Don’t Look Now!

Fossil Fuels Have Blossomed Under the Biden Administration

When President Biden took office, his administration championed a move away from fossil fuel production and a push toward renewable energy production. Now, three years after he took office, the current administration is faced with the troubling reality of a fossil fuel renaissance that saw the U.S. become the largest producer of crude oil in the world in 2023.

How did we get here?

It wasn’t long ago, in August 2022, that the landmark passing of the Inflation Reduction Act (IRA) was celebrated for its nearly $370 billion allocated for “Energy Security and Climate Change.” It was a record amount of federal spending for clean energy projects. When the President signed the Inflation Reduction Act into law, he said the new law “is not just about today; it’s about tomorrow. It’s about delivering progress and prosperity to American families.” What lies ahead in our clean energy future has yet to be seen, but as we approach the two-year anniversary of the landmark bill, many elements of the IRA, such as the home efficiency and electrification rebates, are yet to be available for “American families,” and electricity producers and grid operators are sending warnings about the lack of capacity and infrastructure.

Russia’s Invasion of Ukraine Changed Everything

Russia’s February 2022 invasion of Ukraine shifted the energy market on a global scale. Trade routes were altered, sanctions were imposed, and seemingly overnight, the price for crude oil in America jumped to over $100 for the first time in nearly ten years.

In March of 2022, President Biden released an executive order to ban the import of Russian oil, liquid natural gas, and coal to the United States. It came only eight months after the President had ruffled fossil fuel feathers by canceling the permit for the Keystone XL crude oil pipeline from Canada to the United States. Environmentalists across the country celebrated as a landmark victory in halting work on the pipeline which would have moved up to 830,000 barrels of crude oil daily from Canadian oil sand fields to Steele City, Nebraska when complete.

The EIA recorded the price for crude oil at roughly $70 per barrel when the pipeline was canceled in June 2021, and that ballooned to over $107 per barrel in March 2022, one month after the Russian invasion of Ukraine. This sharp rise in crude oil led to an order from President Biden on March 31, 2022, to release 180 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) to combat the disruption in global oil supply from the Russian invasion. This was by far the largest release from the SPR since its creation in 1975, and it has created a deficit that we are still trying to replenish today.

There is no way to determine if the Russian invasion of Ukraine would have ultimately affected the cancellation of the pipeline, but it is an important piece of our domestic fossil fuel puzzle that needs to be included.

American Oil Ramps Up Production

In the face of the Russian invasion and the tightening of global oil supplies, something was happening in the United States. Whether it was to bolster our domestic energy market or fill in for the countries that also embargoed Russian oil, or both, in 2023 the United States oil market produced more crude oil than any country, ever. Since the beginning of the war in 2022, U.S. oil exports set five new monthly records.

Under different leadership, these achievements in domestic oil production would likely be touted as a victory for American energy, but for Biden, it is often treated more like a blemish. Instead, the Administration tries to focus on the growth of renewable energy and downplay the rise in fossil fuel production. It wasn’t only crude oil production that set records in the last two years; the United States became the world’s largest liquified natural gas exporter in 2023.

This has created a delicate situation for the current administration. Acknowledge the thriving fossil fuel boom, and it could discourage younger and more progressive voters. Try and take a step back from oil production and risk those policies being stricken down in a conservative Supreme Court. And there is always the dread of rising gas prices and the overall economy. After all, this is an election year.

Another surprising turn for the Administration came when President Biden approved the Willow Project in Northern Alaska last year. While the approval was granted with a scaled-down version of the original ConocoPhillips-led project, the drilling site in Northern Alaska is said to contain up to 600 million barrels of oil, which they hope to tap into for the next 30 years. The approval drew ire from the same climate advocates and progressives who cheered his Keystone decision. During his presidential campaign, Biden had promised, “No more drilling on federal lands, period.” The approval grant for the Willow Project only added to the murky messaging of the Administration. On one hand, a clean energy future, record-breaking oil and gas production on the other.

For a President who passed the largest spending bill for renewable energy projects in American history, it’s obvious there is also a significant amount of importance placed on fossil fuel production in the immediate future.

The Need for Fossil Fuel Energy Right Now

A focus of the Inflation Reduction Act is to speed up the transition to renewable energy in hopes of achieving the Administration’s stated goal of net-zero carbon emissions by 2050. It includes hundreds of billions of dollars in tax incentives for wind, solar, and other renewable energy projects, but grid operators around the country are sounding the alarm that a transition away from fossil fuels too quickly could put a catastrophic strain on our outdated and insufficient electrical grids.

In the March issue of Oil & Energy, we reported a recent study from ISO-NE. ISO-NE reviewed the costs and pathways for a 2050 New England grid with 100 percent heating and transportation electrification. To reach that, the grid needs to be able to handle an approximate 57-gigawatt peak load, nearly double its current capacity. The cost for the infrastructure and transmission system upgrades will average $1 billion per year, or nearly $26 billion. That anticipated demand could be dropped, and upgrade costs reduced, ISO-NE proposed, if “New England retains some stored fuels like natural gas, oil, propane, hydrogen, etc. for heating and transportation.”

While the President is no doubt planning for the future of clean energy with bills like the Inflation Reduction Act, the immediate need for fossil fuels is evident.

A Rare Opportunity for American Oil

In the aftermath of the Russian Invasion of Ukraine, slashes in OPEC+ production, and a mess of geo-political flare-ups, American oil eyed a rare opportunity in the global oil market share.

In addition to hitting records in oil production in 2023, U.S. crude oil exports also reached a milestone in 2023. Surpassing the previous record set in 2022 by 13 percent U.S. crude oil exports averaged a staggering 4.1 million barrels per day in last year.

Europe’s consumption of American crude increased in the wake of Russian sanctions, and the inclusion of West Texas Intermediate (WTI) crude oil in Dated Brent pricing sent our crude exports skyrocketing. Beginning in May 2023, WTI crude started delivering to Rotterdam, which houses a massive oil storage facility and trading hub in the Netherlands. The floodgates had opened, so to speak, and it lifted the Netherlands to the number one spot for U.S. crude oil exports in 2023. It was the combining factors of Russian sanctions and WTI’s inclusion in Brent that allowed the Netherlands to increase their imports of American crude by 82% from 2022 to 2023.

The second largest importer of U.S. crude oil in 2023 was China, which averaged 452,000 barrels per day, more than double their volume from 2022, EIA estimates indicate.

In April 2023, OPEC+ announced voluntary cuts in production, which by November of last year peaked at 2.2 million barrels per day between various countries in the world’s largest oil-producing coalition. In March of this year, OPEC+ announced an extension of the 2.2 million barrels per day through the second quarter of 2024. With OPEC+ putting a squeeze on the market with voluntary cuts and Russian oil largely turned away by European nations, it created a perfect opportunity for the U.S. to increase production and stake a larger claim in the global crude oil market share.

Electrification and renewable energy were at the forefront of President Biden’s campaign in 2020. But as we stand here today, nobody can argue with the numbers. The U.S. has transformed itself into a global powerhouse in the fuel industry. There is no predicting how the geo-political tensions will play out, if OPEC+ cuts will continue, or if Russian sanctions will be upheld, but one thing is for certain, oil has thrived under the Biden administration, whether they want to acknowledge it or not.

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