The Biden administration has now proposed the least number of offshore oil and gas drilling leases. Over the following five years, the White House plan calls for the sale of up to three leases. This action fulfils an obligation under the Inflation Reduction Act to increase offshore wind energy output.
Effects of the Announcement
Energy stocks plunged on the announcement by the Biden administration that the number of oil and gas drilling lease sales in the Gulf of Mexico will be limited to three, the fewest in history, over the next five years.
Under the terms of the 2022 Inflation Reduction Act, the white house is required to provide a minimum of three lease auctions in order to sustain the growth of offshore wind power projects until 2030. Before any wind leases may be granted, the legislation mandates that at least 60 million acres of oil and gas drilling leases be made available in any given year. The lease tradeoff provision was added to the law in order to win Senator Joe Manchin of West Virginia’s backing, whose vote was required for it to pass.
The Trump administration’s proposed 47 off all U.S. coastal regions for oil and gas leases and the areas examined for possible lease sales have been drastically reduced, according to the Department of Interior 1. Plans for 16 sales each were presented by the Obama and Clinton administrations, but only 11 or 12 of those sales were ultimately held under each.
The strategy “sets a course for the Department to support the growing offshore wind industry and protect against the potential for environmental damage and adverse impacts to coastal communities,” according to Interior Secretary Deb Haaland. The lease programme is “restrictive,” according to American Petroleum Institute President and CEO Mike Sommers, who harshly criticised the decision. “The Biden administration is choosing failed energy policies that are adding to the pain Americans are feeling at the pump,” he claimed during a period of high inflation.
Shares Dropped
Following the news, shares of Halliburton (HAL), Baker Hughes (BKR), and SLB (SLB), providers of oilfield services, dropped by more than 3%. This pattern is expected to continue, throwing uncertainty over shares in the coming months.
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