Every time I try to engage in this subject I can't follow the logic.
Demand is expected to increase, so big oil won't commit to capital projects.
You two are smart guys - help me understand how they're not just using our partisanship to take our money.
Demand increases would lead to capital project spending in a normal environment. We do not have that. The oil and gas industry has had it made abundantly clear to them that for one party in our country at the very least, they want them out of business.
Now we can debate whether or not that is good or plausible, but consider you own this kind of business in this environment. You haven't had a great past decade or so, be it the Russian/Saudi price war, Covid causing lower demand, take your pick. Oil is a worldwide commodity, you are at the whims of the market as to your price you can charge. Because it's expensive to cap wells, even if you have to sell for a loss at times, you must produce. We find ourselves today now where demand is high but supply is constrained due to the Russian invasion of Ukraine. This is probably an intermediate term event. You are making more at any point than you have in the past decade. Consider these two questions:
What are my realistic revenue projections for the next 10-20 years on any capital investment I make?
Can I rely on being able to operate any sites I open with this investment for that same period without government regulatory issues or suspension of leases?
Before you can invest capital dollars, you have to take your best guess and have some level of confidence to those two things. I don't think the Russia/Ukraine war is going on in 2032, at least I hope not. Pricing probably won't be what it is today past that intermediate term, so you'll need to discount your financial models for those price declines. You simply can't count on today's pricing to stay going forward. I say that, but understand that any one project isn't going to bring enough supply to the market to change the price of a world commodity. This is a difficult scenario to model, but people are paid to do it and companies make these type of best guesses all the time.
Also, can you rely on that site being operational for 20 years or more? How good would you feel as an oil and gas exec today given our political environment where one side is for little/no regulation and the other wants you out of business? That's a pretty hard parameter to put on a project when projecting cash flows. I did this type modeling for years, and there is no good answer to it. To me, this is a huge barrier to spending capital reserves. It's hard to commit to something that is going to take you 20 or 25 years to get your return on when you are under this type scrutiny or threat.
So when you take the above into consideration, what would you do? As a business owner, I can't fault anyone who would look at that scenario and make the decision to take the profits for awhile and keep evaluating the situation. That appears to me to be where we are.
I don't think our partisanship has anything to do with it. Yes these companies are making good profits today but I'm not sure why it's partisanship or them taking advantage of anything. The market for crude and gas is what supply and demand dictate it to be. Why would we expect them to take less than market price today when none of us complained with the cheaper prices during the Saudi/Russian pricing war? This isn't the same as General Mills deciding to go up 3X on a box of cereal.