>> washington journal continues. host: joining as now is tim stewart, president of the u.s. oil and gas association. good morning. as far as the association itself, whom does it represent? -- who does it represent? guest: we are the oldest energy trade association, formed in 1917 to make sure petroleum made it to the military. our membership has evolved. we primarily represent production companies.

we represent publicly traded and small companies as well, a good cross section of the industry. a lot of the legacy companies, odds are that it they are the name on a building in oklahoma or texas, it is a company founded by the grandfather of eight-member. host: how would you characterize oral production in the u.s. today? guest: given where we were a few years ago and the dark days, we have stepped back in a resilient way. we are encouraged right now. we have 250 more rigs than we did last year at this time. we are almost at full capacity. there is a rig in the u.s., odds

are it is in the air right now. production is starting to, we are facing interesting challenges. we are feeling the impacts of inflation, but we are in a better situation than we were in april of 2020. host: was that strictly because of covid? guest: pre-covid, the saudi's and russians declared war on the u.s. shale industry and ramped up production significantly to drive the price of global real down. shale producers -- of global oil down. shale producers responded in kind. then covid hit and that led to demand collapse. i only put gas in my car once during the three months during

those first months of covid. those were the dark days -- overproduction, no use. we sense have come back from that. host: as far as numbers, most people will take a look at how much it cost to fill their cars these days. help much is that attributed -- how much is that attributed to production in the u.s.? guest: the cost of a gallon of gasoline, only 60% of that is the cost of crude. another 20% is refining, transportation, distribution. on top of that is taxes and the margin for the retailer. the cost of crude has had an impact on rising gas prices. they challenges as demand increased faster than ramping up production from those dark days in 20, we have not been able to catch up.

the other challenge is the impact on refining capacity. some refineries have not come back online. it is this accordion effect, where we have not hit that valance yet. host: tim stewart is with us. if you want to ask about the whale and gas industry, you can do so on the lines. (202) 748-8000, democrats. (202) 748-8001, republicans. (202) 748-8002,s. --independents. you can also text at (202) 748-8003. -- talked about the role of oil producers. listen to what he had to say. >> there is number one reason why oil prices go up or down. when prices go up, they tend to

say that his political leadership, but think about it this way. over the last few months, the president has supplied the u.s. market with one million barrels a day from the strategic reserve. we have never done that before. that will end toward the end of the year. >> will it end? >> look at what has happened. the private sector said they tend to increase production by about one million barrels a day that that will take time to invest in. the president said, i will fill that gap. my expectation is that the private sector in the u.s. will have those increases coming so we do not need the emergency from the government. host: how would you respond? guest: the private sector plays a critical role.

the challenge when you tap the strategic reserve for that long is that it still disrupts production in the u.s. it puts a million barrels a day into the system, which has an impact on prices but also impacts the ability of producers. the strategic reserve, i worked on that in the 1990's, there was a time when congress was considering privatizing the strategic reserve because industry had a better feel of where markets would be six months from now. i would suggest it is used primarily for an emergency. from an industry perspective, we wish they would have said, ramped up, give us an extra million barrels any way you can and we will remove obstacles. that has not had the impact on

prices that they thought it would. they did this in november and prices still went up. it sets out the issue of increasing domestic production. host: when you hear him say that the private industry could come forward and help, are there still obstacles? guest: yes. whenever you do work on federal lands, those obstacles remain. we think there was an opportunity the administration hat and we are still open to them coming to us and saying let's look at critical infrastructure, expedited permitting, let's see what we can do to make sure we do not find ourselves with a global price shock. when we were at the shale peak, saudi production facilities -- nobody registered that. u.s. producers head so felt that

market that it was a price shock that never materialized. we could use something like that again. host: our first call from richmond, virginia. this is bill, independent line. caller: mr. stewart, two quick questions. please explain the difference between the keystone pipeline and the keystone xl and whether or not president biden has actually shut down either. guest: great question. it seems to catch everybody's attention. i find infrastructure in -- pipeline infrastructure in north america is pipeline. those two lines are part of the same system what was needed was

for that last segment to be approved to get it from canada, to oklahoma, to the gulf. the administration essentially killed the project because of the time delay that would take place. they sent not do it while we are in office, possibly an 8 year delay. that was a troubling signal to our closest partner that we were not going to participate with them appeared it had ramifications not just for the pipeline but for broader energy infrastructure. that is why if you hear the industry being worried about being the banked were not funded -- debanked host: the pipeline would not

have increased capacity for years. guest: it would have taken several years, but oil market locally and to the future. that extra supply could bring imbalance to the american portfolio. now the canadians do not have an option to send it to the u.s. so they send it to asia. host: delaware, jay, democrats . caller: i am in my late 70's. i have been through this before. i tried to trigger everything we are told -- try to check out everything we are told. i cannot believe you are still saying it is all regulation, we cannot get enough, it is the keystone pipeline. there are people who leave you, but a lot of us do not because

of the obscene profits you have been making and the because you still insist that everything is the fault of the government who did not give you everything you want. you want to try to do a better job. host: what would you like to ask our guest? caller: i am asking him when they are going to stop blaming the government and the keystone pipeline, which was an option to sell us the oil, not guaranteed, which was not going to do much for us. how many times do you think we can go through this? guest: the caller is expressing the frustration that millions. our industry functions largely independent of significant

government subsidy or support. i think -- i understand the estimation because that has been the political back-and-forth that we have been under for the last 18 months. even four years ago, it was a quiet time in industry. we had our disagreements, but a tendency to work with each other. most of my colleagues do not deal a lot with the federal government but they deal with global markets. the concern they have let -- get out of our way and let us do what we were doing quietly and we can produce a product and bring down prices. the president host: -- the

president sent a letter -- a letter to oil executives. today gas prices are $.75 higher in diesel prices are $.90 higher, the difference is the result of the historically high profit margins for refining gas and diesel and other products. prices have tripled another highest levels ever recorded. is the president right? host:'s goat -- guest: this goes to our ongoing criticism with he and his administration. we make the argument they only view half of the problem and they do not give credit to the markets or the way we do our business. this is been a criticism, the number of people that came out of our industry that work in the administration that understand oil and gas production, you can probably count on one hand. they do not have a lot of

advisors who can come in and say to the messaging team yes, but, and i think that is a challenge. people that do understand the industry work hard to try to bring that balance. our industry responded to that letter and we said yes, but come and laid out some of the reasons why we were facing the pricing climate we are. nobody is completely free of fault in the administration or the industry. the reality is we do not respond in time like we could and we cannot get the financing we had hoped in time. host: you are making high profits. guest: we are making high profits and we are also paying record prices. we are making record profits in a historical context. 2008 was actually a higher

pricing environment when you factor in and nation, but we are also paying record prices from everything to labor costs to the cruise we bring in. i think what you're saying is our record profits are reflected in the record prices our industry interview analysis paying. host: let's hear from can in pennsylvania, republican line. caller: it seems to me trump build up all the oil reserves and biden is emptying them all so we have to vote trump back in to fill them up. guest: i am glad you raised that because we were talking about the collapse during covid and how prices went underwater for a matter of hours. when they were negotiating the covid package, the covid relief package, one of the ideas was if oil is trading at $11 or $12 a barrel, let's invest $3 billion in completely fill it up to the

whole capacity because it will never be cheaper than it is right now. unfortunately the democrats did not agree to that. that was a big missed opportunity. when you an extra 100 million barrels at $14 a barrel, that is a good deal for the american taxpayer. it is a missed opportunity. host: tim stewart of the u.s. oil and gas association joining us. can you walk us through what happens when a company requires an oil lease and what they do with it? guest: that is a great question. an oil lease is no guarantee for everything. it is not like buying a sixpack at a convenience store. it is not a guarantee of 612 outs cans of something. when a company secures a lease is the equivalent of saying we are securing the right to make a big bat that may or may not pay out. that is all it is.

it is a gamble. you are making an educated guess on a parcel of land that may or may not have resources. the leasing process is very long and very complicated. it starts when a company or individual come to the bureau of land management and issue what is called an expression of interest. they say we think this 4000 acres in wyoming, we are interested. the bureau of land management takes their plant managers and they go through a process to determine if the parcel qualifies or if it has resources. it is everything from do we own the surfaces, do we own the minerals. the bureau goes through all of that and puts forward a quarterly lease sale. as a company i may express that

interest, i may not secure the lease if i bid on it. let's say i requirement. that becomes a rigorous environmental process by which i have to go in and present my drilling plan and my plan of production to the bureau of land management, i have to comply with numerous federal laws and documentation can sometimes take years. we have to record everything from the archaeological surveys to wildlife stipulation impacts and things like that. that is a process in and of itself. it is very rigorous. all of the time the blm is processing these permits and this takes anywhere from six months to 5, 7, 10 years. it is a challenging process.

in the meantime all of my capital is locked up in this project, either the lease or the rental payments or the environmental work i am paying for the attorneys fees before i can get a raid on the ground. i am burning capital while i'm waiting for a lease. the administration's criticism of our industry, you have 9000 leases you are not losing, my responses we have 4500 leases we are waiting for you to approve and the other -- the other 4500 way got approval for the first 4500. host: let's hear from new york on our independent line. this is dave. caller: i live in suburbia. anything i to do after you get of the car in drive and pay for gas. after 2008, the big financial crisis, there was a big spike in gas prices, but the interest

rates came down and that is when the fracking started to blow up. our number at one point it was like $80 a barrel, then supposedly they brought it down. when you said russia and saudi arabia attacked the fracking industry, they had to. the fracking industry used cheap debt. it is manipulated interest rates that the fed put in to continue fracking. at one point everybody was -- and then as time progressed everybody fell away from that and went back to giant trucks and suvs. what i'm saying now is what happened is are we ever going to get back -- did fracking burn up all that cheap fuel and in the long-term is suburbia a big

mistake? host: we got you. thank you. guest: that is a great question and you articulated it really well, a certain sense in 2008. the irony in high gasoline prices and high oil prices is it increases the number of reserves we have. the way the industry operates, we have proven reserves at a particular price point. interest rates made the capitalization of those very capital intensive projects and made them possible, the price point on oil was sitting that 50 to $60 to make shale profitable. if we remain above $90 or $100 a barrel we have proven and probable reserves that all of

the sudden we have tens of billions more barrels of oil that are financially feasible. none of us want that from the consumer's perspective. our industry -- a volatile place -- price climate is not ideal for us. by those low-interest rates allowed for the industry to crack the code on the shale plays. each shale plays different. they are not identical in terms of how you produce. i would say do not bet against the industry. to the issue of the suburban lifestyle, that is a long-term transition that will take place, i cannot bet on what that will be like in 20 to 30 years but i can say our industry will be around for a long time. host: the administration is

pushing things like electric vehicles. how's the industry looking forward to that if people are going to rely less on petroleum-based products? guest: that is interesting. odds are if i plug in my electric vehicle there is a 41% chance i will be charging that vehicle using natural gas and a 22% chance i will be using coal. we are shifting the transportation use from vehicles to charging of those vehicles. from the industry's perspective, we are agnostic with regards to how it is used. if it is used for power consumption is great. it is a long transition. europeans are telling me if you are moving rapidly towards a transformation of your transformation sector, you better be ready to have something in place to receive.

caller: i was wondering if you could fill in the timeline of the situation we find ourselves in. when there was a lot of talk about the oncoming inflation from joe manchin and why he wanted to stop build back better come and then having the russian invasion of ukraine and knowing there was going to be in need for all kinds of petroleum resources for europe as well as everyone getting over covid and being ready to get back driving and doing everything. i wonder how long it takes to use the rigs that were already there and ready to go. what kind of percentage of the inflation you think the petroleum industry is responsible for. guest: is a good question. if you look at where the cpi numbers are, obviously energy is

a big portion of that. that is not just for gasoline but also for electricity production and other things. if i can take you back 18 months ago when the biden administration first came in, industry was slowly ramping up, coming out of the pandemic impact and we were bringing more rigs and cruise online. we were still finding workforce and supply chain constraints. as we were trying to ramp up the administration knew early on it was their intent to force the transformation, particularly in the capital markets. what that did is have a chilling effect on our ability to raise capital for these projects going forward. i was talking with a small investment firm out of denver a couple weeks ago. they are here in washington. bright women but started a

venture capital fund. normally they would go out and identify a project. they found themselves last summer abby to make over 300 presentations before they could hit their target. the reason being there was so much uncertainty for that first year of the administration with regards to where we were going with regards to the oil and gas industry. unfortunately for inflationary pressures the global events caught up and they have since realized we played important role. i think it has a chilling effect on our projects being financed. host: in early july the interior secretary posed a new round of leases saying the proposed plan puts forward several options for sales over the next five years like the current program finalized in 2016 that removes

the federal waters off the atlantic and pacific coast. the gulf of mexico in the cook inlet off of south-central alaska. what does this do as far as production is concerned? guest: that was for offshore lease sales. the secretary in the five-year plan, they were a few days late getting the draft out. they are about 18 months behind. the trump administration five-year plans are all forward through administrations. the trump administration had proposed 48 lease sales offshore. they had died out that back and we were waiting to see if it would be in the 20 to 30 range. in july the administration said our draft plan calls for 11 to zero lease sales. the offshore research in the gulf of mexico is astounding. there is one project which is an

engineering marvel in and of itself. 8000 feet to the c4, 200 miles offshore. 33 wells that expand in a 30 mile diameter. a massive project that also requires a massive amount of capitalization. when you're putting billions of dollars on the table you need assurance leases will be available before you bid the investment and then you will have ability to get it out. i think the department of the interior has missed an opportunity. the draft has not made it quite palatable to industry to seek this billions of dollars into the market. if they had 25 leases, i think there would be much more interest. now is limited to a handful of players who can invest that much capital. host: we are talking to tim stewart, president of the u.s. oil and gas organization.

let's go to angela, independent line. caller: since this is a complicated issue, what effort is mr. stewart making to put out information a lot of americans are not aware of? to give you one example, that the way oil and gas are retrieved in the u.s. is probably more careful and more eco-friendly than the way that happens in other countries, but there is lots more to tell and i'm wondering how mr. stewart gets that information out. guest: that is a criticism of my industry i hear over and over again from people. i hear the church, here in my neighborhood, i hear it from c-span. i'll be the first to admit that despite our best efforts, we still struggle to get a good message out there. the reality is that a barrel of oil produced in the united

states is the cleanest barrel of oil anywhere in the world. the state of north dakota it requires 96% of all emissions are captured when we are producing a barrel for an oil and north dakota. you do not find that in saudi arabia or venezuela or anywhere else that is doing that. i remember early on in my career when i was working on the issue in utah and bought public lands in utah on an oil lease. we counted the number of state and federal and local laws that a company needed to comply with before they could bid again producing those, it was 127. that is a rigorous legal and environmental criteria the industry has to make. we do produce energy cleaner than anywhere else in the world and to angela's point we are not good at telling our story. i appreciate the opportunity to tell the story just now. host: if you are from twitter

asks what happens to u.s. oil when saudi arabia shale production is up and running? guest: that is a great question and we will still be competing globally. the price point right now is we prove that when the saudi's were a complete full production, when opec plus was jamming everything into the market, we still could compete. the shakeout was interesting because we had over 100 companies go bankrupt. they disappeared. we have learned that unlocking the shale revolution was a very expensive proposition for the industry. it was very capital-intensive and we went to the capital markets and they backed us. we learned some lessons. i think the industry has winnowed itself down and is ready to compete regardless of what the salaries -- the saudis

do. host: we have heard president biden say they expect the saudis to help with production. where is the reality? guest: that was an interesting correspondent. we learned the saudis were working with russia -- is cheaper for them to buy the cheap russian oil and spirit the sanctions which frees up their own production for the global market at a higher price. i did not think the president accomplished what he wanted to do and there were warning signals from the saudis and others we are not going to be able to deliver what you asked for. you cannot call someone a pariah that expect them to do you a favor shortly after. host: larry is in maryland, democrats line. good morning. caller: i work for the federal

government in energy modeling and we used to have a model that modeled all of the refinery industry of production and its pipeline extended shipments. it gave insight into the total industry for the u.s. it helped the government have an idea of what would be happening if production was lost and all of that. when i would give presentations to the industry, they stopped all that they wanted it out so we do not have the insight. when the administration change from democrat to republican, all of that knowledge modeling went out of the federal government, which gave the federal government very little insight into what the oil companies do. the only insight they have is what the oil companies tell the federal government this is what

we do. that is a very bad situation for a nation that depends on the oil industry's ability to repair the economy. something in the interests of the american people may not be profitable for all companies at certain levels. at least when you have the model and you and conversation back and forth between the industry and federal government, that is god, so the federal government is blind to what the oil company does now. host: that is larry in maryland. thank you. guest: 80% of inspiration is based on good information. i do not disagree that there have been periods where there not been good communication with the federal government. we rely on the agency for their modeling. i think this refining capacity

challenge we are facing because obviously there has been a breakdown at some point of our ability would protect and prepare for the problems that you can see something coming down the road but you cannot find the ability to address it in your present day. we were warning about this in november and october of last year that the signs and the inventories are not looking good and it is too late for us to react quickly. host: we have a question from stephen michigan who says how can you ensure another deepwater horizon does not happen? guest: nobody wants another deepwater horizon. after that we learned lessons with regards to our well safety and the operations we do. multiple redundancies were put into place. you always knock on wood

something like that does not happen, shortly after that incident the industry responded, we worked well with the obama administration to put additional redundancies in place and if we maintain our rigorous standards like we do offshore, that i think we are in good shape. nobody wants that to happen. that is such a huge impact on our ability to do our job. like that is loss of billions and billions of dollars. it is in our interest not to have something like that happen. host: as far as next six months, where you see the industry going and what is your message to those skeptical and the role you play representing the industry? guest: i split time between washington, d.c. and the family farm in utah i was talking to a friend of mine who is a farmer.

i was saying how are you doing. he says tim, we are paid to keep gas in the tractors and you are a new gas industry, how do you think things are going? the worst case scenario for us is a demand collapse, to have people stop using our product. that does not solve our problem. we get as much the blind of the system, make sure we are doing it in a safe way, even the manufacturers see plenty of options to make product available, and do it at a price point where it is affordable. when summary says how high is too high of gas prices, my responses it is too high when you cannot afford to put gas in your car. six months from now, i think dependent on what happens globally come in the u.s. the production numbers will be up if we can adjust our fighting capacity in the global refining

capacity comes back on, we will see a more comfortable price give i meant. host: