Guest MAGA by David Middleton,
Energy Stocks
Energy stocks ignite as Trump declares, ‘Drill, baby, drill’
Schlumberger, NRG Energy, Uranium Energy, KLX Energy Services rise
By
Last Updated: Jan. 21, 2025
Energy stocks moved up Tuesday on the heels of President Donald Trump’s repeat of the slogan, “Drill, baby, drill,” in his inauguration speech.
While oil futures fell Tuesday on the prospect for increased supply, Trump sparked buying in energy stocks after declaring a national energy emergency to speed oil and gas permitting.
He also ordered the withdrawal from the Paris Agreement, an Obama-era international compact that aims to combat climate change and which Trump pulled the U.S. out of in his earlier presidential term. (Democrat Joe Biden had the U.S. re-enter the climate-agreement fold on Day 1 of his term in 2021.)
“We will drill, baby, drill,” Trump said, quoting a phrase in the Republican campaign vernacular for nearly two decades. “We will bring prices down, fill our strategic reserves up again right to the top, and export American energy all over the world.”
[…]
Quantifying Drill, Baby, Drill
SEB: Speculation Surrounding Potential USA Oil Output Surge Gains Attention
Rigzone Staff | Friday, November 29, 2024
In a Skandinaviska Enskilda Banken AB (SEB) report sent to Rigzone on Thursday, Ole R. Hvalbye, a commodities analyst at the company, said “speculation surrounding a potential surge in U.S. oil production – up three million barrels per day – has gained attention”.
Hvalbye warned in the report that such a ramp-up could drive crude prices below $50 per barrel but added that it “is considered unrealistic”.
“U.S. producers understand the strategic risks involved, particularly with OPEC+ holding an estimated five to six million barrels of spare capacity,” the analyst said in the report.
“A significant production increase by the U.S. would likely provoke a strong response from OPEC+, potentially flooding the market to protect market share,” he added.
“Such a scenario would lead to sharp price declines, ultimately punishing U.S. production rather than fostering growth. This dynamic makes the proposed ramp-up highly unlikely,” he went on to state.
[…]
“Up three million barrels per day”
US crude oil production is currently around 13.5 million barrels per day (mmbbl/d):
Is it even possible to increase this by an additional 3 mmbbl/d? Theoretically: yes. If all, currently off limits areas in the Alaska North Slope and its offshore areas were opened to exploration & production *and* all of the newly opened plays were successful, we could add ~2.5 mmbbl/d.
Canada currently produces about 200,000 bbl/d from its offshore Atlantic areas, immediately adjacent to the US North Atlantic Planning Area:
Assuming the US oil industry could at least match Canada in the North Atlantic Planning Area, that’s another 200-300 thousand barrels per day (mbbl/d), bringing us to ~2.7-2.8 mmbbl/d.
Then there’s the Gulf of Mexico America. Biden’s malfeasance regarding permitting and particularly leasing, has resulted in production being ~100 mbbl/d lower than what it should be.
Assuming a resumption of law-abiding permitting and leasing activities over the next 4 years, Gulf of America production should grow to ~2.4 mmbbl/d, an increase of ~500 mbbl/d.
Getting there from here:
- Alaska North Slope & OCS Areas: 2.5 mmbbl/d
- North Atlantic OCS: 0.3 mmbbl/d
- Gulf of America OCS: 0.5 mmbbl/d
- Total: 3.3 million barrels per day (mmbbl/d)
Can Trump revoke Obama bin Biden’s offshore drilling bans?
Can Trump Undo the Ban?
After Biden’s ban was announced this month, Trump said that he would quickly end it. But he may not be able to do so on his own.
Hannah Wiseman, a Penn State law professor and co-director of the university’s Center for Energy Law and Policy, told us in an email that the Outer Continental Shelf Lands Act authorizes presidents to, in the words of the act, “from time to time, withdraw from disposition any of the unleased lands of the outer Continental Shelf.” But the law “says nothing about whether a later President may revoke this prior withdrawal,” she said.
In fact, in 2017, Trump was unsuccessful in trying to reverse bans on new drilling in parts of the Arctic Ocean that were implemented by President Barack Obama. Trump issued an executive order to undo Obama’s bans, but in 2019, a federal district judge in Alaska, Sharon Gleason, an Obama appointee, ruled that Trump’s order was “unlawful and invalid” because the Outer Continental Shelf Lands Act does not allow a president to repeal a withdrawal made by another president.
“The court in 2019 reasoned that ‘the statute does not expressly grant to the President the authority to revoke prior withdrawals’ and that the phrase ‘from time to time’ does not suggest that presidential withdrawals of land from leasing must be temporary (subject to revocation),” Wiseman said.
The Trump administration appealed the decision, but a higher court never weighed in before Biden took office in January 2021 and revoked Trump’s executive order. After Biden’s revocation, the U.S. Court of Appeals for the 9th Circuit dismissed the case as moot.
This time, Trump could issue another executive order and hope that it survives a legal challenge.
Andrew Mergen, a professor in environmental law at Harvard Law School, told the Washington Post that he believes the 2019 court ruling could have been overturned if the appeal had proceeded. The Congressional Research Service also wrote in a January “legal sidebar” that a different effort by Trump “to revoke a withdrawal may be interpreted differently by courts.”
Another option is for Trump to work with the Republican-controlled Congress on legislation that would amend Biden’s ban or rescind it. In her email, Wiseman noted that Gleason’s 2019 ruling said that Congress could override a leasing ban “by either revoking the withdrawal itself … or amending Section 12(a) to expressly provide that a future President could also revoke a prior presidential withdrawal.”
Some Republicans have already suggested that they are open to do so. In a Jan. 6 statement he issued responding to Biden’s actions, Rep. Bruce Westerman, chairman of the House Natural Resources Committee, said that congressional Republicans “will use every tool, including reconciliation,” to make the regions that Biden protected accessible for future oil and gas drilling.
The reconciliation process would allow the Senate to pass a bill with a simple majority instead of the 60 votes required to stop a potential filibuster.
[…]
That said, the odds are stacked against all of the off limits areas being reopened and the odds of everything working as expected are no better than even. While the potential is YUGE, ANWR and the Alaska OCS areas could just as easily fall flat… If finding oil & gas was easy, there’d be more Democrats in the industry So, let’s go back to the Rigzone article.
The article focused on soon-to-be Treasury Secretary Scott Bessent’s “three arrows economic plan.”
- Maintain consistent 3% economic growth,
- Reduce the deficit by 3% of GDP by 2029
- Increase US energy production by “three million more oil barrels equivalent” per day
Key phrases are: energy production and barrels of oil equivalent. The general convention is that 6 billion cubic feet (Bcf) of natural gas is equivalent to 1 million barrels of oil.
The analysts went on to state in the report that the addition of three million per barrels of oil equivalent to U.S. energy production is a significantly less ambitious target, “even if we interpret energy production in this context as solely oil and gas”.
“U.S. oil and gas output is currently about 40.7 million barrels of oil equivalent per day,” the analysts highlighted in the report.
“It has grown by an average of about 123,000 barrels of oil equivalent per day per month since 2015; at that rate, three million barrels of oil equivalent per day would be added in less than 25 months,” they said.
“Forty-one percent of the post-2015 increase has come from natural gas, 28 percent from natural gas liquids (NGLs), just 28 percent from crude oil, and three percent from other oil liquids (mainly corn ethanol),” they added.
“We think the crude oil element of the next three million barrels of oil equivalent per day increase is likely to be significantly less than 20 percent, with natural gas likely to be the main instrument for meeting the new administration’s energy goals…
[…]
In terms of oil-equivalent production, natural gas and natural gas liquids are already on a +3 mmBOE/d trajectory. (m = 1,000 | mm = 1,000,000 | BOE = barrels-oil equivalent).
Now let’s add in energy sources other than oil & gas…
Trump says he will approve power plants for AI through emergency declaration
Published Thu, Jan 23 202512:25 PM EST Updated An Hour Ago
President Donald Trump said Thursday he will expedite the construction of power plants for artificial intelligence through an emergency declaration, as the U.S. races against China for dominance in the industry.
“We’re going to build electric generating facilities. I’m going to get the approval under emergency declaration. I can get the approvals done myself without having to go through years of waiting,” Trump said in a virtual address to the World Economic Forum in Davos, Switzerland.
The plants can use whatever fuel they want, the president said, making clear that his administration won’t hold the AI industry to any climate targets. Trump suggested the plants use coal for emergency backup power.
“There are some companies in the U.S. that have coal sitting right by the plant so that if there’s an emergency, they can go to that,” the president said.
[…]
Can you say “all of the above”?
Climate and energy in Trump’s Day One executive orders
Tuesday, 21 January 2025
New US President Donald Trump has declared a national energy emergency, announced the country’s withdrawal from the Paris Agreement, and named cabinet-level appointees including new heads of the Department of Energy and the US Nuclear Regulatory Commission.
[…]
Energy unleashed
An executive order on Unleashing American Energy orders an “immediate review of all agency actions that potentially burden the development of domestic energy resources”. It directs the heads of “all agencies” to review existing regulations and agency actions to identify those that “impose an undue burden on the identification, development, or use of domestic energy resources – with particular attention to oil, natural gas, coal, hydropower, biofuels, critical mineral, and nuclear energy resources”. It also, among other things, instructs the US Geological Survey “to consider updating the Survey’s list of critical minerals, including for the potential of including uranium”.
This order rescinds 12 climate-related orders from the previous administration, as well as terminating immediately “all activities, programmes, and operations associated with the American Climate Corps”, an initiative launched by then-Energy Secretary Jennifer Granholm, with the help of actor, producer and climate advocate Robert Downey Jr, in 2022 to recruit climate professionals for the deployment of some USD62 billion of investment to meet climate goals.
“The American dream will soon be back and thriving like never before,” Trump promised.
[…]
The icing on the cake
BMI Says Trump Orders Poised to Have Profound Implications for Energy
by Andreas Exarheas | Rigzone Staff | Thursday, January 23, 2025
The executive orders issued by President Trump are poised to have profound implications for both the U.S. and global energy landscapes, analysts at BMI, a unit of Fitch Solutions, stated in a BMI report sent to Rigzone late Tuesday by the Fitch Group.
“Domestically, the emphasis on increasing fossil fuel production will boost U.S. oil and gas production output, providing immediate economic benefits to the oil and gas sector by reducing regulatory barriers and streamlining permits,” the BMI analysts said in the report.
“We expect that these orders will increase oil and gas consumption in the U.S. – domestic production becomes more readily available and potentially more cost competitive,” they added.
[…]
“Furthermore, it places barriers on wind power development, through the suspension of offshore wind leasing, representing a critical setback for the U.S. renewable energy sector,” they added.
[…]
“An increase in U.S. fossil fuel exports, facilitated by expanded production capacity, could reduce fuel costs, shifting the global energy mix towards higher emissions. This could counteract the progress made by other nations in reducing their carbon footprints and transitioning to cleaner energy sources,” they added.
“The United States’ dominant position in global energy markets, driven by increased exports, may influence energy prices and supply dynamics, increasing the availability of cheap fossil fuels, thereby increasing the attractiveness and consumption of oil and gas,” they continued.
The BMI analysts stated in the report that this “would lock in fossil fuels for many years and slow the transition to cleaner alternatives”.
[…]
“The orders could face legal challenges, particularly if they are perceived to exceed the President’s authority or conflict with existing environmental laws and regulations,” the analysts added.
“Despite this, we do not expect that these orders will be overturned by the U.S. courts,” they went on to state.
[…]
The key is in fossil fuel exports. This is how we can increase production, particularly natural gas, while maintaining relatively low prices.
We are able to export natural gas because we produce more than we consume. If natural gas exports were prohibited, we wouldn’t have excess natural gas production.
When the U.S. consumed more natural gas than it produced, we were a net importer and prices were higher.
https://www.eia.gov/energyexplained/natural-gas/imports-and-exports.php
US LNG export capacity is currently on track to double by 2028.
Will this cut energy prices in half? Probably not. It will definitely result in far lower energy prices than we would have seen under the green new scam. EIA currently forecasts that crude oil prices will soon be halved relative to Peak Biden:
EIA’s current forecast already has US oil production increasing by nearly 2 mmbbl/d relative to Peak Biden.
David can you do a write up on your impressions of Land Man?
Billy Bob’s character makes claims about the industry and wanted your opinion.
I only watched the first episode… Entertaining show… About as realistic as Armageddon.
Big BBT fan, but I eschewed it altogether. Unlike the ads, the job is actually vital and boring. Lots of time negotiating and sniping over damages. A few landmen end up as oil execs, from their contacts and/or because they were lawyers. Those I knew all too often ended up jawing in my office door, due to underemployment.
I also jetted Armageddon as soon as Bruce closed the valve to stop the blow out.
I love Armageddon for pure entertainment value. The offshore drilling rig scene is hilarious… 😆
When BBT asked for a Dr Pepper and a cigarette after walking into a blowout, that vaporized three guys, and shut it in by closing a valve… 😝
Good overview. I am more optimistic about undoing Biden’s offshore ban because of the ‘from time to time adding clause’ cannot be interpreted as a sudden Continental wide ban as Biden did. So was not valid in the first place, therefore not needing to be undone.
“cannot be interpreted”
Strikes me as being very unwise ‘legislation’ or policy when changes can only occur that reduce production, without the flexibility of raising production in an emergency. I expect that was Biden’s intent, to choke off oil production, but I don’t think someone as obviously suffering from dementia as Biden, can be a good chess player. He has painted the USA into a corner with the hope that OPEC and Russia will do what is in our best interest. Such inflexible, autocratic decisions are counter to the purpose and function of Congress and SCOTUS should say as much.
Changing any laws that purportedly granted Biden the power to withdraw areas from fossil fuel development would be more direct than waiting on the interpretation of the courts.
I agree – I think it will be useful for Trump to test the alacrity of the law makers in moving USA’s economic agenda forward in alignment with his and republican mandate..
I have never monitored the congressional voting for cabinet confirmation but was surprised Marco Rubio got unanimous support.
Trump’s energy is inspiring and infectious.
Starmer #94 Blow wind, blow..
Now that’s funny. It has to be tough living in the UK. But then it is not freezing like most of the USA the past few days.
I’m disappointed that someone from the judicial branch would allow someone from the executive branch to define permanent law.
Yep, where does the constitution draw the line at congress giving up/transferring responsibility to another branch of govt.
If the Act (or any Act) explicitly gave the courts the ability to interpret the Act in a manner that best represented accepted societal norms/desires the specific time in the future that the Act was ‘litigated’, would that be considered a law that is in line with the constitution? (if yes, would it be at the time the complaint is filed, or when the final court decision is rendered?)
Creating variable laws is a bad thing. Sort of like if congress created immigration laws, and included language that could be interpreted as saying “the executive can ignore, or interpret, all immigration laws as is most beneficial for the respective executive political party”. It is a bad thing.
From the article:”…Outer Continental Shelf Lands Act…”.
So congress can amend the act or repeal it.
Yes of course it’s possible. Just not conceivable.
We have a majority of 1 in the House, and in the Senate, we are 7 seats shy of the three fifths supermajority required to invoke cloture (end a fillibuster).
Unless language can be construed to be directly impacting the budget, it is not allowed in a budget reconciliation bill. According to Senate rules, the only votes not requiring a cloture vote to end debate are budget reconciliations and judicial confirmations.
So, no, this Congress will not be able to amend the OCSLA or repeal it, at least not in a standalone bill.
The options are:
Executive Order to revoke a prior restriction, leading to a Supreme Court ruling that ‘from time to time’ implies a temporary restrictionSome kind of compromise legislation that gives the Dems something so dear to them that the three RINOs and at least 7 (gets back up from rolling around on the floor laughing his ass off) conservative Democrats will support an amendment to OCSLA
That leaves only the EO and court battle as a desirable approach. Government is already far too large and expensive. Anything the Democommies would want is sure to be a poison pill to getting the right to deem OCSLA restrictions revokable.
And oh by the way, winning the right to revoke a restriction isn’t that much of a win. Unless you’re thinking there will never be another Democrat president.
Great presentation, David. I heard some commentator remark that dropping the price of a barrel of crude from about $80 per barrel to around $40 per barrel really hurts Russia’s illicit oil revenue and reduces their tendency to keep throwing money at the Ukraine invasion. Drill, Baby, Drill!
Ukraine is a boondoggle of waste taxpayer money funneled back into Congress. We need to get out.
$40/bbl would also crater a lot of US oil production.
I don’t see $50 oil as a lot of companies will start to curtail drilling if the prices plunge.
Sanctions will be back.
Iran -1.4 million
Venezuela -0.4 million
Russia – ??
Sanctions will balance out the 3.3 million from US. Plus Trump wants to refill the strategic reserve (which he tried to do when oil prices were negative but the Dems blocked it, one of the dumbest partisan moves ever) so that will add to the consumption side of the equation.
As for getting to 3.3 million, I don’t think he can do it without Canada’s help. Much of what is exported from the US now comes from Canada in the first place. Canada has a crazy amount of capacity they could ramp up, but Ottawa is strangling production with “carbon caps” and refusal to fast track pipelines to get oil to market. Trump will bully Canada (or work with the new sane government after the election) to help meet his goals.
OK, but changing the name of the Gulf of Mexico is not restoration but spelling may be different. Just looked at a Humboldt map, 1804, and earlier French, 1680s. Unlike the oil industry currently Mexico seems to be doing more offshore oceanographic research than we are. Shipout, researchers, Shipout. Board of Geographic Names has too often been politically correct.
Personally, I like Gulf of Halokinetics… 😎
How about “Gulf of the West” or “Gulf of Valinor”? 😎
“Energy stocks ignite as Trump declares, ‘Drill, baby, drill’”
Not all of them, right? Maybe they will throw you a pity **** and reprice your puts…
I really struggle with stuff like this. We need energy to prosper. We have energy resources right here in our own country. We know how to access the raw materials in a safe and clean manner. We know how to produce the energy we need using our own resources in a safe and clean manner. We know which energy production systems work and which don’t. Yet we piss around wasting or time, money and resources with systems that we know don’t work. The point is the only thing standing in our way to plentiful, clean, dependable and safe power is politics. It makes me want to puke.
The ‘pissing around’ stopped at noon on Monday Jan 20
This is great article. It gives a sense of relief tempered with details on the reality. It is broad ranging on possibly the most important factor for modern humankind – energy production.
Trump 2.0 is setting the world free from the grip of an inhumane scam.
David, Good post and lots of information not typically reviewed by many folks outside the petroleum business.
The 2.5 mmbpd from Alaska isn’t theoretically possible because the maximum TAPS flow rate is 2.1 mmbpd. The flow has only averaged more than 2 mmbpd one year back in 1988.
On the practical side, nobody will operate a 48 year old pipe at or near the maximum limit. Further, many pump stations and storage tanks at Valdez are decommissioned or dismantled. They can be rebuilt. It just takes lots of money.
I think success at ANWR and the Alaska OCS might justify some TAP upgrades… 🍻
TAPS is an 800 mile-long 48” steel pipeline and is the best maintained in the world. But, we can’t upgrade or change physics … 2.5 mmbpd can’t flow down it.
Shell killed the Chukchi Sea and spent many $billions doing it. The Beaufort Sea is drilled and developed with existing technology. Except maybe Kuvlum that is 250 mmbo tops. Really tough to make anything economic offshore northern Alaska with sea ice and near-shore scour. Just ask Quintillion who tried laying something simple like a fiber optic cable in the Beaufort.
As for ANWR, it has undergone 3 major deformational episodes and trap integrity/timing is challenging. We can’t change bad geology that is dealt out by Mother Nature.
The Brookian topset plays like Pika and Willow are great examples of billion barrel discoveries from innovative thinking that can deliver future production. These aren’t even included in the 2009 DOE Alaska Production Forecast plot in your post.
Yep… It ain’t easy… 🍻
Sarah Palin should have copyrighted that.