Oh Well!!! "Drill Baby Drill" Won't Happen, Because Oil Companies Manage For Profitability, Not Quantity

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At the Republican national convention in July, Donald Trump pledged to cut gas prices by boosting domestic oil production. “We will drill, baby, drill,” he declared. Despite the president-elect’s promise, oil and gas companies probably have other ideas. For the past few years, US energy producers have focused on keeping costs down to stay profitable, balancing between producing enough oil to satisfy global energy needs and paying shareholders big dividends, according to energy experts. That’s unlikely to change soon.

“We see no change to the intermediate term drilling path for oil set by the fundamentals,” Lloyd Byrne, equity analyst at Jefferies, said in a recent research report. Darren Woods, CEO of ExxonMobil, the largest US oil and gas company, is also skeptical of Trump’s plan. “I’m not sure how ‘drill, baby, drill’ translates into policy,” he told CNBC after its latest results. Separately, at the UN’s Cop29 climate summit in Azerbaijan this week, Woods also urged the incoming administration to not pull out of the Paris climate agreement.

For the past six years, the US has been the world’s largest producer of oil and natural gas, according to the Department of Energy’s Energy Information Administration, and produces about 13.4m barrels a day – a figure that will grow even without new wells on federal lands. US oil and gas companies have excess capacity as they have restricted production to their most efficient and productive wells. Inflation in the oil patch is cooling, so the combination of lower costs and higher efficiency equals increased profits for oil companies, even as crude-oil prices stay flat, said Peter McNally, an analyst at Third Bridge, a research firm.

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Since the pandemic, energy company executives began belt-tightening, rather than trying to increase production. It amounted to a sea-change in how they ran their companies, according to Rob Thummel, senior portfolio manager at Tortoise Capital Advisors. “For maybe the first time in my couple decades studying the sector, they started to generate free cashflow,” said Thummel. “And that made a lot of sense, because they didn’t need to be investing a lot. Global energy demand was still growing, but not by as much.” Tortoise Capital Advisors forecasts that oil production for 2025 could increase by about 500,000 barrels from current levels if companies stay disciplined. Even if oil producers flooded the domestic market with crude oil, there’s only so much shale-oil refiners can process into gasoline. Refinery capacity is limited: some have closed and others were retooled into renewable-diesel facilities.

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https://www.theguardian.com/business/2024/nov/19/trump-oil-gas-prices