Big Oil CEO is concerned about potential Middle East escalation, touts record US supply
Originally Published: 09 JAN 24 07:01 ET Updated: 09 JAN 24 11:15 ET By Matt Egan, CNN
New York (CNN) — The American oil industry is on high alert for an escalation of the violence in the Middle East that disrupts the flow of oil out of the region.
Mike Sommers, CEO of the American Petroleum Institute, worries there is a growing chance the crisis will intensify and derail oil supplies.
“This should be a real concern, I think, to every American,” Sommers told CNN in an exclusive interview. “Oil tankers are being attacked by the Houthi rebels in the Red Sea. And what you’re seeing is a number of those oil tankers no longer traversing the Red Sea.”
Sommers, who runs a powerful oil-and-gas trade group whose members include ExxonMobil, Chevron and Hess, also cited the potential for the Israel-Hamas war morphing into a regional conflict that endangers energy supplies.
“If this situation in the Middle East continues to escalate,” Sommers said, “that will certainly have an effect on price.”
Last month, BP halted shipments through the Red Sea, citing a “deteriorating security situation.” Attacks on vessels have only intensified since then, with Houthi rebels launching unmanned surface drones against commercial shipping lanes and US Navy helicopters sinking three Houthi boats and killing those aboard.
Bab al-Mandab Strait, a sea route connecting the Red Sea to the Arabian Sea, is a critical passageway for crude oil and fuel. About 8.2 million barrels per day of oil and oil products transited the Red Sea through the strait this year, according to oil research firm Vortexa.
Oil executives are working “hand in glove” with the US Navy and other elements of the federal government to “ensure that these attacks stop,” Sommers said.
Elsewhere in the Middle East, ISIS claimed responsibility last week for deadly twin blasts in Iran that killed at least 84 people. Violence has also increased in Lebanon between Israel and Hezbollah, the pro-Iranian group.
Helima Croft, global head of commodity strategy at RBC Capital Markets, told clients late last week that the violence in Lebanon and Iran isunlikely to be the triggers for a regional war.
However, the former CIA analyst cautioned: “If the current trends continue it is hard to see how it remains a contained conflict.”
Gas is cheaper than before October 7th
Although oil prices have surged at times during the Israel-Hamas war, those spikes have been fleeting. US crude closed at $70.77 a barrel on Monday, about 15% below where it traded before the October 7 Hamas attacks on Israel.
One major reason energy markets have been relatively calm is robust supply from the United States.
“Oil prices have stabilized right now and it is only because of the American energy revolution,” Sommers said. “American oil and gas producers should be thanked for ensuring that volatility hasn’t gone in an upward direction.”
As of the final quarter of 2023, the United States was producing more oil than any country in history. Not only has that US oil offset the loss of OPEC+ barrels taken offline by the producer group, but it has acted as a shock absorber as the security situation in the Middle East devolves.
“Ten yearsago if this same situation was occurring, we’d be dealing with significantly higher oil prices,” he said. “We’re producing more oil than this country ever has and that is a huge advantage to the American consumer and, by the way, to our national security. We don’t have to go and beg, borrow and steal from other countries for energy.”
Despite the security jitters about the Middle East, gas prices are 20 cents cheaper today than at this point last year, according to AAA.
‘Sowing the seeds for the next energy crisis’
Some Republicans claim the Biden administration has waged a war on American energy on the regulatory front. That’s despite the record-shattering oil production that has occurred on President Joe Biden’s watch.
Sommers voiced significant concerns about Biden’s energy stance, especially a “regulatory onslaught” on drilling on public lands and public waters. He argued most federal production today was made possible by leases approved by prior administrations.
“If we don’t get the policies right, and if we don’t eliminate this red tape, we’re really sowing the seeds for the next energy crisis,” Sommers said. “This administration has gone backwards on energy policy. You’re not seeing it at the pump right now, but you’re going to see it in the future if we don’t reverse course.”
Of course, most US oil production occurs on private land, not federal. And despite Biden’s climate ambitions, US oil production is up sharply since he took office.
The White House did not respond to requests for comment.
Big Oil launches ad blitz
The oil industry is taking its message to the airwaves.
The API previewed for CNN a major new ad campaign, called “Lights on Energy,” launching on Tuesday ahead of the group’s State of American Energy event.
The ad blitz will cost eight figures and air on national TV as well as on digital platforms, seeking to convince voters and lawmakers that oil and natural gas are “vital to our energy future.” It will target the Beltway audience as well as key states.
“We will work to dismantle policy threats and empower voters and policymakers with facts,” Sommers said. “Renewable sources have a role to play, but oil and natural gas will be needed for decades.”
In response, advocacy group Climate Power said polls show Americans support speeding up the transition to clean and renewable energy.
“It’s no surprise that API is spending their money trying to hold back progress,” Alex Witt, Climate Power’s senior advisor of oil and gas, said in a statement. “Big oil and gas has bought the support of Donald Trump and his Republican allies in Congress, but they can’t buy American voters.”
Climate Power has launched an $80 million campaign to tout Biden’s environmental record, including advertising, digital messaging, an influencer program and targeted outreach to Latino voters.
Meanwhile, climate scientists continue to warn the world needs less, not more, fossil fuels to save the planet.
A UN report in November found that global fossil fuel production in 2030 is set to be more than double the levels consistent with meeting the 2015 Paris climate agreement goals.
Research released last year concluded that oil and gas production in the Gulf of Mexico is creating significantly higher levels of planet-warming gas than previously thought — finding the climate impact is twice that of official estimates.
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