving themselves money
and thereby squeezing more
profit from their production.
By the way, the Exxon deal is
for the permian mostly.
B Chevron deals to get it piece
of the action in Guyana, which
is the fastest growing oil
province in the world.
Geoff: As I mentioned at the
beginning, all of this beefed up
oil production comes directly at
odds with the Biden
administration's desire to
use less oil and gas and use
more renewables.
How do we as a nation square
that seeming contradiction?
Clifford: [Laughs]
That is a tough one.
Because the United States has
two goals, and they conflict.
One goal is geopolitical, and to
take basically to provide gas
and oil for Europe and other
countries that were dependent on
Russia.
Also to keep our gasoline prices
low to try and fight inflation.
But at the same time we are
trying to pivot.
How do you do those two things
at once is a contradiction.
The Republicans are attacking
this administration for making a
war on oil, even though our oil
production is at record levels.
But it is hard to see this
administration saying look at
us, the United States is the top
oil producer in the world, when
you want environmentalists and
young voters to vote democratic.
Geoff: That is the essential
cntradiction right there.
Cliff Krauss of the New York
Times, great to see you.
Thank you so much.
Clifford: Thank you for having
me.
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