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New Permian Basin drilling permits approved, by week

Data: Rystad Energy; Chart: Thomas Oide/Axios

Growth in drilling permits for new wells in the most prolific U.S. oilfield could signal a coming production surge, the consultancy Rystad Energy said.

Why it matters: Producers face calls to accelerate growth as some buyers shun Russian crude and U.S. gas prices average over $4-per-gallon.

Driving the news: Permit approvals in the Permian Basin for horizontal drilling — which is key to unlocking shale oil — grew to 904 in March.

It's a record high for the region in West Texas and New Mexico, "driven by elevated oil prices and production demand," Rystad said.

Yes, but: Don't expect an immediate production jump. 

Artem Abramov, Rystad Energy's head of shale research, said the permits herald faster output expansion "over the next few months once supply chain bottlenecks ease."

It "foreshadows a significant increase in supply capacity from early 2023," he said in a research note. But Rystad cautioned that permits don't guarantee drilling or production from specific wells.

What we're watching: The growth trajectory as production returns from 2020's COVID-fueled collapse. 

The U.S. Energy Information Administration currently sees production averaging 11.90 million barrels per day (mbd) this quarter.

EIA forecasts a rise to 12.46 mbd in Q4, before climbing to exceed 13 mbd in the latter half of 2023. On an annual basis, the agency sees a record average of roughly 13 mbd next year.

Why U.S. oil production isn't growing even faster

Oil executives: Wall Street is holding us back

A lot more U.S. crude may be coming — eventually

Drilling permits jumped in the most prolific U.S. oil basin.

Crude oil

Oil companies

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

Gas prices reached record highs after Russia invaded Ukraine, prompting the Biden administration to scramble to reduce pain at the pump. 

The latest: The Biden administration is set to announce new policies to help curb prices, including waiving requirements that limit the amount of ethanol in gasoline during summer months.

It plans to allow gasoline with up to 15% ethanol blend, rather than the usual 10%. Air pollution regulations normally restrict sales of those blends in the summer, Axios Generate co-author Ben Geman reports.

Officials estimate the change can save an average of 10 cents per gallon where the fuel is sold.

The big picture: The U.S. is effectively energy independent, but bans on Russian oil exports from the U.S. and other countries will have a knock-on effect in world markets.

1) Why aren’t U.S. oil companies increasing production faster?

U.S. oil and gas production reached a record high in 2019, then plummeted during the pandemic. It was already rising again before Russia invaded Ukraine.

U.S. crude oil production

It's a colossal feat to re-start all that halted production, but the number of active oil rigs has grown steadily since bottoming out in 2020. Still, the rig count is far shy of the 2019 peak. 

Between the lines: U.S. oil drillers haven’t returned to 2019 production levels in part because investors have called for discipline to put an end to boom-and-bust cycles of overproduction and bankruptcies.

The industry is also suffering from broader supply chain problems and labor shortages that make it harder to rapidly scale up production, as Occidental Petroleum CEO Vicki Hollub said this week, per Reuters.

2) Can Biden open Keystone XL to lower gas prices?

Some Republicans and Canadian politicians have called on Biden to greenlight the unfinished Keystone XL pipeline, which would have brought oil from the tar sands of Canada to the U.S. Gulf Coast. 

"If President Biden had not vetoed that project, it would be done later this year – 840,000 barrels of democratic energy that could have displaced the 600,000 plus barrels of Russian conflict oil that’s filled with the blood of Ukrainians," said Jason Kinney, the premier of Canada's Alberta province — where the Keystone XL pipeline originated.

The project was first proposed in 2008. The Obama administration rejected a permit in 2015. A new permit was issued by the Trump administration in 2019. The Biden administration revoked the permit in January of 2021.

Less than 10% of the pipeline had been constructed as of March 2021, according to Reuters. 

The bottom line: The company developing Keystone XL abandoned the project in June of 2021, and it would take years to finish if restarted now.

3) Why is Biden asking dictators to help lower gas prices?

Another avenue for the U.S. to reduce gas prices is to ask major oil producers to increase production. 

Two of the biggest targets are Saudi Arabia and Venezuela, both members of OPEC, the oil cartel that tries to regulate global production and prices. The cartel rebuffed Biden requests to increase production back in November of 2021.

Saudi Arabia: President Biden’s advisers are discussing a possible visit to Saudi Arabia this spring to help repair relations and convince the Kingdom to pump more oil, Axios' Hans Nichols reported.

Venezuela: Some Republicans and Democrats in Washington suggest Venezuela's oil could replace Russia's, according to the N.Y. Times. 

The biggest importer of Russian oil is China, followed by Germany and the Netherlands. Many eastern European countries are heavily reliant on Russian imports for oil and natural gas.

OECD oil imports

Total imports of crude oil and oil products. Data: IEA; Table: Will Chase/Axios

Canada, Mexico, Saudi Arabia and Russia export the most oil to the U.S., and Russian oil mostly goes to Hawaii and the coasts.

Top oil exporters to the U.S.

Data: U.S. Energy Information Administration; Chart: Kavya Beheraj/Axios

6) How gas prices compare when you consider inflation

Adjusted for inflation, gas was more expensive throughout much of the early teens and financial crisis era (in today’s dollars, gas was $5.31 back in June 2008).

Data: Energy Information Administration; Chart: Axios Visuals

Relative to average earnings, gas is also less expensive today than it has been throughout much of the 2000s. University of Michigan economist Justin Wolfers lays it out here.

7) Can politicians suspend gas taxes to lower prices? 

Some governors and state lawmakers are looking to give people a gas tax break as gas prices continue to climb, reports Axios' Shawna Chen. Gas taxes vary by state, with Pennsylvania and California having the highest.

State gas taxes

Data: Federation of Tax Administrators; Map: Baidi Wang/Axios

Several governors are also calling on Congress to support a bill that would suspend the federal gas tax — 18.4 cents per gallon — for the rest of the year.

"Money saved at the pump translates into dollars back in consumers’ pockets for groceries, childcare, rent, and more," six Democratic governors wrote in a letter to congressional leaders this week.

Go deeper: Soaring gas prices not yet souring demand 

Editor's note: This article was first published on March 9 and has been updated with newer developments.

Why gas prices are so high and what Biden can do about it

Gas prices reached a record high during the Russian invasion of Ukraine.

Photo illustration of President Biden holding a gas nozzle in front of a chart

Gas prices

Axios Explains: Ukraine

Climate change

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

World

Shell's decision to pull out of Russia has cost the company roughly $5 billion so far, the energy giant said in an update released Thursday.

Why it matters: Major international oil companies, including BP and Exxon, divested from Russian energy companies or projects following the invasion, potentially significantly reshaping the West’s energy relationship with Russia.

The losses will likely come in the form of reduced value of Russian assets, credit losses and contract terms, according to the update, which the company shared before the publication of its first-quarter earnings in May.

The big picture: After the start of the invasion, the London-based company first ended its relationship with the Russian energy company Gazprom, then later withdrew from Russian hydrocarbons altogether.

Those moves came after it and London-based BP faced pressure from the United Kingdom's government to cut ties with Russia, as hydrocarbons exports are crucial for financing the Kremlin and its military.

Go deeper: Why it's so hard to quit Russian energy

Shell says its Russia pullout has cost $5 billion so far

Major oil companies divested from Russia because of the invasion of Ukraine.

Shell CEO Ben van Beurden speaking in Lisbon, Portugal, in November 2021.

Shell CEO Ben van Beurden speaking in Lisbon, Portugal, in November 2021. Photo: Horacio Villalobos Corbis/Getty Images

Royal Dutch Shell

Russia

House Natural Resources Committee Chair Raúl Grijalva (D.-Ariz.) slammed the CEOs of three major oil companies for refusing to testify at a Natural Resources Committee hearing scheduled for April 5.

Why it matters: The hearing would have examined the fossil fuel industry’s failure to help stabilize gas prices during the ongoing crisis in Ukraine, Grijalva said in a statement. 

Details: The companies that refused to testify are EOG Resources, Devon Energy Corporation, and Occidental Petroleum, which are among the largest oil and gas companies that operate on public land and waters, per the committee statement.

By the numbers: The three companies hold over 4,000 leases covering nearly 1.5 million acres of public land and over 2,800 approved and unused drilling permits, per the NRC.

Those same companies experienced record profits over the past year, totaling nearly $9 billion, per the statement.

What he's saying: "Their silence tells us all we need to know — that cries for more drilling and looser regulations are nothing more than another age-old attempt to line their own pockets,” Grijalva said in the statement.

But, but, but: While Devon​ Energy Corporation​ won't participate in the April 5th hearing, a spokesperson ​told Axios​ the company's​ president and CEO Rick Muncrief is confirmed to speak to the House of Energy and Commerce Committee on April 6.

A spokesperson for EOG Resources confirmed to Axios they will not be participating in the hearing. Occidental Petroleum did not immediately respond to Axios' request for comment.

​Editor's note: This article has been updated to add statements from Devon Energy Corporation and ​EOG Resources.

Democrats blast oil execs for skipping hearing on gas prices

The hearing sought to examine the fossil fuel industry’s failure to help stabilize gas prices during the ongoing crisis in Ukraine.

Natural Resources Committee Chair Raúl Grijalva. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Fossil fuels

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

Shell said early Tuesday it will "withdraw from its involvement in all Russian hydrocarbons," including spot purchases of Russian crude oil.

Driving the news: The U.K.-based giant apologized for its recent buy of a Russian cargo at a steep discount.

What they're saying: "We are acutely aware that our decision last week to purchase a cargo of Russian crude oil to be refined into products like petrol and diesel — despite being made with security of supplies at the forefront of our thinking — was not the right one and we are sorry," Shell CEO Ben van Beurden said in a statement.

"Our actions to date have been guided by continuous discussions with governments about the need to disentangle society from Russian energy flows, while maintaining energy supplies," he added.

Between the lines: After facing intense criticism for its purchase of Russian oil last week, Shell said it would donate the profits to a fund for charity toward Ukraine.

The company also announced it would end its partnerships with Russian energy company Gazprom.

Shell vows complete break with Russia

The U.K.-based giant apologized for its recent buy of a Russian cargo at a steep discount.

The exterior of the anglo-dutch oil and gas company Shell's refinery in Pernis, Netherlands.

Photo: Robin Utrecht/AFP via Getty Images

Axios Pro Rata

Warren Buffett moved big into one of the country's largest oil companies, Occidental Petroleum, just as Carl Icahn hit the exits.

Why it matters: This comes as oil prices Monday hit a 14-year high, as both the U.S. and EU consider bans on Russian imports.

Buying in: Buffett's Berkshire Hathaway on Friday disclosed that it bought 91.2 million Occidental shares, on top of existing warrants to buy another 83.9 million shares. If it were to exercise its warrants, Berkshire's stake would climb to 17% from 9%.

Berkshire's warrants are exercisable at $59.62 a piece.

Occidental shares opened last Monday at $38.53 and closed Friday at $56.15. They opened up higher this morning.

Selling out: Carl Icahn fully exited what once was a 10% stake in Occidental, which he began building in 2019 as opposition to the company's highly-leveraged, $38 billion buyout of Anadarko Petroleum.

His two board reps at Occidental also resigned.

Icahn is estimated to have earned around $1 billion off his Occidental investment, but may regret not holding on for a few more days.

And, just to square the circle, Berkshire got its aforementioned warrants by helping to finance the Anadarko deal that Icahn despised.

Meanwhile, there are reports that Oasis Petroleum and Whiting Petroleum are nearing an all-stock merger that could value the combined North Dakota shale drillers at around $6 billion.

The bottom line: Oil price volatility isn't tamping down on oil industry deal making.

Buffett buys into oil giant as Icahn exits

This comes as oil prices Monday hit a 14-year high, as both the U.S. and EU consider bans on Russian imports.

Someone holding a barrel of oil on their finger

Warren Buffett

Blinken Oil 

The U.S. is working with its European allies to look into the possibility of banning Russian oil imports, Secretary of State Antony Blinken told CNN's "State of the Union" Sunday. 

Why it matters: Momentum had grown in Congress for the U.S. to cut off imports of oil from Russia in response to the invasion of Ukraine. But the White House had been reluctant to take action against the world's No. 2 oil producer. 

Administration officials had pressured some Democratic senators not to support bipartisan legislation to ban oil and gas imports from Russia, Axios first reported Saturday.

What he's saying: "When it comes to oil, Russian oil, I was on the phone yesterday with the president and other members of the Cabinet on exactly this subject," Blinken said. 

"And we are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil while making sure that there is still an appropriate supply of oil in world markets."

The big picture, via Axios' Ben Geman: Total U.S. oil and refined product imports have declined greatly since the mid-2000s, but the country remains a significant importer.

The U.S. imports from Russia have bounced around, from more than 800,000 barrels per day in mid-2021 to about 400,000 per day in December.

Yes, but: Banning Russian imports into the U.S. could further increase gas prices.

Between the lines: In an illustration of how toxic it is for a western company or country to buy Russian oil right now, U.K.-based Shell was backed into announcing it would donate the profits from a purchase of Russian oil to a fund for charity toward Ukraine. 

That was after Ukraine Foreign Minister Dmytro Kuleba called the company out on Twitter, asking, "doesn’t Russian oil smell Ukrainian blood for you?"

Blinken: U.S. and EU allies eyeing Russian oil ban

The White House had been reluctant to take action against the world's No. 2 oil producer.

Russian invasion of Ukraine

There is growing momentum in Congress to cut off U.S. imports of oil and petroleum products from Russia in response to the invasion of Ukraine.

Why it matters: This issue is pitting lawmakers from both parties against the White House, which is wary of a ban's potential to jack up gas prices.

Driving the news: On Thursday, a bipartisan, bicameral coalition of lawmakers introduced a bill that would ban U.S. oil and petroleum product imports from Russia. 

The lawmakers include Senate Energy Committee Chairman Joe Manchin (D-W.Va.) along with Sen. Lisa Murkowski (R-Alaska). 

House Speaker Nancy Pelosi backed the idea. "I'm all for that. Ban it. Ban the oil coming from Russia," Pelosi said at a news conference. 

The big picture: Total U.S. oil and refined product imports have declined greatly since the mid-2000s, but the country remains a significant importer. 

The U.S. imports from Russia have bounced around, from more than 800,000 barrels per day in mid-2021 to about 400,000 per day in December. 

Yes, but: Banning Russian imports into the U.S. could further increase gas prices, which are already running at their highest levels since 2014. 

For this reason, the White House has opposed an oil imports ban. 

"Our objective and the president's objective has been to maximize impact on President Putin and Russia while minimizing impact to us and our allies and partners," White House press secretary Jen Psaki said yesterday.

"We don't have a strategic interest in reducing the global supply of energy," she said. "It’s as simple as: Less supply raises prices."

Later on Thursday, Manchin contested the administration's arguments, saying an imports ban would not necessarily reduce oil supplies and cause prices to rise because the U.S. can boost its domestic production in the meantime. 

"We can basically produce whatever needs to be produced," he said.

Zoom in: The bill, which has 18 bipartisan co-sponsors, would prohibit more than the importation of Russian crude oil. It would also ban imports of petroleum products, liquefied natural gas and coal.

The intrigue: The White House needs Manchin's support to pass any pared-down version of the Build Back Better legislation, including climate provisions. 

If the administration blocks Manchin's push for an imports ban, it could complicate already tough efforts to revive pieces of that legislative package.

Calls for Russia oil imports ban pits lawmakers against White House

The White House is wary of a ban's potential to jack up gas prices.

Illustration of two fuel nozzles criss-crossed. 

Lawmakers from both parties are pushing the White House to impose a ban on U.S. imports of oil and petroleum products from Russia, even as buyers are already steering clear of the country's crude.

Driving the news: Appeals or proposed bills are coming from lawmakers including Senate Energy Chairman Joe Manchin; a number of GOP lawmakers, and liberal Democratic Sen. Ed Markey.

Why it matters: Total U.S. oil and refined product imports have declined greatly since the mid-2000s as the shale boom began a surge in domestic production.

The U.S. remains, however, a significant importer, and Russia is among the largest suppliers.

Yes, but: Russian oil exports are taking a major hit even without new government limits, Reuters and others report as buyers "self-sanction."

"U.S. traders in the nation’s largest oil hubs have cautiously put imports from Russian companies on hold, even though the White House has said oil sales are not the target of sanctions," it reports.

It's not just the U.S., either. "Demand for Russian oil has collapsed as refineries, banks and shipowners shunned the country’s vast commodities market," the Financial Times reports.

Charting Russia's U.S. oil sales

Lawmakers from both parties are pushing Biden to impose a ban on imports of oil and petroleum products from Russia.

A chat showing top oil exporters to U.S. 

ExxonMobil pledged Tuesday to end its role in a major Russian oil-and-gas project and cease new investments in the country due to its invasion of Ukraine.

Why it matters: ExxonMobil is among the world's most powerful oil companies and has longstanding investments and operations in Russia.

The move, which follows divestment announcements by Shell and BP, signals how Western oil majors are cutting ties with Russia despite its massive hydrocarbon reserves.

Driving the news: Exxon has a 30% stake in the big Sakhalin oil-and-gas project in Russia's far east and operates the development. It's Exxon's only current project in Russia, a spokesperson said.

The other partners in the venture are Russian state-controlled oil giant Rosneft as well as Indian and Japanese companies.

ExxonMobil said it's "beginning the process to discontinue operations and developing steps to exit the Sakhalin-1 venture."

The company also said that "given the current situation, ExxonMobil will not invest in new developments in Russia."

What they're saying: "ExxonMobil supports the people of Ukraine as they seek to defend their freedom and determine their own future as a nation. We deplore Russia’s military action that violates the territorial integrity of Ukraine and endangers its people," the company said.

Exxon to end operations in Russia, vows no new investments

Exxon has longstanding investments and operations in Russia.

Photo Illustration: Budrul Chukrut via Getty Images

The Biden White House increasingly views rising gasoline prices as a source of potential political peril — and is now asking some of the world's biggest oil producers to pump more oil.

Why it matters: This trend, combined with a fragile economic recovery threatened by the Delta variant of the coronavirus, and inflation beginning to bite consumers, could threaten the administration's ambitious congressional agenda for late summer and early fall.

Driving the news: The administration made two revealing moves on gas prices Tuesday morning.

One was to instruct the Federal Trade Commission to investigate "market manipulation or anti-competitive practices" influencing the retail price of gasoline. 

The other was the issuance of a memo from national security adviser Jake Sullivan, criticizing the recent decision from OPEC+ countries to increase production by 400,000 barrels a day monthly through December as "simply not enough" to avoid putting the international economic recovery at risk.

The big picture: Urging OPEC+ to produce more crude oil is, at least on the surface, incongruent with Biden's climate agenda of moving the country away from a dependence on fossil fuels. It was also a particularly dissonant move coming just two days after the U.N. IPCC issued its starkest warnings yet of the repercussions of human-caused global warming.

Between the lines: The FTC letter and Sullivan memo came the same day that the White House National Climate Task Force met to discuss the IPCC report and overall progress on the president's agenda to reduce greenhouse gas emissions and improve climate resilience.

By the numbers: Gas prices have been on the rise, from $2.24 per gallon in January to $3.172 as of Aug. 9, according to the EIA. 

What they're saying: A White House official told Axios that the administration can simultaneously push forward its ambitious climate agenda while being "vigilant" that middle class families don't suffer from a temporary surge in gas prices as the economy climbs out of its pandemic recession. 

The official said that while current gas prices are within the range seen in recent years, the crude oil prices have climbed higher than pre-pandemic levels.

The administration is also mindful of the fact that the move off fossil fuels will not be like flipping a switch, and a ready supply of affordable gasoline is still needed.  

The big picture: According to Bob McNally, founder and president of Rapidan Energy Group, who served on the National Security Council during the George W. Bush administration, Biden's team is acting due to increased concerns over inflation — but not just among the public.

McNally said it's clear that key lawmakers on Capitol Hill, notably moderate Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.), are attuned to inflation and are likely to seek a smaller Democrats-only spending bill. 

"I think what the White House did is realize inflation's a clear and present threat to our political agenda, meaning not just the president's poll support, but actually passing robust climate policies and human infrastructure policies later this year," McNally told Axios. 

"Gasoline prices are the point of the spear, if you will. They are the most politically toxic and dangerous price that is rising." 

Yes, but: The latest Axios Engagious/Schlesinger focus groups of swing voters, conducted Tuesday night, showed that higher gas prices are not yet a top-of-mind issue in the minds of swing voters who moved from voting for Donald Trump in 2016 to supporting Joe Biden in 2020. 

Not a single swing voter out of 13 participants from six pivotal swing states in the 2020 election said the price of gas would motivate them to vote for or against a candidate. 

While a focus group is not a statistically significant sample like a poll, the responses show how some voters in crucial states are thinking and talking about current events.

Oil analyst Ellen Wald told Axios that domestic oil production has remained stagnant despite the uptick in gas demand during the summer.

She said surveys show that the administration's climate agenda is making domestic producers hesitant to boost oil production.

"There's regulatory uncertainty and there's just this idea that they're going to be met with resistance from the Biden ministration. And so that's keeping a lot of producers from producing, which keeps American production down," she said. 

Biden White House jammed on gas prices

A request for more oil production came just two days after the UN's alarming climate report.

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