US energy industry will bounce back with the post-pandemic recovery
This past weekend’s deal to cut global oil production did not produce the results its participants wanted. In fact, it failed to raise the price of oil at all. But the good news is that even though the talks were instigated by the United States government’s pressure on Saudi Arabia and Russia, our government refused to compromise on our free-market ideals. The situation in America’s oil patches is difficult right now, as it is everywhere, but the U.S. energy industry maintains the tools it needs to thrive — as soon as the world and the American economy are ready.
The pessimists preach that current low oil prices would harm America’s robust oil production, but they ignore the opportunities and the characteristics that make today’s American oil industry resilient. In a traditional boom-bust industry, we are not facing a long-term bust. Americans should not lose faith in their oil and gas industry, or in the energy security it has brought in recent years.
As the American and global economies suffer, so does the American oil and gas industry. Yes, we will see a decline from those record-breaking production numbers of the past few years. And, yes, there will be closed shops, consolidations, and new entrepreneurs and businesses in the U.S. oil fields. But the promise of U.S. production and American energy security remains strong.
As Dean Foreman, the chief economist of the American Petroleum Institute, said in testimony to the Texas Railroad Commission this week, they “remain confident that oil demand will be resilient once the effects of COVID-19 subside.” As it is constituted, the American oil industry is primed to be there as Americans return to work, travel and recreation when the American economy recovers.
The most important point to remember is that the oil and gas are still in the ground, whether companies extract it tomorrow or next month or next year. Low oil demand caused by the coronavirus pandemic and sudden overproduction from Saudi Arabia and Russia cannot kill the American shale industry. It can only delay it. When the economic situation is ripe again, when we return to our cars and our workplaces, U.S. oil will be there to provide the fuel. The jobs that industry can create will return as well.
The American entrepreneurial spirit has not been killed by the coronavirus. Nowhere has that spirit been stronger this century than in the oil fields across this country. When one company struggles, another is there to assume its assets. In fact, we are already seeing purchases and consolidations. We also will see new opportunities for entrepreneurs, investors and job seekers. There will be pain in the industry but, as happened after the last price crash in 2014, we will come out of this struggle with stronger companies and a stronger industry to fuel America.
Second only to the spirit of the American people, our great business strength is the rule of law that established the strong corporate and financial structures on which our industries rely. These are still present and will be present for America’s oil and gas industry. Oil prices are low now, and there is no denying that low prices decrease investment in the industry, but American corporations and financiers will be around to build the recovery in the oil patch as in the rest of the country.
OPEC and other global producers have failed in their attempts to raise the price of oil and only harmed their businesses with petty squabbling. However, Americans should not lose faith in the energy industry. This industry will produce, and will be a major part of the next big national economic recovery. We have the oil and gas we will need for the post-pandemic recovery, and America still benefits from its entrepreneurial spirit and financial and corporate infrastructure. The promise of U.S. production and American energy security is still strong.
Ellen R. Wald, Ph.D., is a senior fellow at the Atlantic Council’s Global Energy Center and the president of Transversal Consulting, a global energy and geopolitics consultancy. She is the author of “Saudi, Inc.,” a history of Aramco and how the Saudi royal family controls this multitrillion-dollar enterprise. Follow her on Twitter @EnergzdEconomy.