The recent meteoric rise in oil prices has created pressure for U.S. oil producers to pump more crude — and quickly. But the process takes time.
"People think it’s like Fed Ex overnight delivery, but it’s more like a Wells Fargo stagecoach," strategist Andy Lipow tells Yahoo Finance.
The oil industry has pointed the finger at the Biden administration for tight regulation and slower permitting processes to drill. Meanwhile the government points back at producers for profiting from high prices and not increasing enough output.
“There is not a lack of places to drill. This is not a lack of access to oil,” White House press secretary Jen Psaki said on Tuesday.
"The Biden administration doesn’t have that many more levers to pull" amid the current energy crunch, says RBC Capital's Managing Director Michael Tan says.
“They’ve already released strategic barrels twice in the past four months,” Tan told Yahoo Finance Live. “They’re trying to talk to Venezuelans to try to get them to bring more barrels on. It’s a pretty desperate scenario to be perfectly honest.“
Tan says U.S. producers have immense shale resources right here in the U.S.
“A lot of it is a function of timing,” said Tan. "Part of it has to do with the policy we’ve been living with for a number of years, but part of it is also we’re not able to search fast enough,” he added.
“To be able to secure rigs, to be able to hire frack crews, to be able to secure equipment, to drill the well, to complete the well — assuming that permitting is in place — that’s a six month period,” he added.
'It just takes time'
This week, Occidental Petroleum’s (OXY) CEO Vicki Hollub said oil producers are in a “dire situation,” compounded by work shortages and supply chain delays.
“The call for increased production from the U.S. at this point, especially with supply-chain challenges, can’t happen at the level that’s needed,” said Hollub during the CERAWeek by S&P Global conference in Houston on Tuesday.
Occidental Petroleum is increasing production by about 100,000 barrels a day through the end of the year.
There are signs drilling and spending on drilling in the U.S. is increasing among other oil producers.
Permian basin oil production is already at a record 5 million barrels per day.
“New production from the USA will occur over the next several months; it just takes time,” added Lipow.
On Wednesday crude prices crashed more than 10% after Reuters reported that Iraq and United Arab Emirates could increase oil outputs. The decline reversed the massive upward price trend for U.S. West Texas intermediate (CL=F) and Brent (BZ=F) since the outbreak of the Russia-Ukraine war.
Ines is a stock market reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre