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 level. But it comes at a time when the U.S. is trying to wean itself off fossil fuels. William Brangham examined the big changes and the implications with Clifford Krauss, the national energy correspondent for The New York Times.
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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. ♪♪