Oil Demand is Here to Stay

President Joe Biden delivered his State of the Union speech on Feb 7, outlining his vision for the country and addressing several pressing issues, including the ongoing COVID-19 pandemic, oil demand, and the urgent need to address the climate crisis. Biden’s speech was generally seen as climate-friendly, with the President emphasizing the importance of transitioning to clean energy sources and reducing greenhouse gas emissions. However, he also went off-script and stated, “We’re still going to need oil and gas for a while.”

This declaration was a departure from the President’s previous comments on the matter, which emphasized the need to phase out fossil fuels and shift towards renewable energy rapidly. It was also a recognition of the energy landscape in the United States, as oil and gas continue to respond as the primary source of energy in the country. With the energy industry currently undergoing a (sometimes painful) transition to other energy sources, the comment shows an important evolution in current politics.

Source: EIA

From oil and gas producers to refiners to downstream distributors, the White House’s focus on green energy has caused traditional fossil fuel investments to fall. That has meant fewer new wells being drilled, refiners choosing to transform from petroleum to renewable fuels, and other supply chain challenges. Without new investment, the global oil supply chain will face major shortages in the coming years, before renewable fuel projects come online to fill the gap. With gas prices exploding last year and on-going challenges caused by the Russia-Ukraine conflict, the White House changed its approach.

While the President still spars with oil companies over their high profits, his rhetoric on the energy transition has shifted to acknowledge that oil will be around for a long time. It’s too soon to see whether this changing stance will flow through to policy decisions and industry investments, but it’s promising.

Despite this admission, President Biden remained firm in his commitment to reducing the country’s reliance on fossil fuels and achieving net-zero emissions. He outlined several measures to achieve this goal, including increasing investments in clean energy research and development and strengthening regulations to reduce greenhouse gas emissions.

With this off-script declaration, President Bidden emphasized the continued importance of the O&G industry for the entire nation and highlighted – even if unintentionally – that the oil demand is here to stay.