Let’s Pump More Oil to Punish Russia. |

Some 22 days ago, I agitated that President Biden and Mitch McConnell (as the titular leaders of their respective parties) lean on (at least) the smaller oil producers in the South and the Midwest to up their production. Not just to counteract the removal of Russian Oil from the market place , but because, as happened in the past, as our oil production increases, the price per barrel drops precipitously.

And, if we want to really press Russia to cease their invasion of Ukraine, we need to make it very difficult for its economic engine to survive. The last time our shale oil producers went at it whole hog, the price of oil plummeted. And, any price of oil below $ 80 or $90 a barrel tends to quickly tank the Russian economy. (Their sales of petroleum and grain provide the bulk of their economic engine- and breakeven for Russian oil is about $ 84 a barrel, so it begins to lose money instead of raking it in at $ 100 to $ 110 a barrel.)

After all, once Russia invaded Ukraine, oil prices skyrocketed above $ 100 a barrel (and US gas prices surged way over $ 4 a gallon). But, despite the entreaties of President Biden, domestic oil production is stagnant at about 12 million barrels a day (which is below the levels produced before the pandemic 2 years ago.)

But, here’s a key fact- Permian Basin oil production is profitable once the price of oil is about $ 30 a barrel! Which means these folks can be making money hand over fist, right now.

Yet, it’s the fact Big Oil (and, to some degree, small oil) relies on the stock market for its capital. And right now, investors want to see stock buybacks and dividends, not big drilling plans. (That’s a result of the 2014 shale oil crash, which forced a bunch of firms into bankruptcy.) So, these firms are sitting on their hands and not increasing production- which we need to clobber Russia’s economy.

But, some of the small private firms. They aren’t stupid. They know the price of oil can go up or down. And, many of them are not pumping more oil to force the Russian market to cavitate, but to accumulate cash for themselves.

Consider Endeavor Energy Resources and Mewbourne Oil. Between the two of them, they are running 33 rigs (that’s more than Exxon Mobile and Chevron combined with 27!) They are going to pump some 430,000 barrels of oil a day- that’s 4% of the entire US production.

We need to convince these other small producers- as well as the majors- to up their production. After all, our production is down considerably from what it was in 2020, before the pandemic and the precipitous drop in oil prices.

In so doing, we can resume our spot as the primary oil producer of the world. And, that will supplant the Russian oil output, drop the price of oil to below where it’s breakeven for Russia, and maybe break the back of the Ukrainian invasion.