1) Drillers holding back as oil prices rise
Newly released government data shows the oil industry is shrugging off President Trump’s call to hike oil production even as nearly three months of war with Iran have sent prices over $100 a barrel.
In the two months since the Strait of Hormuz closed, figures from the US Energy Information Administration show US oilfield activity has slipped. The number of onshore wells drilled fell in April to 946 in the lower 48 states, off near 1 percent from February. That figure is slightly lower than the monthly average of 959 wells during President Joe Biden’s term. Meanwhile, the number of rigs drilling new wells in the field dropped by nine to 523. Without more new wells to sustain and increase production, global increases in the price of oil will continue to drive up the price of gasoline and diesel at the pump.
The United States is still producing more oil than any country, ever. But producers have resisted any urge to capitalize on the prices hovering around $100 a barrel by sending out more drilling rigs. They are worried about spending big only to see a swift reversal in the Persian Gulf make prices plummet. But some in the industry are saying they’re starting to put their drilled-but-uncompleted (DUC) wells in a row since companies can bring them online quickly to respond to oil shortfalls when prices rise, and companies turn to them first because it won’t cost as much to get the oil flowing. Industry leaders have said they expect to see production increase soon, starting with DUC wells and then putting new holes in the ground. It is believed in the industry that many operators are likely to accelerate the completion of DUCs to capture improved pricing while gradually increasing rig counts over time.
2) A surge in diesel costs is set to ripple through the US economy
Most Americans are focused on the cost of gasoline at the station up the street, but diesel fuel costs are also poised to set an all-time high in the US, which in turn is expected to drive up prices for everything from groceries to postage. Diesel fuel affects a wide array of commodities that need to move across the country, including items for home building, manufacturing and much more.
The average price for a gallon of diesel is $5.66, just 16 cents away from the record price of $5.82 set in June 2022 under former President Joe Biden, according to the American Automobile Association (AAA). Prices jumped nearly 30 cents recently as inventories of the fuel fell steeply.
The inflationary impact of high diesel fuel costs lasts much longer in the economy than gasoline prices. Trucking, rail, and freight companies sign long-term supply contracts for their diesel, meaning that a higher price will be baked into their costs and passed along to consumers for months at a time. The ripples of high prices are just beginning to roll through the US trucking industry that is the backbone of the economy. More trucks have been idled because of the high prices.
About 20 percent of operators have parked their trucks amid higher fuel costs that can result in up to $1,200 a week in added expenses, according to a recent survey by DAT Freight & Analytics. Half of owners are driving fewer miles and are being more strategic about what they are hauling, preferring lighter loads that require less diesel, the survey found.
3) Department of Interior generates more than $4 billion in revenue in major oil and gas lease sales
The Interior Department recently announced that they have generated more than $4 billion in revenue in major oil and gas lease sales across some of the nation’s most lucrative acres in the Southwest, though oil and gas companies have largely spurned calls to ramp up drilling.
Interior’s Bureau of Land Management leased all 74 parcels it had put up for auction across parts of New Mexico and Texas, totaling 33,530 acres. The area offered is in the most prolific region for US oil production that has continuously grown for nearly two decades. Winning bids and rental payments totaled $4,007,944,870, the department said.
The Trump administration has moved aggressively to try to boost oil and gas drilling in the United States by allowing for more permits for oil and gas development and lowering royalty rates, especially as the war in Iran crimps global supplies and raises prices. But with US crude production already at record levels and future oil prices uncertain, the results have been mixed. The recent sales continue a string of successful onshore auctions, including a record sale in the National Petroleum Reserve-Alaska in March. But the administration has struggled to drum up industry interest in offshore acres, and companies already holding leases have held back drilling.
In the announcement, Interior Secretary Doug Burgum stated, “By cutting costs and removing barriers to development, we are unleashing American energy, strengthening national security, creating jobs and generating significant revenue for taxpayers and local communities.”
4) US Secretary of State Marco Rubio signs a series of minerals-focused deals with India, Japan and Australia
The US, Japan, Australia and India recently launched a joint framework aiming to counter China’s control of global mineral markets and vowed to mobilize up to $20 billion in government and private sector financing to back the effort.
Additionally, the Trump administration is pushing to start deep-sea exploration and mining for mineral-rich nodules in both domestic and international waters. Nodules are a vital source of critical minerals essential for modern technology and national security. These seabed mineral concentrations are rich in metals such as cobalt, manganese, nickel, and copper, along with rare earth elements.
The framework will “guide each of us to leverage economic policy tools and coordinate investment to strengthen critical mineral supply chains, including in mining and processing and in critical minerals recycling,” US Secretary of State Marco Rubio said during a meeting of the four nations in India.
This update comes as the Trump administration looks to boost its partnerships with allied nations on critical minerals through a combination of bilateral agreements and multilateral initiatives.
5) US House of Representatives passes bill to bolster ethanol sales
House lawmakers recently passed a bill that would allow year-round sales of increased ethanol-blend (E-15) fuel after years of debate on the issue sparked partisan fights and divided Republicans. The 218-203 vote represents a victory for a bipartisan group of Midwestern lawmakers who have aggressively lobbied House leaders to bring the E15 measure to the floor.
Agriculture groups have spent years pushing Congress to approve year-round sales of E15 blend fuel. President Trump urged lawmakers earlier this year to negotiate an E15 agreement that would help farmers and refiners. The proposal faces an uphill battle in the US Senate due to entrenched opposition from oil-state lawmakers.
The legislation also faces significant opposition from a wide array of interest groups. Oil-refining companies say the bill doesn’t do enough to cut potential compliance costs. Environmental organizations warned that boosting ethanol demand would disrupt US crop allocations while harming the climate and consumers. A Congressional Budget Office analysis determined the bill would add billions of dollars to the federal deficit over a 10-year period.
Biofuels advocates pitched their Congressional colleagues on voting for the measure amid high gas prices spiked by the war in Iran and as a boon for corn farmers facing an economic crisis.
