In Wake of Oil Import Ban, White House Course Corrects on Fossil Fuel Investments

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A CALL FOR INVESTMENT: The White House is pressing Wall Street to step up and help oil and gas companies grow production now that it cut the cord on Russian imports, marking a detectable shift in posture after months of discouraging investment in fossil fuels.

Russia’s invasion of Ukraine has upended global commodity markets and forced the Biden administration, along with European governments, to reimagine their energy strategies in the face of record fuel prices.

In the U.S., that involves the Biden administration now openly encouraging more domestic production of crude oil, where it had previously sought to limit expansion by putting a moratorium on new leasing on federal lands for such activities, planning restrictions on drilling in Alaska, and the like.

But White House officials are also putting the onus on Wall Street to help capitalize more production activities, notwithstanding the Biden administration’songoing rulemaking effort to require disclosures designed to reveal special risks to climate change of investing in fossil fuel companies.

“It’s a time for oil and gas companies to work with Wall Street to unleash our productive capacity,” a senior administration official told reporters yesterday. “Price signals are giving every incentive that producers need to invest in America’s energy security, our energy reliability, our energy sustainability.”

Press Secretary Jen Psaki also said yesterday it’s up to oil companies, “as well as Wall Street,” to determine “whether they’re going to reinvest these war profits from high prices back into the economy, raise production, and lower prices to American consumers.”

Since energy prices began spiking last fall, Biden administration officials have been saying that producers must keep supply up to maintain market stability while more renewable and lower-emitting energy sources are rolled out.

“If I stopped all oil production today, our system would collapse. We’re not there yet,” Amos Hochstein, senior energy adviser at the State Department, said at an energy forum in October.

But he also discouraged spending big on things like pipelines and downplayed the role of fossil fuels in the future energy mix.

“The energy security of the future is going to be not who controls oil and gas but who controls the inputs into a solar panel cell or into an electric vehicle battery,” said Hochstein, who has been meeting with Saudi, Qatari, and other officials in recent weeks about how to keep oil and gas supplies flowing amid the Russia-Ukraine conflict.

Holding the green energy line: The administration still maintains that “the way to avoid high gas prices is to speed up, not slow down, our transition to a clean energy future,” the same unnamed senior administration official said yesterday.

However, the official said unleashing productive capacity and investing in energy security “will cut our vulnerability to tyrants like Putin that influence global oil prices and gas prices at home,” the official added.

The industry view: A number of oil and gas industry groups have backed the Biden administration’s import ban and used much the same language about the necessary path forward.

“We share the goal of reducing reliance on foreign energy sources and urge policymakers to advance American energy leadership and expand domestic production to counter Russia’s influence in global energy markets,” American Petroleum Institute President and CEO Mike Sommers said in a statement yesterday.

Still, the industryhas been especially critical of the Biden administration’s policies, rulemakings,and political appointees, specifically describing them as sending negative signals to prospective investors about the viability of investing in oil and gas and inhibiting their ability to secure new capital.

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EU TO DRASTICALLY SCALE DOWN RUSSIAN GAS RELIANCE: The EU announced a plan yesterday to cut its dependence on Russian natural gas by two-thirds this year, and rid itself entirely of Russian fossil fuels by the year 2030.

The ambitious plan was published yesterday by the European Commission, and comes as the bloc seeks to drastically cut back its reliance on Russian energy supplies in response to the country’s invasion of Ukraine. European leaders are also slated to meet in Versailles tomorrow to discuss the plan, which calls on governments to find alternative energy supplies and expand their country’s clean energy alternatives.

Reuters reports “The Commission said gas and liquefied natural gas from countries like the [U.S.] and Qatar could this year replace more than a third … of the 155 bcm Europe gets annually from Russia. By 2030, increased biomethane and hydrogen use could also help.

“New wind and solar projects could replace 20 bcm of gas demand this year, while tripling capacity by 2030, adding 480GW of wind and 420GW of solar energy, could save 170 bcm a year.”

BRITS FOLLOW BIDEN ON RUSSIAN OIL: The U.K. also announced plans yesterday to phase out imports of Russian oil and oil products by the end of the year. British officials said it will begin exploring options to bolster its own supply and find alternative sources to Russia, which supplies roughly 4% of its gas supply.

“In another economic blow to the [Putin] regime following their illegal invasion of Ukraine, the U.K. will move away from dependence on Russian oil throughout this year, building on our severe package of international economic sanctions,” British Prime Minister Boris Johnson said in a statement.

Frack on the table?: Johnson is also responding to weeks worth of calls from fellow conservatives to lift a moratorium on fracked gas to grow domestic production and is having his ministers consider the merit of such a decision, the Daily Telegraph reported.

GOP ESCALATES ATTACKS ON BIDEN ENERGY POLICIES: As the U.S. moves to implement its ban on all imports of Russian oil and oil products, Republicans have doubled down on their criticism of the Biden administration––noting that prices at the pump had skyrocketed well before Russia invaded Ukraine, and arguing that Biden should have done more to increase production at home.

Others argued that Biden’s energy policies have created an environment of uncertainty for domestic producers, who have been reluctant to expand production in fear of getting hit with fines or new regulations.

“What I’ve said is: ‘Stop buying oil from Russia but get it from America,’” said House Republican Whip Steve Scalise, adding that Biden “will say the first half, but he won’t say the second half. So what does he have against American energy? He’s trying to point to everyone else in the world when everything we need is right under our feet.”

House Minority Leader Kevin McCarthy said Democrats’ policies “are why we are here in the first place.”

“Never should we think that foreign oil is better than American independence when it comes to energy,” said Rep. Yvette Herrell of New Mexico.

And Minnesota Rep. Tom Emmer said that, ultimately, Democrats will “own” the rising gas prices and energy costs in the U.S. “They’re the ones who shut it down in the first place, whether it’s drilling on federal lands, freezing all the permits a couple weeks ago, killing the Keystone XL pipeline,” Emmer told NBC News in an interview. “They’re responsible for this like they’re responsible for inflation.”

Texas Rep. August Pfluger praised Biden’s decision to ban Russian imports yesterday, but also criticized the administration for what he described as an “assault on the oil and gas industry … [that] has created a weakness in the United States.” Ultimately, Pfluger said, the import ban is a “lesser step” that should be followed by an uptick in production. “It is time to unleash American oil and gas,” he said.

Now that supply is low and the stakes are high, Biden is calling on the industry to ramp up production––a move that was described to Breanne yesterday as “incongruous” with the administration’s messaging to date.

For now, public opinion is still in Biden’s camp. A new Reuters/Ipsos poll found that four in five U.S. voters favor banning Russian energy imports, despite an increase in gas prices. The survey, conducted Monday and Tuesday, found that 80% of respondents –– including strong bipartisan majorities –– said the U.S. “should not buy oil or gas from Russia during the conflict, even if it causes gasoline prices to increase.”

A 63% majority of voters said such price hikes were “worthwhile” to defend another democracy. Read the full poll results here.

Ukrainian President Volodymyr Zelensky also praised Biden’s decision, writing on Twitter yesterday: “Thankful for US and @POTUS personal leadership in striking in the heart of Putin’s war machine and banning oil, gas and coal from US market. Encourage other countries and leaders to follow.”

THE PROSPECT OF $240 PER-BARREL OIL: Oil could reach $240 per barrel over the coming months if countries more heavily and widely sanction Russian exports, analysts with Rystad Energy estimate.

“If more Western countries join the US and impose oil embargoes on Russia, it would create a 4.3 million barrels per day hole in the market that simply cannot be quickly replaced by other sources of supply,” said Bjørnar Tonhaugen, Rystad’s head of Oil Markets.

Oil prices have already grown steeply in response to the escalation of conflict in Ukraine. Brent crude closed at $95.39 on Feb 21., when Russia announced it would recognize the independence of two separatist regions in Ukraine, and since has shot up into the lower $130 range.

Today, though, prices are down after opening at $121.50 a barrel.

SENATE ENERGY APPROVES NOMINEES: The Energy and Natural Resources Committee approved the following nominees out of committee yesterday:

• Shalanda Baker, nominated as director of the Office of Minority Economic Impact at the Department of Energy
• Asmeret Asefaw Berhe, nominated to be director of the Office of Science at the Energy Department
• Sara Bronin, nominated to be chairman of the Advisory Council on Historic Preservation (ACHP), passed out of committee by a recorded vote of 12-8.
• Joseph DeCarolis, nominated to be administrator of the Energy Information Administration.

FORMER OFFICIAL SHINES LIGHT ON IMPACT OF UPCOMING SANCTIONS ON RUSSIAN ENERGY: Frank Fannon, the former U.S. Assistant Secretary of State for Energy Resources, joined former FERC chairman Neil Chatterjee on this week’s “Plugged In” podcast to explain the opportunities and pitfalls associated with the new U.S. ban on Russian oil imports.

Fannon said the U.S. could benefit by taking a page out of their playbook in Iran: To maximize economic pain on Russia, he said, it’s crucial for the U.S. to work with other countries and cut off its imports around the world. “That’s what we did in the case of Iran,” Fannon said, though he noted “it would have to be a phased in approach over time––you can’t do it immediately.”

In the case of Iran, he said, the U.S. “took more than 2 million barrels of Iranian oil and condensate off the market.” There were concerns such a move would “destroy the economy,” Fannon said, “but we didn’t.” He said that’s largely because the U.S. did so “in close partnership with Gulf producing countries. … Plus we have a reasonable expectation of how the U.S. oil and gas industry would respond to market conditions. We’re kind of lacking those two elements today.” You can listen to the full episode here.

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THURSDAY | MARCH 10 10:00 a.m. 366 Dirksen The Senate Energy and Natural Resources Committee will hold a hearing to examine the use of energy as a tool and a weapon, and ensuring energy security for the United States and its allies.