These efforts have reversed the Biden administration's slow approach to oil drilling, reducing (though not completely eliminating) the backlog of onshore and offshore drilling permit applications that has accumulated during Biden's presidency.
Delays in permit approval increase project costs, risk and uncertainty. Delays can increase the likelihood that a project will ultimately be scaled back — as happened with ConocoPhillips' Willow project in Alaska — or canceled altogether. Longer timelines increase financing and execution costs because capital is tied up without generating revenue, and developers must pay interest on debt while they wait for approval. Delays also increase project costs, eroding project economics and sometimes preventing the project from making a profit.
Investments follow the economy, not politics
Unlike some countries, such as Saudi Arabia's Aramco, Norway's Equinor, or China's CHN Energy, the US does not have a national oil or gas company. All major energy producers in the US are privately owned and answerable to shareholders, not the government.
Executive orders or political slogans may set a tone or direction, but they cannot override the fundamental requirement for profitability. Investments cannot be imposed by presidential decree: projects must make economic sense. Without it, whether due to low prices, high costs, uncertain demand or changing regulations, companies will not be able to continue.
Even if federal policy opens new areas for drilling or eases some regulatory restrictions, companies will only invest if they see a clear path to profits in the long term.
Because most energy investments cost large amounts of money over many years, the industry likely wants a sense of policy stability from the Trump administration. That could include lowering barriers to profitable investments by accelerating the approval process for supporting infrastructure such as transmission lines, pipelines, storage capacity and other logistics facilities, rather than relying on sweeping announcements that lack market power.
Skip York, non-resident fellow in energy and global oil, Baker Institute for Public Policy, Rice University. This article is republished from The Conversation under a Creative Commons license. Read the original article.
