After half a decade of U.S. oil drillers underinvesting in projects and returning money to shareholders, it could take years to resume pre-pandemic production levels that could further roil oil markets for years to come.
"I'm worried that it may get too high, above $100 (per barrel)," according to Scott Sheffield, CEO of shale explorer Pioneer Natural Resources Co., who was speaking to Reuters in an interview at the Petroleum Congress in Houston on Tuesday.
"I hope it stabilizes between an $80 to $100 range over the next several years. We need stability in the oil markets," he said.
Sheffield said U.S. oil production would only increase by 3% annually because oil companies return cash to shareholders rather than boost CAPEX. In that case, he added oil prices would continue to bid more than $70 a barrel for the foreseeable future.
He was mind-boggled last month when the Biden administration requested OPEC to increase crude output to suppress prices, overlooking U.S. oil/gas companies.
"The Biden administration called up OPEC to increase production and didn't ask the U.S. to do it," he said.
Sheffield's outlook differs drastically from the Biden administration, desperately trying to squash oil prices amid plunging poll numbers due to high inflation ahead of the midterms.
President Biden has managed to coordinate a global SPR release of crude. He's also requested OPEC to increase production. OPEC and its allies announced last month that it boosted crude oil production by 500,000 b/d in November. However, WTI remains above the $72 level. Further, the new Omicron variant of the coronavirus is turning out to be a nothing burger at the moment.
It's not just Sheffield. Kyle Bass explains that higher prices are coming, and blames "7 years of dramatic underinvestment in hydrocarbons" will "inevitably generate $100+ crude oil and $5+ prices at the pump for years to come."
Get ready for explosively higher oil. 7 years of dramatic underinvestment in hydrocarbons fueled by ignorance like this will inevitably generate $100+ crude oil and $5+ prices at the pump for years to come.We all would love to see an overnight transition to alternative energy 1/3 https://t.co/fwJkRZzgQs— 🇺🇸Kyle Bass🇺🇸 (@Jkylebass) November 23, 2021
Who could have seen this coming? Well, us and Goldman for one: "A Biden SPR Release Is Now Fully Priced In And Will Send Oil Price Even Higher In 2022."
U.S. oil output is around 11.7 million barrels per day, below the 13 million produced pre-pandemic. Energy Information Administration on Tuesday forecast output will rise to 12.1 by the end of 2022.
Years of underinvestment in the energy patch and the continued pressure to transition the economy to green energy will boost crude prices -- thus continuing to unleash energy inflation that could be devastating for the Biden administration ahead of midterms as consumer sentiment slumps.