The effort has reversed the Biden administration's slow approach to oil drilling, reducing, although not completely eliminating, a backlog of oil requests. coastal And offshore drilling permits accumulated during Biden's presidency.
Delays in permitting increase project costs, risks and uncertainty. Delays can increase the likelihood that the project will eventually be cut short, as happened with ConocoPhillips' Willow Project in Alaska– or canceled altogether. Longer terms increase financing and maintenance costs as capital is tied up with no revenue generated and developers must pay interest on the debt while awaiting approval. Delays also increase project costs, undermine project economics, and sometimes prevent the project from being profitable.
Investments follow the economy, not politics
Unlike some countries, such as Saudi Aramco, Norway's Equinor or China's CHN Energy, the US does not have national oil and gas company. All major energy producers in the United States are privately owned and answer to shareholders, not the government.
Presidential orders or political slogans may set the tone or direction, but they cannot ignore the fundamental requirement of profitability. Investments cannot be authorized by presidential decree: projects must make economic sense. Without this, whether due to low prices, high costs, uncertain demand or changing regulations, companies will not be able to continue operating.
Even if federal policy opens up new fields to drilling or lifts some regulatory restrictions, companies will only invest if they see a clear path to profit over the long term.
Since most energy investments cost large sums of money over many years, the industry likely wants a sense of political stability from the Trump administration. This could include reducing barriers to profitable investment by speeding up the approval process for supporting infrastructuresuch as power lines, pipelines, storage capacity and other logistics, rather than relying on sweeping announcements that lack market impact.
Skip YorkNon-Resident Fellow in Energy and Global Petroleum, Baker Institute for Public Policy, Rice University. This article has been republished from Talk under Creative Commons license. Read original article.
