The U.S. oil and natural gas sector could thrive with federal stimulus packages and with the resumption of fair trade worldwide, a top Federal Reserve Bank (Fed) executive said Tuesday in North Dakota.
Fed President Neel Kashkari of the Minneapolis branch spoke at the Williston Basin Petroleum Conference. He discussed the Biden administration’s proposed stimulus packages, among other things, with North Dakota Petroleum Council Chair Kathy Neset. She noted there is uncertainty regarding the stimulus plans, but Kashkari said they would be positive for the industry.
“Most economists are surprised by how much capacity the U.S. government has to issue debt at very low interest rates,” he said. “There is great confidence in the U.S. economy around the world, along with the U.S. legal system and our political system. As much as we’re dysfunctional at times, the rest of the world has a lot of confidence in America.”
A key question, he said, “will the proposed Biden programs be paid for?” Spending cuts or higher taxes are the two options. “Neither option is inflationary; you’re taking money out of the economy on one hand, and putting it back in the other.” The funding “needs to be invested wisely, such as in the U.S. oil and gas industry.”
The energy sector is “so important,” he said. The Permian Basin and Bakken Shale are “profoundly important to the global economy. I think a robust energy sector is enormously important.” For now, though, investors may be adopting a “go slow” posture for the sector.
Knowing where the equity and investment will come from is key, according to Neset. “Where is the capital to be found for drilling and exploration? I get the impression that shareholders are looking for safety and getting a return on the existing resources rather than expanding the resources.”
Neset said oil prices in the $60s have resulted in bringing back some production but not development. “We’re not seeing the drilling picking up.” She also noted concerns about energy infrastructure, including the Dakota Access Pipeline (DAPL), “which is one of the negatives that hangs over the industry” in the Bakken.
Kashkari said DAPL is important to the industry, “so it is important to the global economy too.” He acknowledged that uncertainty surrounds all the major sectors today, but issues like the U.S. global trade deficit is “not troubling by itself. Many people say they are confident in America’s future relative to other economies. But having said that, there is no question that we need fair trade around the world, and especially with China, and we have not had it.”
Former Secretary of State Mike Pompeo, who served in the Trump administration, also spoke at the conference on Thursday. He said the Biden administration was making a strategic blunder by de-emphasizing energy in its foreign policy.
[NGI’s natural gas price indexes have included trade data from both price reporters and the Intercontinental Exchange (ICE) since 2008]
The U.S. oil and gas sector allows the country to be energy secure and not have to send military forces to foreign lands, he said.
Pompeo said the Biden administration had made clear its objectives to pull back energy development by pausing leasing on federal lands and offshore. He also slammed Biden’s infrastructure stimulus packages that among other things would reduce carbon emissions. Pompeo referred to one Biden plan as the “green new deal, and I must tell you the Russians and Saudis are thrilled.”
Pompeo encouraged Bakken Shale producers to continue to “produce and outstrip the world.” He also urged the audience to “push back against the efforts to undermine what is at the core of American greatness” including entrepreneurship and innovation.