Shortly following Russia’s invasion of Ukraine, the CEOs of Pioneer (PXD) and Devon (DVN) indicated they were willing to work with Washington in a coordinated effort to increase US oil (USO) and gas (UNG) supply. Washington responded with an historic release of strategic oil reserves, Congressional price gouging hearings, calls for a windfall tax, and discussion of export restrictions.
Tuesday, Chevron (CVX) CEO Mike Worth wrote a letter to President Biden, highlighting the company’s 50% increase in capital investment during 2022, 15% Permian oil production growth, and rising refinery runs. Noting that “we need an honest dialogue on how to best balance energy, economic and environmental objectives…we can only meet these challenges by working together.”
Last week, in response to Biden’s letter to industry, Exxon (XOM) also released a statement. Noting that the company invested double what it earned over the past five years, in the US. Exxon (XOM) provided short-term solutions to the current refining supply crisis. Specifically, waiver of Jones Act provisions and some fuel specification changes.
Both Chevron (CVX) and Exxon (XOM) noted that clarity and consistency of policy are required over the long term, if the US oil and gas industry (XLE) has any chance of helping balance global markets. Inconsistent lease sales, inefficient permitting and unforecastable infrastructure were cited in both letters, as reasons for the industry’s supply struggle in recent years.
In addition to policy recommendations, Chevron’s (CVX) Mike Worth wrote the administration also needs a “change in approach.” Going on to write, “your administration has largely sought to criticize, and at times vilify, our industry.” And encouraging the President to “also send your senior advisors to this meeting,” in reference to the upcoming meeting with Secretary Granholm. Perhaps indicating some frustration with the President’s chosen Energy Secretary, and the level of industry expertise gained from years of service as the Governor and Attorney General of Michigan.
Whether the administration accepts the olive branch, or whether the constructive sentiment from Exxon (XOM), Chevron (CVX), Pioneer (PXD) and Devon (DVN) is genuine remains to be seen. However, in lieu of further investment and production growth from US companies, the market is unlikely to balance without more oil and gas from Russia or more refining capacity from China.