Drill, baby, drill. Oh, we have already done that and are continuing!

Certainly are serious times and there is no lack of back and forth in social media regarding gas prices, energy independence, etc. Plenty of memes shared about opening the Keystone Pipeline (it is open) and back to the familiar refrain of “drill, baby, drill” — we are already doing that too. The Keystone XL project was abandoned by the Canadian company that was sponsoring the project.

Some History on Gas Prices

Despite all the rhetoric on who to blame for high gasoline prices at the pump, the highest price per gallon to date was in July 2008 at $4.051 cents per gallon. That is worth $5.22 in today’s dollars. There were plenty of explanations for the increase in the price of gas at time; from a shortage of oil supply to an increase in demand by China. These and other reasons are spelled out in a BBC News article. With the discussion in the U.S. and by others of not purchasing oil from Russia and the continued speculation in the oil market it is almost certain that U.S. gasoline prices will go up.

The roiling of the market is caused by one reason and one reason only — Vladimir Putin’s invasion of Ukraine.

Drill, Baby, Drill

According to the U.S. Energy Information Administration the U.S. exported slightly more petroleum than it imported in the first half of 2021. Yep, you read that right — we exported more than we imported. Kind of shocking considering some of the rhetoric you hear.

Fact of the matter is we have been drilling and have continued to drill. The Washington Post in a January 27, 2022 highlighted this fact in an article entitled, “Biden outpaces Trump in issuing drilling permits on public lands”. And, while the U.S. has increased its production of crude oil exponentially since 2008 we still import oil from places like Canada (our largest partner), non-OPEC nations, OPEC nations and Russia. Some of the product is refined into gasoline and other petroleum products and exported out of the country.

In fact, U.S. crude oil production is forecasted to rise to record levels in 2022 and 2023.

The interactive chart for the data above can be found here.

With all that said, even prior to the pandemic and then the weight of the pandemic with the collapsing price of oil (you remember when the price of crude oil was in the negative) there were plenty of oil drilling platforms that were abandoned because the price of oil was so low it was a money losing proposition to continue to drill them. Some 600 such companies have gone bankrupt from 2015 to 2021. According to the EIA as of January 2022 there are 4,446 drilled but uncompleted wells (DUC) in the United States.

Every Action has a Reaction

No doubt purchasing crude oil from Russia is problematic. One must point out, however, the increase in the purchase of oil from Russia has occurred after the United States government in January 2019 sanctioned the government of Venezuela and prohibited the import of oil from that country. We were purchasing far more oil from Venezuela than Russia at the time.

In January 2019 the U.S. imported 19.6 million barrels of oil from Venezuela. Since that time the amount of oil imported from Russia increased. EIA has all that data on their web site.

The U.S. Exports Gasoline

Hard to believe it, but it is true.

In 2020 (the last annual data available) the United States on a daily basis exported more than 700,000 barrels of gasoline around the world. The single largest recipient is Mexico. From 1975 until 2015 there was an ban on the export of petroleum products from the United States.

According to a report from the U.S. Government Accountability Office, “Between 1975 and the end of 2015, the Energy Policy and Conservation Act directed a ban on nearly all exports of U.S. crude oil. This ban was not considered a significant policy issue when U.S. oil production was declining and import volumes were increasing. However, U.S. crude oil production roughly doubled from 2009 to 2015, due in part to a boom in shale oil production made possible by advancements in drilling technologies. In December 2015, Congress effectively repealed the ban, allowing the free export of U.S. crude oil worldwide.

Here is article from Reuters about the lifting of the ban. Here is one particularly interesting quote in the article, “Drillers have said lifting the ban would increase U.S. oil security and give Washington’s allies in Europe and Asia an alternative source of crude beyond OPEC and Russia”.

We Have a Consumption Problem

I have taken enough trips around the sun to remember the gas lines of the 1970s when OPEC placed an embargo on oil exports. You were only able to purchase gasoline on an odd/even day based upon the numbers on your license plate. Goodness I was incensed at having to pay 60+ cents for a gallon of gasoline. The good old days.

Transportation is one of the important sectors of our economy that relies almost exclusively on oil products — gasoline or diesel. According to the US EIA 66% of the end use of oil is used for transportation. In Northern Virginia the transportation sector is responsible for 50% of all the greenhouse gas emissions in the region.

Thus lies an opportunity for the United States to finally take decisive action to truly become a energy independent nation.

Some Ideas Moving Forward to Reduce Oil Consumption

Electrification of the Transportation System

The Bipartisan Infrastructure Investment Act takes a big first step in making public investment to create a robust electric vehicle charging network throughout the country.

In a fact sheet released by the White House in December 2021 “The Bipartisan Infrastructure Law includes $5 billion in formula funding for states with a goal to build a national charging network. 10% is set-aside each year for the Secretary to provide grants to States to help fill gaps in the network. The Law also provides $2.5 billion for communities and corridors through a competitive grant program that will support innovative approaches and ensure that charger deployment meets Administration priorities such as supporting rural charging, improving local air quality and increasing EV charging access in disadvantaged communities. Together, this is the largest-ever U.S. investment in EV charging and will be a transformative down payment on the transition to a zero-emission future.”

The Commonwealth of Virginia will receive $106 million over five years for these investments.

Electric Vehicles

The automobile makers in this country and abroad have announced ambitious plans to ramp up their own production of electric vehicles. Forbes magazine put together a nice compendium of what automakers are doing for their own energy transition to electric vehicles. The EV tsunami is happening.

Certain EVs are still eligible for the Federal Tax Credit, but cars from General Motors and Tesla no longer are eligible because the statute creating the credit caps it at 200,000 vehicles sold.

According to an article in Cars.com, “When a manufacturer sells its 200,000th qualified vehicle, the tax credit is scheduled to wind down, reducing by half to $3,750 and then half again over a period of time before being reduced to nothing. Tesla sold its 200,000th vehicle in 2018, and the credit fully expired at the end of 2019. Another popular EV, the Chevrolet Bolt EV, also is no longer eligible for any tax credit.”

Legislation that passed the U.S. House, but did not make it to the floor of the Senate for a full vote would have offered credits of up to $12,500 for consumers if they purchase an electric vehicle. Discussion are on going.

Sustainable Aviation Fuels and Electrification of Ground Support Equipment

Airlines are important partners in reducing their use of aviation fuels that are refined from crude oil. Recently, United Airlines completed a flight utilizing 100% sustainable aviation fuel for one of its engines. While modest, this is an important step in their transition away from fuels refined from crude. And, Airbus is looking at the use of hydrogen as an alternative fuel as well. The airlines are active partners at the airports in Northern Virginia in converting their ground support fleet to electric power and away from petroleum products.

Supporting Freedom

We are fortunate in this country to have an open debate and discussion on these important issues. While I do not like paying more at the pump, I think of the folks in Ukraine living in subway stations, fleeing their home land and seeing families killed by indiscriminate bombing and shelling by the Russians. Let’s remember why we are here — Vladimir Putin.

There are a number of organizations on the ground in Eastern Europe to help those folks who are in danger. I would ask that you consider helping them and pray for peace.