Global fossil fuel exploration hits decade high in 2022

Yahoo Finance’s Rick Newman joins the Live show to discuss the production of more oil and natural gas.

Video Transcript

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JULIE HYMAN: President Biden spent much of 2022 encouraging US and foreign energy providers to produce more oil and natural gas. New data says he could be getting just that but not in the way he might have expected. Yahoo Finance's senior columnist Rick Newman is here with the details. You've been tracking this quite a bit and the sort of rhetoric between the White House and the oil companies. So what are you talking about here?

RICK NEWMAN: Yeah, so this is a new analysis from the consulting firm Wood Mackenzie. And they look at new exploration for new oil and gas wells every year. And they found that, in 2022, there was a lot of new exploration by companies, mostly non-American companies, and almost all of this was exclusively outside the United States.

But they found that the value of new fields that were discovered in 2022 was the highest in more than 10 years. And I think that's important because it tells you that we're kind of getting back to business as usual a little bit in the fossil fuel industry. We've gone through a couple of years where they really struggled with losses and shareholders started to say we want you to turn the money back to us instead of spending it on new capacity.

And that is one reason we saw-- we've seen a shortage of fossil fuels last year, let's say, especially with the Ukraine war. But they're opening up a little bit. They're starting to go out and look for new fields. And the data from '22 suggests that we are going to have more oil and natural gas coming on to global markets eventually. This is not-- you don't turn this over in a day. But it does show that oil companies are out there looking for new deposits.

BRIAN SOZZI: A lot more production, Rick, it seems like that'd be good for prices.

RICK NEWMAN: We-- it depends. So we're still probably not going to see, like, gushers of new oil coming online. Here in the United States, for example, there is a very small increase in production even with prices that were as high as $5 a gallon last year. So there is still what they call in the industry a lot of capital discipline. They don't want to spend too much on new fields.

But it's coming online. It's going to take time. There are a couple of wild cards here. China is a really important factor with regard to energy prices here in the United States, especially-- especially energy related to oil, which would obviously include gasoline because one of the things that happened last year is with the Chinese economy in those COVID lockdowns, China's demand for energy really went down, which is one of the things that helped us get gasoline prices lower here in the second half of the United States.

Now, China is opening up again. It depends how robust that recovery is going to be. If China really came charging back-- I mean, China churns through a ton of energy. And if Chinese energy demand goes up a lot, then that means our energy is going to go up a lot as well. But who knows if that's going to happen.

And then the other wild card here, of course, is Russia. Russia, before their invasion of Ukraine last year, was the third largest global supplier of both oil and natural gas. A lot of that is now being rerouted because of sanctions. Some of that is probably coming off the market. So this is going to be very volatile for the foreseeable future. You know, gas price is now around $3.50, manageable, not the lowest ever, not the highest ever, not creating outrage among motorists, and that seems to be OK for now.

BRAD SMITH: So what's the significance of this exploration as it kind of correlates to some of the sustainable energy targets that have been set?

RICK NEWMAN: Yeah, this was an interesting finding. So what Wood Mackenzie found when they looked at all the new fields that energy companies want to develop is they have found better ways to get energy out of the ground. So energy companies are now looking for-- I mean, there are different-- so burning fossil-- burning carbon creates emissions. But getting it out of the ground, extracting it also burns a lot of emissions in terms of the energy you have to expend just to get it out of the ground and the infrastructure you have to build.

So they are now trying to find more efficient ways to get energy out of the ground that doesn't require as much burning of carbon or cause as many emissions. Like, one example of a way to do that is a new field underneath an existing field. So you've already got a lot of infrastructure in place, and you don't need to build new infrastructure. So that is one of the things that has been happening.

And the carbon-- the fossil fuel that is going to be coming online is more efficient in terms of what it takes to get it out of the ground. So that's good news, less burning of carbon to get the carbon out of the ground. Of course, this is all happening at the same time there's a huge push to move over to renewables and stop burning carbon altogether.

But one revelation of the last year when energy prices spiked is that we are going to need oil and natural gas for a heck of a long time. And anybody who tells you we just need to flip a switch and get over to renewables, that is not the way it works. The global economy still is incredibly dependent on fossil fuels.

BRIAN SOZZI: And of course, you Rick-- read Rick's full piece on this now on the yahoofinance.com homepage. Rick, thanks so much.

RICK NEWMAN: Thanks, guys.

BRIAN SOZZI: Appreciate it. Coming up, layoffs continue to sweep through big tech, which could reflect major leadership failures. We'll discuss with Bill George. There you see him on the screen right there. We'll discuss with Bill next.