The Dispatch Podcast - How Gas Prices Got So High

Episode Date: June 23, 2022

Remember when filling up your gas tank didn’t cost the same amount as your weekly grocery bill? Leslie Beyer, CEO of the Energy Workforce & Technology Council, and Skanda Amarnath, the Executive Director at Employ America, join Declan to discuss the oil and gas supply issues America faces. The Biden administration’s current approach to the sector doesn’t inspire much confidence prices will come down any time soon, but there are levers policymakers could pull to ease the pain at the pump.   Show Notes: -Capitolism: “Fueling Uncertainty” -Employ America Research Report Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the dispatch podcast. I'm not your host, Sarah Isger. This is Declan Garvey again, editor of the morning dispatch, and today we're going to talk about energy. The national average price of a gallon of regular gas is $4.95 as we're recording this podcast, and much higher than that in many parts of the country, including where I fill up my tank in Washington, D.C. Other than a few days last week, when the national average surpassed $5 per gallon, Americans at least nominally, have never paid more at the pump, and it's wreaking havoc on the country, both economically and politically. Voters routinely tell pollsters that inflation is the biggest problem currently facing the United States, and energy is among the biggest drivers of those price increases. You're seeing the effects

on gas station billboards as you drive around town, but you're also seeing it at the grocery store, and when you're online shopping, and when you're buying your plane tickets, and when you crank up the AC this summer. If energy is more expensive, that means it's more expensive for companies to produce and transport all of their goods, and those added costs are going to filter through to the consumer. So to tackle inflation, we need to get oil prices under control, and to do that, we need to understand why they're so high in the first place. That's why I'm thrilled about the two guests that we have lined up for the show today. Leslie Beyer is the CEO of the Energy Workforce and Technology Council in Houston, which represents more than 450 companies in the oil field services and

equipment industry. Before that, she spent 15 years in Washington, D.C., working in the Senate, and White House and on multiple presidential campaigns. Our second guest, Skanda Umarnath, is the executive director of Employ America, a new think tank focused on macroeconomic policy. Prior to that, he was an economist at MKP Capital Management and an analyst at the Federal Reserve Bank of New York. I really enjoyed this conversation. I think it got really deep on a really important issue, and I hope you will as well. Leslie Skonda, welcome to the Dispatch podcast. I'm really excited for this conversation because gas prices are, I think,

simultaneously one of the most important and least understood issues in politics today. And I think that your unique perspectives, both from the industry side and from the macroeconomic side, will be really useful in helping me and hopefully our listeners kind of grasp what it is that's led to the spikes that we're seeing and hopefully what, you know, levers, policymakers can pull to at least reverse or begin to reverse some of these trends. So, Leslie, I'll start with, with you. And it's kind of a ambitious question. But, you know, in two or three minutes, can you walk us through the last two or three years of the global energy market? Obviously, the war in Russia and Ukraine has played a huge role

in the spike in oil prices we've seen over the past four months, but prices were increasing at a slower rate for more than a year leading up to that invasion. And so in what ways are we still dealing with the effects of those initial COVID-19 lockdowns from spring 2020 when demand for oil collapsed and prices briefly even turned negative for a while? Sure. Declan, thanks for letting me join y'all today. I'm happy to attempt to explain that in a few minutes. I like to think if I can't explain it at a third grade level, then I don't understand it well enough myself. But, you know, if you look at energy markets, and we can go back even just a little further than two years, but, you know, certainly since 2014, I think is the most recent

kind of big mark. You know, you saw commodity prices really plummet. The energy industry has not had investment at an appropriate level for at least a decade. And so that was the playing field that we started with really even before the demand destruction from COVID really hit the global energy markets. So for the past two years, you know, oil and gas production has been woefully underfunded, underinvested in with the kind of the emerging sentiment within the capital markets, around prioritizing ESG and sustainability investments and not necessarily understanding that a lot of the oil and gas companies are good ESG investments because of the emissions reduction technologies

that they have, there has been a lack of investment. And then you had the complete demand destruction from COVID, where we really just had to stop production altogether. And then as we started to recover from that, that we're starting to really start to increase demand slowly but surely increased production, trying to get our workforce back, the men and women of my industry, really working hard all the way through the pandemic, in person, getting it done, and still can't get the production quite back to where it was. And then you see the Russia-Ukraine crisis and the geopolitical

turmoil that caused. So ultimately, what we're seeing in the energy market, was a situation where we were already in bad shape with supply. And then as demand increased, it just got worse. So then, you know, as we deal with supply constraints, supply chain constraints globally that have been kind of an offshoot of the geopolitical issues in Russia and Ukraine, it has caused the pricing to just go up and increase and increase just because there isn't enough supply for the demand. In Europe, talk about underinvestment,

there were some decisions made in Europe to really reach a higher level of renewables and their energy systems. And they just weren't quite ready to move away from any of the hydrocarbons there and it put them in a tough position. So then once they lost their reliance on their Russian resources, it has just created a huge demand issue there in Russia or in Europe. So that's why the markets have been so extraordinarily volatile and continue to increase in those prices are high and will stay high for quite some time, I think, because the industry

cannot turn on a dime. Oil and gas development is not as easy as just flipping a switch and companies are doing and everything they can. Refiners are at max capacity. US producers are at max capacity to try and fill that. And there are some things I hope that we talk about today that we can do to help assist them and produce and get that supply back on the market.

But that's the only thing that's going to stabilize energy prices after all of these, this confluence of events that are making pricing go up. Right, right. And, you know, I think you preempted this a little bit there, but in a typical market, when the price of a good skyrockets, especially in the way that, you know, oil prices have in recent months, businesses are incentivized to, you know, ramp up production of that good, capitalize on those higher prices until supply catches up with demand at a new equilibrium. And, you know, I think we've seen some oil companies announce some plans for additional investment and ramping up production a little bit, but not nearly as much as you'd expect, crude oil at $120 a barrel or whatever it is today.

And so, you know, even last week, President Biden wrote a letter to oil executives arguing they have, quote, ample market incentive to increase their supply. And the oil industry has generally responded kind of with a shrug. So, you know, why is it that oil executives might be a little hesitant to commit to this new drilling, you know, in spite of these incredibly high prices? has that kind of investment generally gone for them over the past decade? Well, there's two primary reasons that they're unable to just immediately turn it up. The first one, and I'll talk about at length, is the lack of infrastructure to be able to have the

take away capacity, to be able to pull away and get to, whether it's a refinery or an export terminal, the product that they're producing. And then the second reason is that the long-term incentives for the business are not there. The administration has vilified this industry and really at every turn takes every opportunity to claim that oil and gas companies are price gouging. They are polluting the environment. They are not a good long-term investment that restricts their access to the capital markets, which is what they need to be able to produce.

So it creates a vicious cycle. But those are really the two reasons why they can't crank it up higher than they are. However, I will state, and there have been two great letters, one that came from Mike Worth at Chevron, I believe, yesterday, and then the Exxon Mobil letter where they're stating to the president, hey, look, we want to be a partner here. We're operating at max capacity. We have obligations to our shareholders. We're doing everything we can. We need some investment in infrastructure. And we need for, investors in the investment community to know that we're a good long-term bet because that is what this production requires. It's not a short-term thing. It's a long-term investment. Right, right. And I, you know, over the past 10 years, these companies have been burned plenty of times by, you know, ramping up investment only for the price to crash back down, you know, six to nine months later when that oil is coming online. And so, Skanda, that's why I want to bring you on this point exactly. I heard you. on another podcast earlier this week, plain English with Derek Thompson, which is a show,

I think dispatch podcast listeners will enjoy quite a bit. And you were talking about a new white paper that you all put out at Employ America last week kind of outlining a step that the Biden administration could take to address some of those concerns about longer term incentives and price stability. So could you kind of talk us through that proposal and why you think that it is kind of one of the best levers that the administration could pull here? Sure. So in the spirit of what also Leslie mentioned about, like, the ability to have some level of partnership and cooperation here on sort of the long term. Look, the industry is been burned by a heavy dose of cyclicality of volatility, especially so that 2014 to 2020 period. We've had

oil crashes that I've tried to make this point to the administration directly. It's like crashes are not good for your climate goals and it's not good for industry. either. Like financial stability is actually a good thing and can be both realistic about the production realities and consumption realities while still like keeping sort of broader goals. So there's two things that are pretty useful to the industry right now, I think. There are other things obviously on the regulatory front. Sometimes they get very adversarial, but that should also be hashed out. Some stuff that's been just not very smart from what the administration has done. But I don't think it's causal in terms of how we got here in the last 12 months call it. The real

things that we've had a kind of crude oil shortage coming into this sort of Putin invasion of Ukraine. But one is insurance or effective insurance. So the SPR is being amped right now, the Strategic Petroleum Reserve. We had huge stockpiles of crude oil that were already kind of being drawn down and being used as a gimmick. It's okay to release them. It does some marginal good. Don't overstate it, but it's helpful at the margin. But you actually can think about the storage capacity as being something that could be helpful to give confidence about demand in the future. So that could be done through a series of instruments, but it's actually, one, it's not trivial to be able to store oil, right? Oil is actually something that if you don't leave out anywhere

to evaporate, but if you have the capacity to use it, there's some constructive ideas there the DOE could capitalize on, or even the U.S. Treasury, for how they could actually use it as an insurance mechanism that helps to give more downside protection. Because I think for a lot of E&Ps, exploration protection companies, I think it's actually, they're understandably worried about going to head first into investment when shareholder returns have been less than desirable for the last decade or so. And that's part of it. As socially, we do need more investment to kind of get supply and demand to balance out. How to make that financially stable and secure is something where government can be helpful.

Unfortunately, this has become a really big wedge issue when it doesn't have to be if we're thinking about this problem holistically. And so that's one part of it. The other part is, look, not every part of the industry has access to capital in quite the same way. So if you're a larger company,

maybe it's easier to go to capital markets or to get whatever. If you need equity or debt financing, it's easy for smaller players, less so. And if you combine the kind of certainty that the SPR could provide in terms of demand, especially in a price crash, with the certainty around financing. Then you're actually dealing with a proposition that actually keeps all stakeholders,

you actually have some mindfulness about shareholders are looking for a proposition that makes sense. We live in a market economy. It makes sense for them to want the capital that's being deployed to actually yield a return they expect. And those two levers are things that are within the Biden administration's authority. And it's constructive. it makes sense, given that we are at risk. Like, it's one thing, we're right now facing the risk of Russian production compliance. We haven't actually seen the full,

the trains left the station, in my opinion. I think there's actually a big chance we'll see Russian production fall off a cliff in the next 12 months. And if that happens, things get a lot worse very quickly. And I'll just say, like, look, I don't have to tell Leslie this, but like oil is still an integral part of our economic system, how our macroeconomy functions. I think this is like something that the Biden administration, should be taking very seriously and realistically. And so far, a lot of the ideas, unfortunately, have been very gimmicky in nature.

So just to make sure that I have kind of that understanding down correctly. So basically, the Biden administration has been releasing, you know, tens of millions of barrels of oil from the Strategic Petroleum Reserve over, I think, dating back up to six months now, to, you know, on the margins, ever so slightly kind of, increase enough supply to, you know, change the price of gallon of a gas for, you know, a couple cents. But now that we've kind of depleted a huge portion of those, that strategic petroleum reserve, eventually we'll need to resupply it. And so that's where the government could kind of come in as a, you know, we're going to guarantee that we will buy X number of barrels of oil at X price.

You know, that is your demand in the future. That is the long-term stability. That is, you know, feel okay about producing today because in the future, no matter what happens with oil prices between now and when this oil comes online, you will have a buyer at that point. Is that generally the idea? That's exactly it. And I just go one step further. They can contractually enshrine this with, and this requires coordinating with industry, but it's a kind of thing that they should at least be signaling and be open to. And so far, I haven't really heard anything of this kind just yet. But it's the kind of thing that actually, if you can provide what's called a put option in sort of financial circles, if you're sort of financially savvy, the ability to have that downside optionality. So if the price falls below a certain point, let's call it $60 a barrel throwing out a number, but you can anchor it to the cost in the industry. That in that scenario, the government's going to be a buyer. If markets are tight, we want there to be enough of price signal and price incentive for the industry to continue investing. I think that is, If you're looking at the industry realistically, and the challenges that are, yeah, the shareholder proposition has not been fantastic for the last eight years. The advent of shale as an extraction method has been both a blessing and a sin, in the sense that it's been very easy to ramp up relative to historically. It's been a lot harder.

But at the same time, like it also has led to a lot of volatility. And volatility raises the uncertainty, raises the amount of, it raises the hurdle rate for investment if you're a shareholder or an executive in the industry and seeing what has transpired. Some insurance could really change decision-making. And I'd say this is a time for coordination and cooperation. We kind of need to try and rescue that spirit right now. I agree.

Yeah, Leslie, I'm curious for your thoughts on that, you know, obviously, what would that kind of certainty, that insurance, how would that change the calculus of these oil companies? You know, it really, well, first, just I like to say, your description of the SPR release is so correct. to people that don't understand it, I have said in the past, if you spend money out of your savings account, you're still spending the money, right? The only way to reduce prices is to increase the supply. And so like Skanda said, it does create a demand. We will need to refill that for our

national security. And so that's good. But that has been a gimmicky type bandaid. But in response to your question about collaboration, I mean, that is my day job. That's what I do full time, is attempt to create collaborations between policyholder or policymakers, elected officials in the industry. And sometimes we can get traction and sometimes we don't. It's been difficult with this administration, but I, you know, I think we're there. I think some compromises could be made. We've certainly made some progress in Congress. There was a letter from congressional Democrats in all producing districts that went, I think, to the president yesterday, and it basically said, hey, we're hearing some things about some talk about potentially trying to stop oil exports,

and that would increase prices. Please don't do that. You know, if you'll remember Elizabeth Warren had sent that letter with some of her colleagues a few months back. So there are, you know, collaborations and corporations that can be made. If you explain the market dynamics. And if you explain the technology behind this industry and how it underpins all others, I think we can start having real conversations like Skonda says once decision makers can get there in their heads to realize that the hydrocarbon production can be cleaner and have reduced emissions with technologies like carbon capture and things like that. you know, we're not sacrificing environmental goals when we produce high requirements. Those

two things are not binary. And so, you know, that's the conversation that really needs to happen first. But I think, too, this summer is going to be so critical. There are Americans that are really going to feel it hard with energy prices this summer. And up until this point, you haven't, you know, seen necessarily people really kind of getting to the point where they're willing to take action that would decrease demand. But now I think they're going to get there this summer. So I think we're hitting a critical point. Right, right. And, you know, I think you've touched on some of the ideas that have been proposed in the past couple weeks that might not be as helpful. You know, we've seen earlier today on Wednesday, President Biden called on Congress to suspend

the 18 cent federal gas tax for three months and ask state governments to do the same. with theirs, you know, in California, Gavin Newsom, the governor there. And in Chicago, I think Mayor Lori Lightfoot have proposed sending constituents gas cards or debit cards that can be used to, used on gas. You know, Senator Ron Wyden recently proposed a windfall tax on oil company profits that are deemed, quote, excessive. You know, I only took two econ classes in college, but when you're trying to lower the price of something, I'm pretty sure you either need to decrease demand for that thing or increase supply of it.

So am I crazy, Scanda, or would all three of those plans do precisely the opposite? I think they're all really bad and counterproductive if the goal is to kind of manage. Look, we have a scarcity. Like we have real scarcity here. Like if you look at the DOE data, the Department of Energy publishes inventory data, you can look at at this time of the year,

If you look at what are gasoline inventories, if it were crude oil inventories, they're both very low, especially if you start to include for the SPR release that's going on right now. So we're dealing with a very fragile supply situation, even independent of Russia, but that's definitely hurt. It's made more actors in the industry understandably, like risk-averse about how this is all going to play out. And so when you think about consumption, like whether you think the tax should exist or not, I'll say like obviously the gas tax is supposed to fund like highway infrastructure. Reducing the gas tax is a demand-side mechanism. It's to encourage more consumption. If there was a lot of spare capacity in the industry, you can make the case that maybe it's doing some good.

There's not really spare capacity of what Leslie was saying earlier. This is a place where the industry, markets are tight, and you actually need to really focus on the supply side seriously. And I would say the U.S. industry in particular, we're the biggest producer of oil by country. By country, U.S. is the largest producer. U.S. has a lot more flexibility in how it produces relative to other countries, less problematic than a lot of other countries.

We should be thinking serious about that as part of the holistic solution here. I'm kind of stunned that they haven't actually tried to even put this on the table about how we actually use U.S. industry. I know. I was going to, export ban is a horrible idea if you think you want to stand with Ukraine. I can't believe that people are actually putting this forward as an honest solution. It doesn't even make any sense

if you think about refining logistics. And then on top of that, if you think about windfall profits tax, again, we have a real shortage, like rearranging who gets the money. And I also say, this is a very cyclical industry, right? So if you just looked at the last 10 years,

there's not windfall profits here. This is a very, this price spike, and yes, the industry takes a lot of price risk. Inherently, it's very hard to kind of take that out of the equation. So when you start to add all those things up, how are any of these policies expanding supply or even adjusting supply relative to demand? Maybe reducing the gas tax is sort of a weird cross-subsidy of the industry. It's sort of weird to say everyone should go out and reduce their gas taxes and

we're going to see more consumption at a time of real scarcity. When this is the key leverage point that Putin kind of has in sort of this geopolitical fiasco. Yeah. It's crazy. I find all of them so problematic. The choice essentially seems to be either, you know, prices are what they are and we kind of go forward on that path or we somehow artificially cap prices and there are shortages instead. And I don't know that that's necessarily a better situation for the president politically or the country as a whole.

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Saudi Arabia next month, you know, going to, with the hope of potentially getting OPEC to increase production somewhat, you know, we could, as we talked about earlier, incentivize domestic producers to drill more by providing some more long-term stability and demand incentives. We could, you know, reduce certain regulations that increase cost for producers, I think Exxon and their response to the letter explicitly mentioned, the president's letter explicitly mentioned repealing the Jones Act that has to do with maritime shipping as, you know, something that, again, none of this is a silver bullet, but on the margins, you know, could add up to have some sort of an effect. In your mind, Leslie, kind of what are the most effective levers that the administration could

pull in the next, you know, nothing's going to happen overnight. But if you were in making the decisions right now, what, what would get us to more normal gas prices the fastest? The most effective lever that they have in the easiest one, honestly, from where I sit to see that they could pull is what Skanda touched on when he said, you know, it's the domestic producers. It's the American economy. So even if Biden could convince, you know, Saudi to produce more to OPEC in general to produce more, but really it's just Saudi in the UAE that could increase production. And they don't have that much excess capacity, really. No, and the rest of the, you know, economies and OPEC are struggling to even meet their production.

So, and why would they do that? It's just, it's not in their interest. But the whole point is, why would we care when we have this resource here and we can do it ourselves? And so the one thing that we haven't even really touched on is the workforce and how that is a challenge for the industry as well. We need to use the domestic industry to produce more, and that will increase supply. But that is a long-term play for the reasons that we've said on infrastructure. We need to, you know, look at permitting. There is such a permitting backlog that it just makes it it's extraordinarily difficult to produce, we need to look at the restrictions on federal lands and waters. The Biden administration, since they started, have had a moratorium on leasing in federal

lands and waters, and it's, it's, it's impossible to be able to produce. But there's this huge workforce issue that's out there. And the administration, and, you know, kind of along the path of vilifying this industry has made it very hard for us to be able to attract the talent we need to be able to move and produce quickly. So it's difficulty. I work with a lot of companies that frack. I mean, that's my business. I work in energy services. I work with the frackers. And they can't get crews. It's really difficult. Not just because the industry is cyclical, but because if that's you and you're making that decision and you're the one trying to support your family, And you think, well, I can go into this industry.

It's a good paying job. But everything I hear tells me that the president of the United States is trying to make this industry go away. John Kerry is traveling around the world telling everyone that no new drilling ever needs to happen again. You know, is that something I want to invest my livelihood, my family's livelihood? It makes it very, very hard for us to get that workforce that we need. And it's a skilled workforce.

And these are great paying jobs. And so in my sector, we have seen an increase in jobs, but really the lever to pull is just to support the U.S. industry, support the companies that are working hard. And in doing so, provide resources for infrastructure and release permitting, make permitting easier. Yeah, yeah. And, you know, it's difficult for me as a journalist to try and follow the three. through line here with the Biden administration when it comes to the energy sector. Because, you know, he, he, as campaigning for office, he told voters that he was going to, quote, end fossil fuel, you know, energy secretary, Jennifer Granholm, a couple months ago was asked, I think, on Bloomberg, about, you know, the plan to increase supply.

And this was well before we hit this latest shock. and she said that the plan is to, quote, diversify and to make sure that we move in a direction of clean energy. And now Biden is writing a letter to oil executives saying, please, please, please produce more. Granholm was saying the same thing. But at the same time, they just delayed another federal land, oil and gas lease. So it's, you know, produce more, but don't produce here, get Saudi Arabia to produce more, but not here because of climate change. Is there any sort of kind of, you know, through line here that from the industry perspective, you know, what signal can you take from all of this noise? You know, Biden will now say that he's gone out

and said, I'm calling on producers to produce more. Why aren't they listening to me? Why don't they believe them? Yeah, there is nothing to take away for the industry other than to not trust. You know, when you see them talking from just both sides of the mouth and just such disparate views from different sides of the administration. And where's the NSC on this? Like they were kind of in play in the beginning, but you haven't heard much lately. It's been more grand home.

You hear a lot from Kerry. So it's just, I think the industry is just waiting for security, just for consistency to be able to invest. That's all business needs in any industry. It doesn't even have to be willing to guess. To be a successful business owner, you need to be able to have visibility

down the path. And we don't have any visibility down the path. And so investors, you know, are not coming in. We aren't able to invest as much as we would like. And all the administration would need to do is just give us some visibility and some stability on some of these things that I mentioned. Got it. Got it. And, you know, I think we just want to touch on this a little bit here. We've talked primarily about supply side aspect of this equation. There is somewhat of a demand side. And I think, Leslie, you mentioned that we might start seeing that kind of rear its head more in the coming days and weeks here as things continue to progress. But is there any opportunity here for clearly the environmental left thinks that there is in some way, you know,

higher gas prices were a goal of that movement for a long time? You know, are there ways that we can be expediting some of these changes where we aren't as reliant on, you know, the volatility of the oil market and, you know, things that we can do to, you know, whether it be subsidizing public transportation or incentivizing carpooling, things like that, that, you know, on the other side of the equation that we can, at least in the more immediate term, try and eke some value out that way. I love that question. That is the best most, you know, kind of optimistic way to look at this. And that's the way that we talk about it a lot is increasing demand means we need more of everything. And more of everything is specific to geographies. You know, there are some countries,

they need to use the resources they have with what's happening in India. They need to be able to use the resources they have. Their population is booming. They also can leapfrog past certain technologies and get to other renewables. So there is going to be a mix of energy systems for every economy that's going to be different. But the key to getting rid of the volatility is going to be a healthy mix. It's the same thing as like the food pyramid, right? You don't want to eat all beef. Like you need you need bits of everything to be healthy. And when we can finally start getting, you know, some some thought. some thought awareness around, it takes different energy systems in a certain combination to work,

then we'll get rid of the volatility. But we can't be taking options off the table, especially the most dense ones like oil and gas. We need to keep all the options on the table and do what's, you know, geographically correct dependent on resources for each area. And that will get rid of it. But I love that question. Scott, do you want to jump in on that too? I'll just say for that consumption, especially it's relevant to terms of,

of the context of how people talk about climate change. They like to think of it as some sort of it's purely a reflection of production. And so a lot of, I'd say, misguided environmental advocates have really focused on cramming down on fossil fuel supply as opposed to focusing on you're going to have to build. Yes, it's true. Consumption can switch over time for certain things. Something's not really. But in some cases where there is room for consumption adjustment, you're going to have to build a new sort of physical asset, set of physical assets and infrastructure to do that. I think there's room for consumption. to adjust at the margins in certain geographies, as Leslie said, in some places, a little less so.

Like in the U.S., some places, an internal combustion vehicle is critical to maintaining a decent standard of living. In a lot of places, I live in a place where I have a lot of transit options. I have pretty walkable and dense area to sort of do my grocery shopping and go to work and everything else. So there's like, it depends on geography. It's important to see that realistically, to the extent your goal is to switch consumption over time, you're going to need to think about investment on that stuff, too. And that stuff's also going to sometimes involve extraction and all sorts of other things, too, that you need to think about seriously and holistically. Unfortunately, there's always been this sort of mindset of somehow, like the John Kerry example,

as if cramming down on supply of one thing necessarily manifests as supply of something else. That's just not true. And I think it's something that if people on administration start to see a little more realistically, I think some do, but some of the administration don't. And it's really important for them to actually get with the program right now because this is a pretty fragile moment. Yeah, absolutely. So we're running low on time here. So I just want to kind of get to a little bit more forward-looking. Each of you can answer this. What is your most optimistic outlook for the next six months to a year and what is your most pessimistic outlook in terms of the directions that, you know, things can go and what are the steps that would lead to either of those?

You want me to go, Skonda? Optimistically, look, I feel like if it gets really tough this summer, which I think it will, and Americans are really hurting on energy prices, the administration could really take a look at opening permitting, putting, you know, like I said, money into infrastructure, and it would release more of U.S. production. I think if there was a signal sent to the markets that they could easily give, that says, you know what, we understand we're not sacrificing climate goals if we look at oil and gas production as something that could have reduced emissions, especially in hand in hand

with carbon capture and some of these methane detection reduction technologies, I think we'd get more investment. So to me, that's what I would like to see. You know, on the negative side, man, I think the administration could just double down and say this was a campaign promise. promise to get rid of this industry, we're going to keep trying. And if that's what happens, pricing will stay where it is. Americans will suffer. We'll see lack of investment. And what we'll also see is more and more publicly traded companies go private. I'm sure you've seen continental resources in recent weeks and do that a large producer. More and more companies are just kind of turning away from the capital markets because it's just easier. And that in kind of a

governance, a broad corporate governance is not good for our economy. We want transparency in our companies and we want to see them publicly traded. So that could be a little bit of negativity. But I don't know, Skonda, tell us something good, what you got. Start with the negative so that we can end on the positive. Sure. Look, when oil prices spike, lots of bad things tend to happen subsequently, including recession. I think right now you have the Federal Reserve trying to manage inflation with some of their more oblique tools. And at the same time, we have, consumption is going to be redirected into some of these categories where people need energy, people need food.

That is a part of consumption patterns in America. It's part of First World Standard of Living that people aspire to. And when that happens, it's discretionary spending goes down. And so, like, that's the big risk that I don't think the administration still quite gets it. That if they want a strong economy, they're going to have to think of. about these problems realistically. I don't think that that has been the case thus far. They're a little too worried about political convenience.

And that's gotten in the way of substance. And I'll leave that on like, I think they're the realization, especially with where we are this summer, I don't have a lot of great hope for the summer price itself, but it may actually catalyze on the optimistic side, some sort of policy shift, some sort of focus on cooperation and substance. I think there are people in administration

who actually do see these things seriously. Unfortunately, they need to be empowered. They actually do need to speak up, and there are levers available. Yes, this is a market economy. The government doesn't dictate everything, nor should it. But there's things that are within their control that could be working with industry. And still, without having dilute their substantive goals, it's just that those goals may not be necessarily what one faction of the left wants,

but a strong economy is probably in their interest, and they should be trying to pursue that too. So I'm trying to speak to their better angels too right now, and I think that there are some people who can hopefully get with the program, and as we do, we can actually see something that actually shifts for U.S. industry. If U.S. industry can respond right now, we're seeing production is picking up. It's still not quite at the pre-pandemic peak, but we'd like to see that accelerate, right? Because there's a big supply gap looming in the background

because Russian supplies could go offline in a pretty material sense, as much as 4 million barrels a day at risk. this is precisely the thing where U.S. industry should be stepping up to the table and I think the industry is interested in doing that but also has it come with certain types of certainty that I'd say

the administration can provide. Great. Well, there's a hopeful note that we can end on there. And Leslie Skanda, thank you so much for joining. I think that this was a really fruitful conversation and one that you don't hear a lot

of there's a lot of two minute sound bites or 30 second sound bites on this issue and not a lot of depth in the media conversations around energy prices and kind of what everything that goes into them. So I think that our listeners will really enjoy this and thank you so much for being here. Thanks, Declan. Thank you so much. With Amex Platinum, access to exclusive Amex pre-sale tickets can score you a spot trackside. So being a fan for life turns into the trip of a lifetime. That's the powerful backing of Amex. Pre-sale tickets for future events subject to availability and varied by race.

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