Increasing Government Activism in the Oil & Gas Sector
February 2, 2023
Needless to say, the established global patterns in energy production, transport, refining, and consumption were severely disrupted at the outbreak of the Ukrainian war one year ago. As that war has played out, course corrections of increasing severity due to embargos, sanctions, sabotage, and bottlenecks have emerged. Thus, traditional customers for Russian oil and gas have had to look for new sources or alternative ways to accomplish their requirements. Through all this, new consumers are emerging for Russian oil & gas. Ditto American NG! All in all, patterns are changing radically.
An article from the January 12th Wall Street Journal entitled “Why Governments Are Pushing Deeper Into Energy Markets” (https://www.wsj.com/articles/energy-markets-governments-security-11673450650?st=isopbo266urv4h9&reflink=desktopwebshare_permalink) is a good read if you care to get down into the weeds of public policy as it pertains to energy – which has expanded as a result of this war.
The war has prompted many governments, including the U.S., to become much more pro-active in domestic and international markets. For example, the United States has chosen to draw down its Strategic Petroleum Reserve (SPR) by 180 million barrels – that’s a big number to replace! That draw-down had the effect of softening upward pricing pressures which naturally helped to dampen the severity of inflationary spikes that peaked in 3Q22. But, more strategically, will the U.S. government really lower the barriers to permitting much-needed NG pipelines? Expediting construction of pipeline infrastructure would be a huge factor in weaning Europe off of Russian gas. Other governments have also expanded their energy activism. For example, Germany outright nationalized several gigantic natural gas distribution companies! The Netherlands is giving consideration to reinvigorating its famous Gronigen natural gas field which has been virtually shut down over concerns of seismic activity. These forces will undoubtedly impact where oil & gas prices will be trending this year and probably next. Often, the best intentions can result in unexpected consequences as was proven in the 1970s. The quasi-embargo placed on the Russian crude oil is certainly among the most audacious moves. In contrast, check out our recent blog posts on the reticence of many U.S.-based oil & gas companies to support the war effort.
We at First Keystone remain focused on delivering high-quality industrial buildings for lease or purchase in Pecos, Texas in order to enable the American oil & gas industry to be a worldwide leader in energy as a strategic force.
The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization. First Keystone welcomes responsible fact-based discourses on these topics.