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“The model has completely changed,” he said.
Oil executives also argue that they spend a lot of money on new oil and gas production, but inflation undermines their efforts. According to RBN Energy, a research firm in Houston, exploration and production spending will increase more than 20 percent this year, but about two-thirds of that increase will go towards paying higher prices for labor, materials and services, among other costs.
“It’s kind of shocking because we’re seeing inflation across the entire industry,” Jeff Miller, CEO of Halliburton, which drills wells and runs other services for oil companies, told analysts on a recent conference call.
Smaller private companies financed by private equity are responsible for most of the new activities. The median growth rate for companies producing less than 10,000 barrels per day is estimated at 15 percent this year, compared to just 6 percent for companies producing more than 10,000 barrels per day, according to the Dallas Fed survey.
Bigger oil companies complain that even if they want to invest more, it will be difficult because Wall Street is not keen on financing new fossil fuel projects. Some investors worried about climate change are instead investing their money in renewable energy, electric cars and other businesses.
It’s not that investors are environmentalists. Many have researched the numbers and concluded that the recent rise in fossil fuel prices will be short-lived and that it is better to invest in companies and industries that they believe have a brighter future.
“If you are an investor, has your view of the next five to 10 years really changed? “I think the answer is no,” said Amy Myers Jaffe, executive director of the Climate Policy Lab at Tufts University’s Fletcher School. “History tells us that oil shocks accelerated the transition to alternative energy, not the other way around.”
Many oil executives also complain that the future of their industry is clouded by political and regulatory uncertainties. They acknowledge that Mr. Biden urged them to produce more, but fear his administration will return to stressing the need for less oil and gas when prices fall.
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