What Would a USA Fracking Ban Mean for the Oil Price?

What Would a USA Fracking Ban Mean for the Oil Price?
Rigzone talks to Matt Willer, Managing Director of Capital Markets at Phoenix Group Holdings.
Image by Makhnach_M via iStock

What would a U.S. fracking ban mean for the oil price? That’s the question Rigzone posed to Matt Willer, Managing Director of Capital Markets at Phoenix Group Holdings.

Responding to the query, Willer told Rigzone that such a ban would “put oil over $100 a barrel, or well beyond, very quickly”.

“If you ban fracking, you are squelching horizontal drilling,” Willer said, noting that “this is a considerable part of the U.S. energy mix with all the shale basins, etc., and it is the most efficient technology for oil recovery”.

“If you ban fracking, you would drastically tighten supply without addressing demand. The result will be an elevated oil price market, likely over $100 a barrel, based solely on supply-demand economics,” he added.

When Rigzone asked Willer what a fracking ban would mean for U.S. oil and gas, Willer said it “would mean the technology and innovation that has built the most efficient energy production in the world would be essentially discarded”. He warned that it “would also drastically slow the green energy movement the democrats are pushing”.

“It takes energy to make energy - it takes energy to make solar panels and wind turbines.” Willer said.

“If the cost of conventional energy is through the roof due to a fracking ban, energy costs will skyrocket; we will force an energy-fueled recession, a prospect that should concern us all, all while slowing all forms of energy evolution,” he added.

In a previous statement sent to Rigzone, Willer warned that a fracking ban “could pull 12 million barrels off the global market, almost 12 percent of global production”.

So, how likely is a U.S. fracking ban?

Willer told Rigzone that, in his opinion, the likelihood of a U.S. fracking ban is less than 50 percent.

“While some disagree, sobering economists will relay the commercial reality to the Harris administration, should she be elected, and the consequences of a haphazard move like banning fracking,” Willer said.

“This could very easily lead to an energy inflation-fueled recession that doesn’t win votes for any party and, hence, is unlikely to transpire since the most impacted is the bulk of her voting base,” Willer continued.

According to Baker Hughes’ latest North America rotary rig count at the time of writing, which was released on September 27, the U.S. has a total of 587 rigs. The rig count shows that 523 of these are categorized as horizontal rigs, 50 are categorized as directional rigs, and 14 are categorized as vertical rigs.

In its latest short term energy outlook (STEO), the U.S. Energy Information Administration (EIA) projected that total U.S. crude oil production, including lease condensate, will average 13.25 million barrels per day in 2024. Production in the Lower 48 states, excluding the Gulf of Mexico (GOM), makes up 11.02 million barrels per day of this total, the STEO showed. 

The EIA’s September STEO projects that total U.S. crude oil production, including lease condensate, will average 13.67 million barrels per day next year. Lower 48 states output makes up 11.39 million barrels per day of that total, the STEO highlighted.

In a BMI report sent to Rigzone earlier this month by the Fitch Group, BMI analysts highlighted that “Harris has now … stated she will not ban fracking – a reversal of the stance taken in her 2020 presidential campaign”.

Rigzone has contacted Harris for comment on Willer’s statements and the BMI analyst statement . At the time of writing, Harris has not yet responded to Rigzone’s request.

Willer has over 20 years of experience in capital markets, Phoenix Capital Group’s website points out, highlighting that he has served as both an investment banker and a C-level executive “for three fast-growing public companies”.

Phoenix Capital Group describes itself as a leading oil and gas mineral rights acquisition, investment firm, and operated working interest company dedicated to discovering untapped value on behalf of landowners across the United States.

To contact the author, email andreas.exarheas@rigzone.com


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Andreas Exarheas
Editor | Rigzone