Tuesday, April 23, 2024

Chevron Needs A Stronger Handle On Who Its Enemies Are

It was good to see Chevron’s CEO Mike Wirth throw a brush-back pitch at the occupant of the White House following weeks of having American oil companies getting the sharp end of the Biden stick (at the same time he’s cozying up to Venezuelan and Saudi autocrats trying to get their oil).

Wirth sent a letter yesterday to Joe Biden which showed at least a little fighting spirit…

In 2021, Chevron produced the highest volume of oil and gas in our 143-year history. In the first quarter of 2022, our U.S. production was 1.2 million barrels per day, up 109,000 barrels per day from the same quarter a year earlier. In the Permian Basin alone, we expect production to approach 750,000 barrels per day by the end of the year, an increase of more than 15 percent from 2021. And Chevron’s U.S. refinery input grew to 915,000 barrels per day on average in the first quarter of this year from 881,000 in the same quarter last year.

In addition to increasing American oil and gas production, Chevron is also investing $10 billion to reduce greenhouse gas emissions and scale new advanced energy technologies, like carbon capture and hydrogen, along with growing our renewable liquid fuels production capacity to 100,000 barrels/day by 2030. America will lead in these critical new industries, creating jobs at home and exporting them to the world to meet energy and climate objectives.

American oil and gas supplies are among the most efficient, responsibly produced, and lowest carbon intensity supplies in the world. At roughly 15 kg of CO2-equivalent per barrel, Chevron’s Permian Basin carbon intensity is some two-thirds lower than the global industry average. U.S. Gulf of Mexico production has carbon intensity just a fraction of the global industry average. Increasing American production will offset barrels produced in other parts of the world that may not support America’s energy security, economic competitiveness, or environmental goals.

I want to be clear that Chevron shares your concerns over the higher prices that Americans are experiencing. And I assure you that Chevron is doing its part to help address these challenges by increasing capital expenditures to $18 billion in 2022, more than 50% higher than last year.

Chevron and its 37,000 employees work every day to help provide the world with the energy it demands and to lift up the lives of billions of people who rely on these supplies. Notwithstanding these efforts, your Administration has largely sought to criticize, and at times vilify, our industry. These actions are not beneficial to meeting the challenges we face and are not what the American people deserve.

While today’s geopolitical situation is contributing to this energy crisis, bringing prices down and increasing supply will require a change in approach. You have called on our industry to increase energy production. We agree. Let’s work together. The U.S. energy sector needs cooperation and support from your Administration for our country to return to a path toward greater energy security, economic prosperity, and environmental protection.

We need clarity and consistency on policy matters ranging from leases and permits on federal lands, to the ability to permit and build critical infrastructure, to the proper role of regulation that considers both costs and benefits. Many of these elements are described in our industry’s recently released 10-point plan. Most importantly, we need an honest dialogue on how to best balance energy, economic, and environmental objectives – one that recognizes our industry is a vital sector of the U.S. economy and is essential to our national security.

We can only meet these challenges by working together. Chevron will engage in this week’s meeting with Secretary Granholm. I encourage you to also send your senior advisors to this meeting, so they too can engage in a robust conversation. Your “whole of government” philosophy in addressing major issues should apply here too, as a comprehensive approach is best to address the energy needs of our nation and of our allies.

The part we liked was the last paragraph, which was very subtle but unmistakably a shot…

The American people rightly expect our country’s leaders and industry to address the challenges they are facing in a serious and resolute manner. We are a willing partner in that endeavor and trust your Administration will be the same.

The letter is fine. Or it would be, if this had gone out four to six months ago. It didn’t really register with Biden, though. Here was his response…

But now that this policy discussion, which has been one-way since Biden took office and declared war on companies like Chevron, is taking place under the cloud of the Biden administration’s utter and perceptibly deliberate failure to provide good stewardship of our energy markets, it’s just not strong enough.

The Democrat Party has spent decades demonizing oil companies like Chevron. That rhetoric didn’t generally mean much until Biden came along. Even though the Obama administration wouldn’t shut up about the evils of fossil fuels and appointed complete loons to regulate the industry, they weren’t serious about shutting it down. And to a large degree America’s shale revolution flowered during the eight years of Obama; when the Trump administration came along and was friendly to domestic oil and gas this country’s production exploded so quickly that we overtook Russia and Saudi Arabia to become the world’s largest producer of oil.

But this, which to be fair is really a third Obama term, is something different. The Biden administration has hamstrung, if not kneecapped, just about every aspect of the petroleum sector – upstream, midstream and downstream. And then they’ve sought to demonize and blame the oil companies for their “massive profit-taking.”

Those profits exist because Biden has made it uneconomic for American oil companies to reinvest in their infrastructure. New oil exploration is being cut off thanks to a refusal to issue new oil leases, oil transportation is stymied with the regulatory hostility to pipeline construction and the savaging of the trucking industry under Biden’s dysfunctional Department of Transportation, and oil refining is becoming a dicey proposition not just due to environmental regulation but the administration’s consistent rhetoric about ending fossil fuels. Most people know that’s a leftist pipe dream, but coming from the White House as it does, it’s enough to make those companies nervous about making investments in refinery capacity, much less build new refineries.

And then there is the Left’s assault on the oil industry through the financial sector, in which banks and financial houses – and federal regulators – are campaigning to deny financing to oil companies for projects which involve the production and processing of fossil fuels.

Given all of this, oil companies like Chevron should be a little beyond the point where they’re writing letters with subtle digs at the administration’s performance and seriousness. Chevron needs to think of itself in the same way Planned Parenthood thinks of itself, because the analogy is exact. Just as Republican politicians are trying, or should be trying, if they’re true to their espoused principles, to put Planned Parenthood out of business, so are Joe Biden and the current cabal of leftists in charge of the Democrat Party trying to kill Chevron.

And Planned Parenthood routinely puts up $600 million or more per election cycle in an effort to defeat Republicans at the ballot box.

Chevron? $8.7 million in the 2020 cycle. Around $4.5 million so far in the 2022 cycle, according to OpenSecrets.org.

Almost all of that is going to Republicans, to be sure. But Chevron is going to have to get a lot louder and a lot more strident. They’re going to have to emulate Planned Parenthood if they want to survive.

Because this is literally an existential issue for them. And no amount of “eat-us-last” wokery, protection money or placating words is going to make the problem go away.