At the recent World Economic Forum in Davos, Chris Wright, the U.S. Secretary of Energy, expressed the pressing need for a substantial increase in global oil production, suggesting the world must more than double its current output levels. This statement arrives amidst a global energy dialogue predominantly focused on advancing low-carbon initiatives over recent years.
Wright's remarks came during a conversation with Vicki Hollub, CEO of the energy firm Occidental, where both underscored the enduring importance of oil for the foreseeable future. They highlighted that, despite growing environmental concerns, oil remains critical to global energy security and economic activity.
Wright further asserted that the United States has strengthened its role as a supplier of natural gas through increased production and significant investments in liquefied natural gas (LNG) export infrastructure. This development has positioned the U.S. as a key alternative to Russian gas imports, which Europe drastically curtailed following the onset of hostilities in Ukraine in 2022.
However, Wright voiced concerns regarding European Union regulations that impose extensive environmental and corporate governance standards on energy producers. He warned that these policies could compromise transatlantic cooperation by creating legal and operational barriers for U.S. energy companies aiming to export gas to Europe. "These regulations could threaten you (U.S. producers) liability-wise to send gas to Europe," Wright stated, adding that discussions are ongoing to alleviate such impediments.
The EU mandates that energy importers meticulously monitor and disclose methane emissions associated with their shipments, aiming to curb greenhouse gas pollution. While the EU recently reduced the stringency of its sustainability disclosure requirements following industry pressure, skepticism remains among investors about whether these changes might limit transparency in differentiating companies based on their decarbonization progress.
In addition to international issues, Wright criticized California’s energy policies, which he characterized as mirroring the restrictive regulatory environment of Europe. According to Wright, these policies have contributed to higher energy costs for California residents. Supporting this view, Hollub referenced Occidental’s withdrawal from the state in 2014, attributing their exit largely to regulatory challenges.
California faces imminent refinery shutdowns, affecting facilities responsible for roughly 17% of the state's gasoline production capacity. This has intensified pressure on Governor Gavin Newsom, a Democrat, to implement measures aimed at mitigating further increases in fuel prices. The state's crude oil output has also declined markedly, currently estimated at 300,000 barrels per day in 2024, down from a peak of 1.1 million barrels per day in 1985, as documented by the U.S. Energy Information Administration’s historical data.
The geographical isolation of California from major refining hubs located along the Gulf Coast and Midwest contributes to volatility in local energy prices. In response, state legislators approved legislation in September facilitating the construction of thousands of new oil wells. The objective is to boost crude oil availability for refineries and help contain fuel costs for consumers.
Requests for comment regarding these developments were not immediately answered by California’s Energy Commission or the European Union.
According to the International Energy Agency, global oil supply reached approximately 107.4 million barrels per day as of last month, underscoring the substantial scale of current production amid calls for further expansion.