These efforts reversed the Biden administration’s go-slow approach to oil drilling, reducing — but not completely eliminating — the backlog of onshore and offshore drilling permit applications that built up during Biden’s presidency.
Delays in permit approval increase project costs, risks and uncertainty. Delays can increase the chances that a project will ultimately be scaled back — as happened with ConocoPhillips’ Willow project in Alaska — or canceled altogether. Longer timelines increase financing and holding costs, as capital is tied up without generating revenue, and developers must pay interest on debt while awaiting approvals. Delays also lead to higher project costs, eroding project profitability and sometimes preventing the project from generating profit.
Investment follows the economy, not politics
Unlike some countries, such as Aramco in Saudi Arabia, Equinor in Norway or CHN Energy in China, the United States does not have a national oil or gas company. All major energy producers in the United States are privately owned and dependent on their shareholders, not the government.
Decrees or political slogans can set the tone or provide direction, but they cannot override the basic requirement of 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, businesses will not be able to move forward.
Even if federal policies open up new areas for drilling or relax some regulatory restrictions, companies will only invest if they see a clear path forward to achieve long-term profits.
With most energy investments costing significant sums over many years, the industry likely wants a sense of political stability from the Trump administration. This could include reducing barriers to profitable investment by speeding up the approval process for supporting infrastructure, such as transmission power lines, pipelines, storage capacity and other logistics, rather than relying on sweeping announcements that lack market traction.
Skip York, nonresident 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.
