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Oil prices likely to remain high over the next few years

Oil prices likely to remain high over the next few years

Geopolitical conflicts have imposed certain restriction on the outflow of Russian oil and gas. This has spiked energy cost and initiated a quest for other fuels. Under the prevailing conditions two of the largest energy consuming countries, China and India are fast reverting back to coal. Pakistan, enjoying the treasure of Thar coal can cap its energy import bill.

Speaking at the Bloomberg Qatar Economic Forum in Doha recently, Exxon-Mobil CEO Darren Woods said he does not see oil prices cooling down over the next few years.

Woods said that it would take some time for the volatility in the energy market to end. He expects oil markets to remain tight for the next three to five years, Reuters quoted him saying.

He called on the US administration to bring a more efficient investment process while pointing out that Exxon-Mobil is one of the few companies in America that has been actively investing in the refining sector.

Back in 2017, the firm kicked off an aggressive investment program, Woods stated. “The investment plan that we laid out five years ago is the plan we are currently on and the pipeline of the projects that we have are continuing; they are very robust,” Exxon-Mobil CEO said at the event.

Woods’s statement comes after ExxonMobil recently faced criticism from US President Joe Biden, who accused the company of being too greedy amid rising oil prices and inflation.

Exxon made “more money than God this year,” the Joe Biden said on June 10, Reuters quoted as saying. He went on to blame Exxon for making money by “not producing more oil” and asked the company to start investing and “paying your taxes.”

An Exxon spokesperson pushed back at Biden’s comments, pointing out that the company lost around US$20 billion in 2020 and borrowed over US$30 billion to finance operations. In addition, the firm has paid US$40.6 billion in taxes in 2021, which is US$17.8 billion more than it paid a year ago.

Exxon also laid out measures Washington can take to address rising gas prices and high inflation.

“In the short term, the US government could enact measures often used in emergencies following hurricanes or other supply disruptions—such as waivers of Jones Act provisions and some fuel specifications to increase supplies,” the oil giant said in a June 15 news release.

As to longer-term measures, Exxon asked the Biden administration to promote investment in the sector through a “clear and consistent policy that supports US resource development.”

This includes streamlined regulatory approval and support for infrastructure such as pipelines as well as regular and predictable lease sales. Biden has been under fire for canceling the construction of the Keystone XL pipeline immediately after taking office last year.

At the Doha event, Russel Hardy, CEO of oil trader Vitol, also said that the current oil supply shortage was the result of chronic underinvestment in the industry in recent years. This will underpin tight fundamentals for years to come, he said, according to S&P Global.

“The solution is more refineries, running more crude, to produce more products,” he said. “The world can solve the problem but things are a little bit tight at the moment”

The Biden administration’s climate czar, John Kerry, proclaimed that despite record-high gas prices, the United States doesn’t need to drill for more oil or natural gas.

Speaking during a forum, Kerry said that Republicans and some analysts have suggested that we need more drilling and we need to go back to coal. He then argued, No, we don’t. We absolutely don’t.

The former secretary of state also suggested that he will push back on alleged false narratives that the US needs to drill more and use more traditional energy sources. Kerry delivered his remarks at the University of Southern California’s Center for Public Diplomacy on June 10.

“We have to prevent a false narrative from entering into this,” he said.

Kerry’s comments come as data from auto club AAA shows that the average price for a gallon of gasoline remained steady at US$5.01 nationwide. California is still leading the way with an average price of US$6.43 per gallon. No other state has reached US$6 gas so far.

Democrats and Biden, meanwhile, have said the high gas prices are caused by the war in Ukraine, often blaming the spike on Russian President Vladimir Putin. However, gas prices and year-over-year inflation had been rising long before the invasion in February.

Some analysts, including GasBuddy, have said that a surge in the demand for oil and other petroleum products as countries emerge from COVID-19 lockdowns is also contributing to the high prices. A report in June of last year found that US refining capability shrunk about 4.5 percent in 2020 as COVID-19 caused oil and gas facilities to shut down.

Although Kerry said the US and other Western countries shouldn’t opt for more coal-based energy, the Chinese Communist Party (CCP) has been heavily promoting relying more on coal-fired plants in recent months. CCP officials in April said China, which has a significant amount of coal reserves, plans on boosting coal production by 300 million tons in 2022, according to reports. That’s equal to 7% of last year’s output of 4.1 billion tons, or a 5.7% increase over 2020’s figures, according to The Associated Press.

And late last month, India’s government said that it would reopen old coal mines to increase output by 100 million tons as cities have suffered frequent rolling blackouts amid a heat wave. In a memo released on May 7, the Indian environmental ministry gave coal mines permission to boost production by as much as 50 percent without permits.

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