Jack Stevens: The Truth About Gas and Oil Production

One would assume that having a new president shouting encouragement from the sidelines to “drill, baby, drill” would be a welcome sound to the 42 tribes that possess hydrocarbon resources.

But to the surprise of many, it isn’t.

That’s because words don’t make a difference to oil and gas production firms. What they really care about are breakeven costs -- the prices needed to pay operating costs.

According to the latest survey of domestic oil producers conducted by the Kansas City office of the Federal Reserve, these costs range widely depending on location of oil fields and their distance from a refinery. The breakeven threshold starts at about $26/barrel in the Eagle Ford area of South Texas, growing to about $33 to $35/barrel for the Permian Basin, and up to $42 to $45/barrel in other basins. 

Now, companies are choosing not to drill new wells because they’re afraid they will lose money. The culprit: Added costs to rigs, steel, and aluminum from President Trump’s tariffs. These trade taxes have driven breakeven ratios in the wrong direction.

Cape Tron, an oil industry consulting firm, reports that drilling components from China that before Trump’s trade taxes cost $6,500 now run to more than $15,000.

Savvy oil operators pay attention to what elected officials do, not what they say.

President Biden campaigned for green energy, yet more gas and oil was produced during his term than during Trump’s preceding four years.

And the fracking revolution that sparked America’s energy dominance began under President Obama, who could never be confused with a gung-ho oil and gas advocate.

So, perhaps the real takeaway is that the marketplace, not presidents, determine US energy output