New York Times reports this morning that “The war with Iran has been very lucrative for American oil companies, which have earned more than $130 billion in profit as people pay much higher prices for gasoline, diesel and other fuel.”
Citing a Brown University Climate Lab study, the Times reported “As of this week, Americans had spent an extra $147 billion on gasoline and diesel since the United States and Israel began striking Iran on Feb. 28.”
Drill, Baby Drill does not get you what they want you to think it does.
Meanwhile a new study from a Finnish think tank adds that Americans have paid more in additional costs than any other country.
Center for Research on Energy and Clean Air (Finland):
This is because of America’s exceptional oil consumption due to high reliance on inefficient, oil-burning private vehicles and a slow transition away from petrol and diesel – leaving households, truckers and farmers particularly exposed to global fuel market shocks.
Fuel prices have risen for two reasons: increased price of crude oil, and a shortage of refining capacity. Refining capacity has shrunk as the disruptions to Hormuz traffic and Iran’s strikes on refineries have shut Gulf refining capacity off the market, and Ukraine’s counterattacks on Russia have affected refining capacity in the country.
—
According to the Finnish data, “The reason that per capita costs in the US are so high is the high consumption of fuels per person and lack of progress in reducing reliance on oil.”
So, when Trump promised the Oil industry that if they supported his election bid, he would open the bag for them, they responded with massive support, and got in return massive influence, even compared to other oil-friendly Republican administrations.
Support for EV sales was axed, even though the cost to the US Auto industry, heavily invested in an EV transition, was immense. Consumers were left with no affordable off-ramp from oil dependence.
Then, the trap was sprung.
And despite those high prices, US oil companies are not rushing to drill new wells. Why would they? The Trump administration keeps promising that the high prices are about to drop in response to some as yet unidentified policy change or solution to the war.
Despite their windfall of cash, Exxon and Chevron signaled they plan to remain conservative in their spending, cutting debt and strengthening their balance sheets.
Exxon has slashed its net debt by almost $11 billion this year; Chevron by $13.8 billion. Even as prices climbed, Chevron spent less than last year in the Permian Basin of West Texas and New Mexico, the epicenter of its American oil production, where output was flat at roughly 1 million barrels a day.
Long-term, expect no great surge in new U.S. drilling. “Oil companies don’t usually respond to economic conditions brought on by policies that can be temporary,” says Patrick De Haan, head of petroleum analysis at GasBuddy, an app that tracks gas prices for drivers. It takes six months or more to get full production from a new well, Cowan says, so producers making these decisions must think about what the fuel will cost months down the line.
–
Funny how, regardless of the particular circumstance, Republican administrations again and again see war in the oil rich Middle East as a solution to every problem. I’m sure the windfall profits are just an oddly repetitive coincidence.