Not even US$200 a barrel: Shale giants say they won't drill more
BNN Bloomberg
The architects of the American shale revolution are following through on pledges to put investor returns above all else.
The Texas wildcatters that ushered in America’s shale revolution are resisting the temptation to pump more oil as the market rallies, signaling higher gasoline prices for consumers already battered by the worst inflation in a generation.
Crude prices hurtling toward US$100 a barrel typically would spark a frenzy of new drilling by independent explorers in shale fields from the desert Southwest to the Upper Great Plains -- but not this year. Influential players like Pioneer Natural Resources Co., Devon Energy Corp. and Harold Hamm’s Continental Resources Inc. just pledged to limit 2022 production increases to no more than 5 per cent, a fraction of the 20 per cent or higher annual growth rates meted out in the pre-pandemic era.
The timing couldn’t be worse for consumers. Outside of OPEC, which has rejected U.S. President Joe Biden’s pleas to accelerate production increases, domestic shale fields are the only other source of crude that can quickly respond to supply shortfalls. Together with fast-rising global consumption, American drillers’ conservatism is likely to keep oil prices elevated for some time to come.
“Whether it’s US$150 oil, US$200 oil, or US$100 oil, we’re not going to change our growth plans,’’ Pioneer Chief Executive Officer Scott Sheffield said during a Bloomberg Television interview. “If the president wants us to grow, I just don’t think the industry can grow anyway.’’
To be sure, U.S. oil output will rise substantially this year and is forecast to return to pre-pandemic levels by 2023. But it probably won’t be enough to knock oil prices off their upward trajectory any time soon.
Publicly-listed independent explorers like Pioneer and Devon account for more than half of the roughly 10.5 million barrels that America produces daily from fields in the contiguous 48 states, according to IHS Markit Ltd. The rest comes from closely held outfits, family-run enterprises and the international supermajors, all of which are aggressively boosting output.
