As the year 2022 begins, the U.S. domestic oil and gas industry stands poised for a major boom year. The Baker Hughes active rig count rose back above 600 in January, still well below the highs of 2016 through 2019, but a far healthier level than the depths under 200 seen during the COVID bust of 2020.
As is almost always the case, this new boom is driven by high commodity prices. The price for West Texas Intermediate topped the $85 per barrel mark in mid-January, double its level from a little more than a year before, and all signs are that it will continue rising throughout 2022, barring a major global recession or a renewed COVID-related pandemic. Demand for crude globally continues to outpace all analyst projections (You’d think they would learn sooner or later to adjust their always-wrong expectations.), as does demand for natural gas.
Demand is especially strong for oil and gas produced in the United States, as evidenced by the fact that exports of both commodities produced in America set new records during the 4th quarter of 2021. Where crude oil is concerned, much of that U.S.-centric demand is the result of many of the OPEC+ countries struggling to meet their production targets as they run out of spare producing capacity. That is not a problem here in the United States, where the Energy Information Administration (EIA) projected in its January update that producers would increase production by 1 million barrels per day during 2022. That is certainly achievable, and it could go even higher if predictions of $100 oil by the likes of Goldman Sachs, J.P. Morgan and others come about during the year.
Frankly, I think we’ll be there well before summer, and a $150 per barrel price is not out of the question later in the year. With the industry having massively under-invested in the finding of new reserves since 2015, thanks to the capital-constraining efforts of the ESG investor community, the sky literally is the limit where oil prices are concerned in the years to come.
Demand for LNG is being particularly driven by the growing energy crisis in Europe, as countries like Germany, France and the UK begin paying the price for their stupid policy decisions of the last 15 years that have led to a massive over-reliance on unreliable, intermittent wind and solar energy sources. Again, much of this dumb decision-making can be attributed to the whims of ESG investors and the radical left-wing environmentalist community.
It’s all basically a plague of stupid energy policy on our society, driven by the upper 1/10th of 1/10th of 1 percent of the global elite who set unrealistic global environmental targets and goals at conferences like the Paris Climate Accords of 2015 and last year’s COP 26 Conference held in Glasgow, Scotland. They all fly into these European cities in their private jets — or, like Leonardo DiCaprio, sail there on their 417 ft. long yachts — attend all the receptions and $1,000 dinners, make inflation-causing decisions for everyone else, and then fly home carrying the $25,000 gift bags that are handed out.
Governments in North America, the EU and some parts of Asia then go about enacting braindead energy policies designed to allow politicians like Joe Biden and John Kerry to signal their virtue to the globalist leaders like UN Secretary-General Antonio Guterres and International Energy Agency chief Fatih Birol — and, of course, DiCaprio and Al Gore — and the result is the outrageously high cost of all forms of energy we see impacting our society today.
We all moan about the 50% rise in gasoline costs we saw in the U.S. during Joe Biden’s first year in office, but few of us are aware that the real cost of solar and wind power rose even more than that during 2021. Even fewer of us are aware that the price for lithium — one of an array of critical minerals that must be available for electric vehicles (EVs) and wind and solar to exist — rose by a somewhat amazing 477% during the same 12 months. That is not a typo.
Why does that matter? It is because the EV industry has irrevocably tied itself to lithium-ion battery technology, for starters. Every increase in the price for lithium inevitably results in a higher price for that Tesla or Ford F-150 Lightning you’re thinking about buying.
Lithium is also one of the critical minerals that goes into the manufacture of every solar panel and the wind turbines atop all those 500 to 700 ft. tall wind towers you see covering West and South Texas now. Plus, the vast preponderance of what little battery backup storage capacity for wind and solar that exists today is of the lithium-ion variety, although some companies are working on scalable alternatives.
Here’s the real dirty secret that no one in the renewables or EV industries wants you to be aware of: Last July, the IEA projected that, in order to meet its laughably unrealistic climate change goals, demand for lithium globally would need to increase by 900% just by 2030. If that seems unrealistic to you, then you should know that IEA also projects that lithium demand would further need to rise by 4,000% (again, not a typo) by 2040.
Yet, we see none of the governments in North America, the EU or Asia outside of China doing anything to ease restrictions on the permitting of mining and evaporative operations for the production of more lithium within their borders. The most recent lithium-related news item was of the government in Serbia canceling the permit of a planned multi-billion dollar Rio Tinto mine in response to the protests of the leftist environmentalist movement.
With China firmly in control of more than 90% of the global supply chain for lithium and other critical minerals, the Biden administration promised in June of last year to mount a “whole of government” approach to securing the supplies and supply chains for future U.S. needs. If it has made any progress on that effort in the intervening nine months, it has not made anyone aware of it. It is more than likely that nothing has been done. Literally.
The big news recently out of Europe is that governments there have been scrambling to secure supplies and supply chains related not to lithium but for … natural gas. Because the real crisis facing Europe this winter is how to keep the lights on and homes heated as wind and solar continue to fail to deliver on their unrealistic promises that were made to secure hundreds of billions of dollars of virtue-signaling government subsidies.
The end result of all this policy insanity is higher prices for all forms of energy for everyone. Higher prices at the pump, higher utility bills and higher transportation costs that raise the retail prices for every consumer good.
It is all a hidden tax caused by these stupid, virtue-signaling politicians that hit the poorest in our society the hardest. You would think that at some point, all the liberals among us would find it within their souls to care and stop electing energy idiots to office. But in this world of the Biden administration, that obviously has not taken place yet.
So, word to the wise: Just prepare yourselves to keep paying more because this administration of energy idiots has three more years to go.
About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels. Contact David Blackmon at [email protected].