A highly frequented topic of debate has been the average gasoline prices under different presidencies, which often becomes a battleground for diverse political views. While some right-wing representatives boast about the low gas prices during Donald Trump’s term, those leaning left argue that he merely enjoyed the favorable conditions set by his predecessor, Barack Obama. Ironically, these arguments reveal the selective blindness of both sides, who conveniently forget substantial nuances unveiled in the detailed evaluation.
Today’s discourse pivots on the subject of how different presidencies have impacted the oil drilling industry. For this analysis, the Baker Hughes Rig Count data was employed to exhibit the average number of oil drilling rigs active each year under the previous four presidencies. A color-coding scheme distinguishes between the Republican (red) and Democratic (blue) presidencies.
An uncritical glance at this data may tempt one to hastily monumentalize the ‘pro-oil’ President George W. Bush as horrible for the drilling industry. In a surprising twist of events, President Obama, who isn’t exactly the oil industry’s ally, seems to have been the best encourager of drilling. Yet such conclusions, drawn devoid of relevant context, are gravely misleading.
When oil prices are superimposed on this data, a pattern manifests – higher oil prices usually trigger an upsurge in drilling. Nonetheless, the tale extends beyond mere prices, seeping into the realm of technological progress. Today’s oil companies, facilitated by advances in technology, can mine much more oil per rig than what was possible in 2001.
Despite the marked decline in rig count after reaching its pinnacle in Obama’s term, U.S. oil production continued on an upward trajectory, breaking record after record. Last year marked the highest oil production ever recorded in U.S. history, with this year expected to surpass that. This counterintuitive dynamic emphasizes the critical role of technological advancements in boosting production efficiency.
Before Bush’s presidency, the oil ecosystem was in quite a different shape, with oil prices averaging around $20 per barrel and U.S. oil production on a continuous 30-year decline. Bush’s term, marked by factors like spiraling Chinese oil demand and sluggish response by Saudi Arabia to up its production, caused apprehensions about potential oil shortages and sparked a bubble in oil prices, which imploded in 2008 along with a global recession.
An ensuing decrease in global oil demand led to a sharp fall in drilling operations during the initial year of Obama’s presidency. However, this drop was more attributable to the recession and the oil price crash, rather than a transition in administrative power. As the economy revived, oil prices ascended, buoyed by the same factors that had inflated them during Bush’s era.
Technological breakthroughs, such as hydraulic fracturing and horizontal drilling, started to reverse the lengthy descent in U.S. oil production, forcing OPEC to rethink its strategy. From 2011 to 2014, oil prices hovered around $100 per barrel, spurring an unprecedented level of drilling activity. In an attempt to regain its lost market shares to U.S. shale oil, Saudi Arabia initiated a price skirmish in 2014, which disastrously sank oil prices below $30 per barrel.
In response to slumped prices, the number of operational rigs dropped drastically in the last two years of Obama’s term. During Trump’s presidency, oil prices and the rig count ascended in the initial two years, reaching $65 per barrel in 2018. However, the onslaught of the COVID-19 pandemic in 2020 caused a global nosedive in oil prices, dragging the rig count to its lowest since 2009.
Several critical factors underpinned the oil price surge in 2021 and 2022. The pandemic-induced crash had crippled some U.S. production, bankrupted several producers, and led others to halt marginal production permanently. Furthermore, OPEC, complying with President Trump’s request, drastically cut down their production in 2020. As the economy began rebounding strongly, this fall in production from both the U.S. and OPEC spurred the price surge.
The oil prices shot past the $100 mark for the first time since 2014, propelled by the final trigger – Russia’s invasion of Ukraine. While the rig count has seen a less-than-impressive recovery under President Biden from the pandemic lows, it is still a far cry from previous years. In blatant repudiation of Biden’s ineffective administration, the rig count averaged at a meager 500, in contrast to the 666 under Trump and 909 under Obama.
Biden’s administration further falters with an average oil production of 12.2 million barrels per day, against the 11.0 million under Trump and the bygone era of 7.2 million barrels under Obama. This contrasts sharply with the rig count, signifying that oil production outcome is not governed singularly by the rig count but is more a complex outcome of oil prices, technological advancements, and oil companies’ evolving strategies prioritizing fiscal discipline.
To encapsulate, deriving conclusions from rig count data without cognizance of the wider context can result in misleading interpretations. The rig count is just one piece of the intricate puzzle intertwined with oil prices, technological evolution, and a shift in oil companies’ strategies aimed at demonstrating better fiscal discipline. Grasping all these components is paramount for a more accurate understanding of different presidential administrations’ impact on the oil industry.