Oil production and consumption help fuel the United States economy. Petroleum products power cars, trucks, and farm equipment. Jet fuel enables passenger and cargo aircraft to travel across the country hundreds of times every day. Oil provides heat for countless residential and commercial buildings.
Diesel-powered semi-trucks haul raw materials and products to supply manufacturers, retailers, and many other businesses. Oil is an essential component of many consumer and industrial products.
In addition, natural gas processing generates liquids that are utilized as petroleum products. Collectively, these diverse petroleum derivatives are involved in many aspects of 21st-century life. Supply chain disruptions can have a ripple effect, causing impact on varied sectors of the United States’ economy.
Gulf Coast Western is ideally positioned to respond to the call for increased oil and gas production. This Dallas-based company maintains a robust domestic oil and gas acquisition and development strategy.
Scope of United States Energy Consumption
For perspective, the U.S. Energy Information Administration states that in 2021 the United States used approximately 19.78 million barrels of petroleum daily. This figure represents an increase of almost 2 million barrels daily compared to the 2020 numbers. The higher consumption rate primarily resulted from the U.S. economy’s recovery from the COVID-19 pandemic.
Supply and demand principles dictate that significant oil supply disruptions will likely lead to product shortages and price increases. The degree of the disruption largely determines the effects’ severity. In March 2022, United States businesses and consumers are faced with this unpredictable scenario.
Conflict Triggers Global Oil Supply and Price Concerns
In February 2022, Russia invaded Ukraine. With Russia a significant oil supplier, there’s considerable uncertainty about how the conflict will affect global oil supplies. Because of this concern, United States fuel prices immediately spiked and continue to rise.
On March 8, 2022, President Biden announced the United States would ban Russian oil imports due to the latter country’s attack on Ukraine. The ban also applies to Russian-sourced petroleum products, liquefied natural gas (or LNG), and coal.
“Today I am announcing the United States is targeting the main artery of Russia’s economy,” Biden said. “We’re banning all imports of Russian oil and gas and energy. That means Russian oil will no longer be accepted at U.S. ports and the American people will deal another blow to Putin’s war machine.”
Following the president’s address, White House officials noted the administration would continue to work with major energy producers to find viable solutions. Besides asking OPEC suppliers to ramp up their production capacities, the administration asked producers to release additional emergency oil reserves. The spokesman emphasized that all parties are exploring measures to resolve this large-scale problem.
Complex Impacts for the United States Economy
In contrast to past energy price spikes, the 2022 oil price increases will affect the United States economy in different ways. In previous decades, elevated oil prices meant that United States suppliers were forced to purchase higher-priced energy from overseas companies.
However, shale gas production has become more prominent during the past 15 years. This added energy source means increased oil prices have not negatively impacted the United States’ aggregate national income and gross domestic product (GDP). Instead, certain regions of the country, such as North Dakota and much of Texas, have benefited from these price fluctuations.
Administration Seeks More Domestic Oil and Gas Exploration
Currently, there appears to be an “all hands on deck” approach to resolving the United States’ oil supply and price issues. As part of this coordinated effort, a White House official recently signaled that United States oil and gas suppliers are free to increase their domestic production. “Prices are quite high, the price signal is strong,” said White House National Economic Council Deputy Director Bharat Ramamurti. “If folks want to produce more, they should.” The official also encouraged energy companies to drill on their existing domestic leases.
Gulf Coast Western’s Proactive Development Program
And that’s where Gulf Coast Western comes in. Established in 1970, GCW has working assets or potential resources in multiple regions. Most of these reserves are in energy-rich Gulf Coast states such as Texas, Louisiana, and Mississippi. The firm intends to enhance its acquisitions in these states.
In addition, Gulf Coast Western has recently expanded its exploration and development activities to several Western states. Currently, the company maintains operations in Colorado and Oklahoma, with more regional development under consideration.
Gulf Coast Western President, CEO, and Manager Matthew Fleeger notes that the Company’s portfolio combines two types of properties. Development-ready resources, along with reserves tapped for future drilling, are equally important components.
Typically, Gulf Coast Western targets properties with development infrastructure already in place. To harness its oil and gas resources, GCW maintains an internal business development team. In addition, Gulf Coast Western, by contracting with regional United States-based well operators holds numerous active leases it can tap when market conditions dictate. Collectively, the leased land includes thousands of acres of potentially productive assets.
Collaborative Relationships Facilitate New Opportunities
Gulf Coast Western’s wide-ranging industry network enables the firm to identify and procure properties that represent good production opportunities. Development of these properties may also enable the company to reach its predetermined corporate goals. In addition, the company frequently enters into targeted strategic partnerships that offer potential benefits to both parties.
Certain partnerships have evolved into extended joint ventures formed with a mutual vision of market development and growth. Here, both parties have declared their intention to navigate industry challenges collaboratively.
Gulf Coast Western consistently seeks to maximize investors’ market returns. Concurrently, GCW wants to minimize each investment’s potential downsides. Before engaging in any investment, the company performs significant due diligence on multiple facets of the proposed transaction.
Prominent Oil Companies Step Up Production Efforts
Several leading oil companies have expressed their intention to ramp up production in 2022. These higher volumes were likely part of each business’ longer-term strategic plan. However, recently rising oil prices may have accelerated the pace of the production increases. The extra stocks will also help to alleviate potential oil shortages, although that relief will be at least several months away.
Permian Basin Production Increase
Exxon Mobil expressed its intention to raise production levels at the expansive Permian Basin oil field. For perspective, Exxon Mobil will pump an additional 100,000 barrels daily at this New Mexico-West Texas installation.
Exxon’s higher 2022 figure follows a notable 2021 increase to 460,000 barrels daily. Chevron will also raise its 2022 Permian Basin oil production by 60,000 barrels daily.
Additional Oil Production Enhancements
Other oil producers are projected to devote more dollars to exploration and related capital improvements in 2022. Marathon, Phillips 66, and Hess have indicated their intention to follow a similar strategy.
Specifically, Hess Corporation CEO John Hess said the firm is spending more on new wells. These increased expenditures are primarily targeted to North Dakota’s Bakken Formation, which has become one of Hess’ major production hubs in recent years.
Suboptimal Oil and Gas Production Timelines
In a perfect world, oil and gas production would flow smoothly with relatively few delays. Oil and Gas Exploration companies, such as Gulf Coast Western, would quickly identify promising resources and immediately move into place to develop them.
With facilities fully online, oil or gas would flow seamlessly from the ground into refineries or storage tanks. Major oil companies would refine the raw materials into petroleum and natural gas products. Varied economic sectors would purchase sufficient resources to meet their ongoing needs.
During the oil and gas production process, equipment malfunctions would rarely occur. When breakdowns took place, skilled workers would be readily available to resolve them. Finally, production logistics issues would be swiftly resolved with minimal downtime.
Multiple Factors Can Cause Production Delays
In reality, the typical oil and gas production cycle is a months long undertaking. Facility construction delays often occur and other issues can further impact the production and transport process. According to Clark Williams-Derry, an energy analyst for the Institute for the Energy Economics and Financial Analysis, it will likely be several months before today’s crude oil will be available for use.
“The problem is, and the harsh reality for U.S. oil markets is, that there is no switch that anyone can flip to suddenly turn on oil production overnight,” says Williams-Derry. “There just isn’t … There is probably going to be six to nine months’ lag between today’s high prices and the time when the oil industry can bring significant amounts of new production online,” he emphasizes.
Paul Bommer, Ph.D., a senior lecturer at the University of Texas at Austin’s petroleum engineering department, says equipment and worker shortages could easily delay the production cycle further. “You know what’s going to happen with the price of oil going through the roof?
“Equipment is going to be hard to find, crews are going to be hard to find … You might have 100 wells you’d like to complete, but you can’t get the equipment and the people to complete them,” he stressed.
Gulf Coast Western Helps Drive the Solution
There’s no magic bullet that will quickly resolve the United States’ troublesome oil and gas supply and pricing issues. However, Gulf Coast Western’s multipronged exploration and development strategy increases the potential for the discovery of promising energy resources.
To acquire these raw materials, Gulf Coast Western works with other oil companies that maintain a highly skilled and dedicated workforce. Gulf Coast Western also utilizes its relationships with industry operators for production and transport equipment, mitigating dependence on outside contractors. Given these advantages, Gulf Coast Western is well positioned to be an important part of the United States’ energy solution.