HOUSTON — Executives at some of the world’s biggest oil and gas producers said on Monday they are ramping up their crude production as U.S. gasoline prices surge to $4 a gallon amid expectations that President Joe Biden and Congress would ban imports of Russian petroleum — but the companies warned not to expect new supplies overnight.
Exxon Mobil and Chevron are both boosting oil production at the mammoth Permian Basin field in West Texas and New Mexico, strategies that both oil majors laid out last year but that have taken on new urgency because of the surge in oil prices to their highest level in 14 years.
U.S. crude oil prices jumped more than $10 overnight to $130 a barrel on news that the U.S. was considering prohibiting Russian oil imports, though prices backed off later during Monday trading. That rally has driven retail gasoline prices up more than 46 cents in the past week, reaching a national average of $4.06 a gallon, according to fuel price service GasBuddy.
Exxon has said it expected to increase its production from the Permian by 100,000 barrels per day this year, on top of a sharp ramp up last year to 460,000 barrels per day. “We’re well on our way to that,” CEO Darren Woods told an industry conference in Houston on Monday. Chevron has also said it would increase its production there by 60,000 barrels per day this year.
But even with those sharp increases, keeping a lid on oil and gasoline prices will be difficult if Russia’s 5 million barrels per day of oil exports are taken off the market. The U.S. industry imports only a modest amount of Russian oil and refined products, but trading firms around the world are beginning to shun Russian supplies as governments tighten the financial sanctions on Russia in response to President Vladimir Putin’s invasion of Ukraine.
U.S. oil production had plunged during the early months of the pandemic, driving dozens of oil companies into bankruptcy and forcing others to retrench and shut down new drilling. But since August 2020, it has roared back, adding 2 million barrels per day to reach 11.6 million barrels per day by late February, and forecasters expect that figure to climb by another 1 million barrels by the end of the year.
The Biden administration is reportedly reaching out to Saudi Arabia, the world’s leading exporter, as well as Venezuela, whose government has also been sanctioned, to help fill any oil shortfalls from the shut-off of Russia’s shipments. But executives say that high international prices have already given producers all the incentive they need to boost output, and that no one is holding back.
“There’s a mirage that spare capacity can be brought out,” Tengku Muhammad Taufik, CEO of the Malaysian state-run oil company Petronas, told the same conference, S&P Global’s CERAWeek.
Still, James Burkhard, head of oil markets for IHS Markit, said the Biden administration was likely looking for the backing of OPEC, whose members would need to boost output if countries were to try to ban Russian supplies.
"It is likely that there is the capacity for this, and OPEC might find themselves inclined to back the step if the U.S. can provide the right incentives," he said.
Carlos Pascual, the former U.S. ambassador to Ukraine under former President George W. Bush who is now senior vice president for global energy at IHS Markit, said the worsening human toll of Russia’s invasion in Ukraine that was driving the international effort to punish Moscow was only in its early stages.
“The global impacts on markets will continue,” he told an audience. “I don’t think it’s going to be over in a few months — potentially years.”
Biden has pledged to try to shield U.S. consumers from the energy market fallout, but that plan has been undercut by the images of bombings and attacks that have sent Ukrainians scrambling to flee the country and are driving up the civilian deaths. Lawmakers from both parties in Congress are working on bills to inflict greater pain on the Russian economy.
The White House announced last week it would release 30 million barrels of oil from the nation’s Strategic Petroleum Reserve to help keep prices in check, but the move had no impact on oil’s march higher.
White House press secretary Jen Psaki said on Monday that no decision has been made at this point by the president about a ban on Russian oil.
"Those discussions are ongoing internally and also with our counterparts and partners in Europe and around the world,” she said, adding, “What the president is most focused on is ensuring we are continuing to take steps to deliver punishing economic consequences on Putin while taking all action necessary to limit the impact to prices at the gas pump."
John Hess, CEO of oil and gas producer Hess Corp., said last week’s announced oil release, part of international disbursement of 60 million barrels, was too modest to affect the market. The Biden administration release amounts to about 1.5 days of U.S. consumption.
The Energy Department and the International Energy Agency need to release “120 million barrels out of the strategic reserves in the world and another 120 million next month and say more is coming,” he said. “They need to do it now, and they need to get ahead of it.”
Hess said his company had raised spending on new wells, much of which was directed to the Bakken field in North Dakota, which emerged as a major production center over the past decade. “[Companies] are going to have to increase levels because people need oil.”
The U.S. has seen its oil and gas production jump dramatically over the past 15 years, and it is now the world’s largest producer of both. But Europe is heavily dependent on imports, even as it has sharply ramped up its use of renewable energy. Russia provides it with nearly 40 percent of its natural gas and a quarter of its crude oil.
Earlier on Monday, German Chancellor Olaf Scholz pushed back against calls from the U.S. and Ukraine for a ban on imports of Russian gas and oil as part of international sanctions on Moscow.
“Europe has deliberately exempted energy supplies from Russia from sanctions," Scholz said in a statement, adding, "At the moment, Europe's supply of energy for heat generation, mobility, power supply and industry cannot be secured in any other way. It is therefore of essential importance for the provision of public services and the daily lives of our citizens."
But Patrick Pouyanné, CEO of energy giant TotalEnergies, told the conference Europe’s failure to address its energy shortages in the past had worsened the current crisis.
“People in Europe are complaining about gas prices and fuel prices being high. It’s high because we did not invest enough in years,” he said. “I think what is happening today is a big wake-up call to Europe.
Kelsey Tamborrino contributed to this report.
