- Oil trading lower this afternoon on concerns
over demand from China--
on the domestic front, President Biden
has accused the oil industry of not meeting its commitment
to the American people.
His comments renewed his attack on the oil majors,
saying the profiteering needs to end.
Well, it comes as the midterms draw ever closer.
And with Americans still paying more at the pump than this time
last year, Biden has slammed the likes of ExxonMobil and Chevron
for not raising production as profits boom,
though fresh data shows US output
jumping to pre-pandemic levels.
Well, lots of strands to join together there-- we're
joined by Claudio Galimberti, Rystad Energy
senior VP of analysis and oil.
Thank you for joining us today.
Now, we do keep hearing this conflation about oil profits
and what that means, whether you can pass those
on to the actual consumer at the end of the day
when it comes to gas prices.
What do people need to understand about this picture?
CLAUDIO GALIMBERTI: Well, thank you for inviting me.
When it comes to the high profit of the oil industry,
we need to remind ourselves where
we were just two or three years ago, when the situation was
completely opposite.
Oil prices at some point in time in 2020 were negative.
So we need to put these things into perspective
and realize that the--
everything needs to be seen from the perspective
of what's the average in the past four or five years.
Currently, obviously, profits are really high.
And the expectation is for the oil producer to produce more.
But this comes another twist, which
is cannot just turn the tap on and immediately have more oil.
So the oil investment, like, cycle take years.
So it's understandable that the public, the administration
is frustrated.
But this situation is years in the making
and cannot be solved in just--
you know, with just one or two-- in just one or two months.
- Yeah.
And the president saying today that these record profits
are a "windfall of war"--
we are just a couple of days out--
I guess less than eight days-- from the midterms.
And we all know control of the Senate
and the House remains up for grabs and no chance,
frankly, that the Democrats hold on to both.
So is this a serious policy proposal?
CLAUDIO GALIMBERTI: Well, it's--
we are really close to the midterm.
So it's really all--
everything can work, in a sense, right?
So they're trying their best to grab as many votes as possible.
I don't think that putting a windfall tax on oil companies
right now will generate more supply in the future.
So this is a simple math and simple economics.
If you want-- as a matter of fact, if you want more oil,
probably you need to consider to do the opposite.
It is counterintuitive.
It might sound very unpopular.
But these are the-- clearly, the laws of supply and demand
in economics.
So when it comes to the midterms,
it's clear that this could be a kind of a last-ditch move
for-- from the current administration
to try and gather as many votes as possible.
But in terms of policy proposal, I
don't think it goes into the right direction,
frankly, because, yes, Biden said we need more oil.
You don't get more oil if you surtax the companies.
- So what is the solution here?
Obviously, the blame game isn't helping bring prices down.
And Biden is accusing oil companies
of not investing in the US.
But at the same time, he's also trying
to push for clean energy.
What is the actual solution here?
CLAUDIO GALIMBERTI: The solution has
to be taken with the long term into perspective.
So first of all, the energy crisis
was not born out of the invasion of Ukraine.
So it was a long, long way coming.
We were already in an oil energy crisis
before the invasion of Ukraine.
And what the invasion did was to heighten things that
were already brewed in the background, which is too
little supply against the demand that after the pandemic was
growing really, really strong.
I'm talking both about oil and gas, but specifically oil.
So what needs to be done is a situation in which
the administration says that, at least for the time being,
even if they ran on a green--
"green ticket," there is no need for more fossil fuel.
And these fossil fuel are going to solve the current crisis,
the current energy crisis.
But even with that in mind, it may take quite a few quarters.
For instance, the oil production in the United States
was supposed to grow.
Right now, we were supposed to be producing
more that we currently do.
And that's due to the supply chain issue.
So even if you are in a situation where the regulators
is supportive, and so far the regulator has not
been that supportive, you may still
encounter supply chain issues.
And this is what--
the situation we're currently in.
On top of that, of course, we are in the international arena,
if you would.
OPEC+ decided to cut their production
in order to support prices.
Therefore, I mean, that's the current situation.
So it's very tough for just one government
to wish the oil prices lower.
It requires much more than that.
- And on top of it, we're nearing 12 million barrels per
day in August, which is near the pre-pandemic
high of 13 million, undercutting a bit of that argument.
Our thanks to Claudio Galimberti,
Rystad Energy senior VP of analysis and oil--
appreciate that.