As the year comes to a close, gas prices in the U.S are at their lowest point of 2023. And not coincidentally, domestic oil production is at a record level. But it comes at a time when the U.S. is trying to wean itself off fossil fuels. William Brangham examined the big changes and the implications with Clifford Krauss, the national energy correspondent for The New York Times.
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Geoff Bennett:
As the year comes to a close, gas prices in the U.S. are at their lowest point of 2023. And, not coincidentally, domestic oil production is at a record high.
William Brangham looks at what's behind the big changes and the implications.
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William Brangham:
Geoff, the average price of gas is $3.12 a gallon. That is far below the nearly $4.00-a-gallon highs we saw this fall.
At the same time, the U.S. is producing an unprecedented amount of oil, some 13.5 million barrels a day. Moreover, big energy companies are merging as they try to get more production out of the Permian Basin in Texas and in New Mexico. Exxon plans to buy shale giant Pioneer Natural Resources for nearly $60 billion, and Chevron plans to buy Hess for $53 billion.
This record production of oil and these big mergers come at the very same time when the U.S. government is trying to wean the nation off of fossil fuels, because using them is dangerously warming the planet.
Clifford Krauss is the national energy correspondent for The New York Times, and he joins me now.
Cliff, great to have you back on the program.
Explain to us, how did we get here from this plummeting oil market during the pandemic to now these record highs?
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Clifford Krauss, The New York Times:
Great to be with you again, William.
Really, the story begins about 15 years ago with fracking, right, where, suddenly, the United States became a production powerhouse. And it's had its ups and downs, but, in the last year or so, there has been almost an unprecedented increase in production, actually the most since 2014.
And so at this point, the United States, as you mentioned, is producing about 13.5 million barrels a day, and we're heading towards 14 million barrels a day. That is more oil than any country in the world. That is a record for the United States, and it may well be the record for any country in the world.
And we are now, after Saudi Arabia, the biggest — we are we're exporting more oil than any member of OPEC, save Saudi Arabia.
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William Brangham:
And is that just a function of companies ramping up production? Is it as simple as that?
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Clifford Krauss:
No, it isn't. Actually, it's very interesting.
The very large companies, the Exxons and the Chevrons, have actually tried to be very disciplined. They don't want to repeat the mistakes of the past, where they would pump a lot of oil when prices were high, only to see the price collapse. And, of course, that's what they don't want to see.
So, while they have been disciplined, the smaller companies financed by private capital mostly, they are basically pressing on the gas, so to speak. And we're producing more oil from these small producers. And this looks like it will continue.
Actually, what happened was, with the Russian invasion of Ukraine, when the price of all the commodities, but especially oil and gas, went up, these companies got a signal from the market to start pumping more. And that's exactly what they have done.
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William Brangham:
As you mentioned, I know we export a great deal of that oil, but is all of this domestic production also responsible for the drop in gas prices, which I take it also came as a bit of a surprise?
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Clifford Krauss:
It is.
There's an abundance of oil going to our refineries. But also remember that our gas prices are linked with global oil prices. And those prices are going down for a variety of reasons, both demand and supply. Demand from China and Europe has been low. Production is not only up in the United States. It's up in Canada, Guyana, Brazil, and a few other producing countries.
So although OPEC Plus is cutting back on the production, that is more than compensated by the United States and other producers that are not in OPEC.
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William Brangham:
Let's talk a little bit about these two big mergers.
Are these, as some critics argue, the last gasp of the fossil fuel industry trying to squeeze every last profit? Or is it a bet by these companies for a bright, robust future for fossil fuels? Or is it something else?
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Clifford Krauss:
Yes, I see it as being something else.
I mean, the oil companies realize — and this is not just our oil companies, the American oil companies, but the international state-owned oil companies — that probably oil demand in the United States and the world is going to plateau and come down.
And so the cheapest barrels are the barrels that will survive on the market. Saudi Arabia is the cheapest. Actually, the Permian Basin is pretty cheap as well. And when these companies consolidate and merge, because of the economics of scale — the economies of scale, they are actually saving themselves money and thereby squeezing more profit from their production.
By the way, the Exxon deal is for the Permian mostly. The Chevron deal is to get a piece of the action in Guyana, which is the fastest-growing oil province in the world.
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William Brangham:
As I mentioned at the beginning, all of this beefed-up oil production comes directly at odds with the Biden administration's desire to use less oil and to use less gas and to use more renewables.
How does — how do we as a nation square that seeming contradiction?
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Clifford Krauss:
That's a tough one, because the United States has two goals, and these goals conflict.
One goal is geopolitical and to take — basically to provide gas and oil for Europe and other countries that were dependent on Russia, also to keep our gasoline prices low, so — to try to fight inflation. But at the same time, we're trying to pivot.
How you do those two things at once is a contradiction. The Republicans are attacking this administration for making a war on oil, even though our oil production is at record levels. But it's hard to see this administration saying, look at us, the United States is the top oil producer in the world, when you want environmentalists and young voters to vote Democratic.
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William Brangham:
That is the essential contradiction right there.
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Clifford Krauss:
Yes, it is.
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William Brangham:
Cliff Krauss of The New York Times, great to see you. Thank you so much.
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Clifford Krauss:
Thank you for having me.
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