Vicki Hollub and Joe Biden – What In The World Do They Have In Common?
Originally published on Forbes.com on June 21, 2023
This article looks into energy security and the energy transition and finds these two influencers have common interests that are surprising.
Vicki Hollub is CEO of Occidental Petroleum Corporation, the first woman CEO of a large U.S. oil and gas company. Joe Biden is President of the United States.
A short answer to the question, previously, was not much in common, even though Hollub did have a connection with Washington politics: she was an advisor to the U.S. Department of Energy during the Trump administration.
Joe Biden came into office in 2020 with plans to stall the further expansion of oil and gas, on the belief that renewable energies were the future and oil and gas would fade away. Biden canceled the Keystone XL expansion on his first day in office. Biden paused the leasing of future oil and gas wells on federal land soon after that.
Conversely, Occidental (Oxy) purchased Anadarko in 2019 for a pricey $55 billion and beat out Chevron in the process. Hollub’s commitment to the future of oil and gas was obvious.
Hollub would have been aware that the oil and gas industry adds to the U.S. economy $1.8 trillion each year (7.6% of gross domestic product) and supports nearly 11 million jobs (5.4% of total employment).
But in the past two years, things have changed in unexpected ways.
First came Covid in 2020, and the price of oil collapsed, actually dropping to zero for a short time. It must have been a scary time for Oxy so soon after their Anadarko purchase. But the rebound after Covid was strong for the general economy, and for the oil and gas industry in particular.
Then came the Russian invasion of Ukraine. Russia cut gas supplies to Europe, and gas prices hit the roof. Oil prices zoomed up in concert as economic sanctions hit Russia, some countries stopped buying their crude oil, and an oil price cap was instigated by the EU that reduced Russia’s sales of crude oil.
Oil sales by Russia were down to 23% of the total Russian budget this year, down from 30% to 35% of the Russian budget before the start of the war in Ukraine.
But crude prices remained high, averaging $100 per barrel in 2022. As a result, oil and gas companies made record profits in 2022 – and twice as much as the previous record year of 2018.
Looking further back, in the years since 2000, Europe had stepped away from oil and gas and coal, while supporting renewables. But renewables could not fill the gap due to the Russian cuts.
From this European experience, what became clear to Vickie Hollub and Joe Biden was that, first, energy security was critically important to a country, and a group of countries with close economic ties such as the EU.
Second, the U.S. could assist Europe by providing oil and especially LNG (liquefied natural gas) to replace lost Russian supplies.
Suggesting that Europe’s dependence on Russian energy instead of its own energy had weakened its hand in the Ukraine situation, Hollub had this to say:
“They attacked fossil fuels, they beat down the industry, they forced production to go down. And this will be, I think, the biggest mistake that they have made.”
“In terms of energy independence, hydraulic fracturing has helped the United States maintain a position of power in the world,” Hollub said, adding that the major shale plays developed with fracturing account for around 8 million B/D out of the total of 11.6 million B/D of crude that the US produces today.
The U.S. became self-sufficient in oil and gas production in 2020 for the first time in 60 years, and this can be attributed to the shale and fracturing revolution that began about 2003. This has enabled the U.S. to step up its exports of LNG to help Europe meet its energy needs after the invasion of Ukraine. The U.S. is now the largest exporter of LNG in the world.
Hollub also said the U.S. industry should promote its own role in creating its success. Meanwhile, she opined, the U.S. government could loosen the permits and restrictions on exporting more LNG that the world, and Europe in particular, needs to overcome its shortages.
Hollub spoke further of the geopolitical advantages the oil and gas industry has given the U.S. “I know how [our policy makers] use or leverage US energy independence in tandem with its defense capabilities,” she said. “When you put the two of those together, there’s no country in the world that can really challenge us very much.”
These statements by Vickie Hollub could have been made by President Biden because they are integral parts of U.S. national security and its assistance to the EU while the Russian invasion continues.
The energy transition.
Self-sufficient energy and energy security are not the only things that Vicki Hollub and Joe Biden have in common. There is a commitment to energy transition by lowering or removing or offsetting carbon emissions – on the way to net-zero emissions.
Emissions come in three types: Scope 1, 2, and 3. Scope 1 and 2 falls under the responsibility of Oxy, but Scope 3 are emissions by consumers – companies or people that burn the oil and gas or refined products sold by Oxy.
Failure to consider the Scope 3 impact of the gasoline sold by an oil and gas company hides the massive impact of that oil company’s primary product, crude oil or natural gas or gasoline. Scope 3, then, is essential to move beyond measuring carbon emissions during production to understanding the total impacts of doing business.
For Oxy, the willingness to include Scope 3 emissions makes their company an outlier. The key is their expertise in carbon capture and storage (CCS), which is a powerful way to offset emissions – for themselves or even for other companies.
Like President Biden, Vicki Hollub believes in climate change and Oxy’s need to do something ambitious about it: “As we started to learn more about climate change and climate mitigation, we realized this plan needed to happen, and would happen, to help the world.”
Oxy has big plans for direct air capture (DAC), a new technology that has a wall of fans that blows air over chemicals that suck CO2 out of the air stream.
The first scaled project should come online in late 2023 or early 2024 in West Texas. This will separate out CO2 at the rate of 500,000 tons per year. Other localities are planned to separate 1,000,000 tons per year. This is only 0.02% of total U.S. emissions, but Oxy’s goal of 100 such plants would remove 2% of U.S. emissions.
Its hard to believe, but Oxy has already sold CO2 removal credits to the Houston Texans football team to offset their emissions from air travel for three seasons.
Hollub pointed out that a competitor, called Climeworks, in Iceland is capturing only 4,000 tons per year, and the method is difficult to scale up to much greater volumes.
Another thing in common between Hollub and Biden: tax breaks are a big incentive in the congressional Inflation Reduction Act (IRA) bill for DAC and CCS projects.
Early in March, 2023, John Kerry spoke at CERAWeek to a room packed with oil and gas CEOs. Kerry is the president’s climate czar. Kerry and the president sent a message. “We need to not be polarized here. We need to collaborate.”
The subject was the IRA bill. The bill funds wind and solar, but also (1) provide tax incentives for CCS, (2) subsidizes hydrogen, and (3) supports biofuel production. The promise of billions of dollars changes the math for the oil and gas industry because the industry has knowledge, skillsets to build these enterprises to scale, and 10 years of IRA carrots to take to the bank.
The industry is seeing opportunities and flocked to sessions at CERAWeek to hear about the fed’s initiatives. After decades of supporting environmental progress and recent opposition to improving oil and gas enterprises, the federal government are wanting to include oil and gas in its climate change program. “If they want to play clean, we welcome them to the party,” said John Podesta, Biden advisor who is leading IRA implementation.
It seems like Vicki Hollub would shake Joe Biden’s hand and say with a smile, “Count us in.”
And a bunch of oil and gas people would have liked to shake his hand when the president announced that Conoco-Phillips could drill wells in the Willow project on the National Petroleum Reserve-Alaska.
Biden is learning that the transition to green energies is a both/and proposition. The U.S. needs continued access to oil and gas while developing renewable energies that will gradually replace them — and at the same time offsetting leftover carbon emissions to satisfy net zero by 2050.
Federal forecasts suggest total U.S. oil production will stabilize in the range of 12.3 – 13.3 MMbpd through 2050. But it’s not clear that switching from gasoline to electric vehicles, which will have a dramatic effect on oil production, has been included in this prediction.