US Secretary of Energy Jennifer Granholm speaks to COP26 delegates in Glasgow, Scotland.
Jan Forsyth | Getty Images
With oil prices recently hitting their highest level since 2008, Energy Secretary Jennifer Granholm took the stage in front of a room full of energy executives with a simple call: boost production.
“We are in an emergency and we must responsibly increase short-term supplies where we can right now to stabilize the market and minimize the damage to American families,” she said Wednesday at CERAWeek S&P Global.
The US has used the Strategic Petroleum Reserve twice in recent months – last week and in November – and Granholm said a further release is not ruled out.
But she also called on the private sector — and Wall Street — to play its part at a pivotal moment.
“I hope your investors are saying these words to you: in this moment of crisis, we need more supply… right now, we need oil and gas production to rise to meet current demand,” she said.
Oil and gas companies have fundamentally changed their business models since the pandemic. If earlier it was about growth at any cost, now capital discipline prevails. Companies pay off debts, announce share repurchases and increase dividends. They promised to control the supply.
Granholm addressed an industry that has felt alienated by the administration, saying the Department of Energy and the Biden administration as a whole are willing to work with manufacturers.
She said the increase in production now doesn’t detract from the White House’s long-term clean energy goals, saying “we can walk and chew gum at the same time,” referring to both ways of generating energy.
The oil and gas industry said the White House is holding back drilling because of unfriendly policies. Officials denied these claims.
The industry is also grappling with the same supply chain issues that are affecting the economy as a whole. Oxy CEO Vicki Hollub said on Tuesday it was hard to find raw materials like sand and said the job market remained tight. Hollub emphasized that the volume of production cannot be raised for a penny. While the industry was prepared for bottlenecks in the supply chain, it was not prepared for the sudden calls to increase production.
Oil prices topped $130 a barrel on Sunday, the highest level since 2008. Less than two years ago, West Texas Intermediate oil benchmark traded below zero.
Demand has since rebounded while producers have cut production to keep supply in check. Years of underinvestment also make the market worse. Russia’s invasion of Ukraine has sent oil prices skyrocketing, given a fundamental backdrop: rising demand, with supply struggling to keep up.
Granholm called for a partnership, saying the government and the energy industry have been working together for over 100 years. She urged energy companies to make the transition as well.
“It’s hard to see history being made when you’re right in the middle of it. I think we are on the cusp of the most important transition that human society has ever seen,” she said.