Oil Goes Green

U.S. oil drillers that pump crude are under increasing pressure from environmental groups to reduce emissions. However, the speed at which they can connect to the electric grid remains a major obstacle because it is already at capacity.

They are encountering significant problems in their attempts to embrace electric technology to appease ecologists despite their efforts to address environmental concerns. One prominent issue they face is frequent power outages or shortages, causing unreliable operations.

In Martin County, Texas, the busiest oil field in the country, oil drillers consume almost four times the amount of electricity as Seattle, Washington—daily, and the demand is growing exponentially. Diamondback Energy is a significant producer in the Permian Basin of New Mexico and West Texas and is increasingly relying on the electric grid to power the pumping of its crude.

However, the company's oil production has grown nearly 5 thousand percent in the last decade, and the grid is dreadfully inadequate. In response, Diamondback has established its own power network to reduce the use of petroleum-powered generators. This problem is a lose-lose situation as the grid cannot meet the current demand but also suffers the removal of many coal, gas, and nuclear-generating plants to satisfy the green dictatorship.

Drillers are endeavoring to transition from petroleum-powered generators to unreliable electricity generated by wind and solar to reduce greenhouse gas emissions. This shift makes oil and gas companies feel environmentally friendly while pumping oil. This move to the grid has also caused electricity sales to surge in Texas, New Mexico, and North Dakota and has severely aggravated the pre-existing bottleneck in grid capacity. Consequently, many operators have resorted to building their own infrastructure rather than waiting for the grid to catch up.

Although consumers have yet to experience significant impacts from this dilemma, infrastructure investments and new-generation facilities will be necessary across the U.S. as more industries feel the need to appease the green dictatorship. However, these investments come with a substantial cost, which consumers will undoubtedly carry as we continue to overload a technology that has not grown in proportion to the demand.

Current data shows that EV acceptance in the United States is very low, with only 0.86 percent of all registered vehicles being electric. However, with the Biden administration pushing for EVs to replace gas-powered vehicles by 2030 and the oil industry alone taxing the grid, it raises an important question: Can the grid be rebuilt economically and quick enough to support the oil industry’s demand in addition to a massive increase in EVs in six years?

The past decade has seen a mere 5 percent increase in U.S. electricity sales on average, but states with extensive oil and gas fields have experienced significant surges in power usage. New Mexico, for example, has seen a 16 percent rise in electricity sales over ten years, primarily driven by the Permian oil basin.

Likewise, North Dakota, known for its daily oil production of approximately 1.3 million barrels, a growing network of bitcoin miners and data centers, has resulted in an overall increase of over 58 percent in electricity sales, with a staggering 120 percent surge for industrial customers. These figures represent the most significant jumps in power usage across the country.

However, despite increased grid connectivity in the Permian basin, the congested power network struggles to keep up with the escalating crude production without the additional burdens of EVs.

The Permian oil field is experiencing significant growth and is aiming to transition to use more electricity. However, meeting emissions targets and increasing demand for power presents insurmountable challenges. Less than a third of the required industrial power comes from the grid. Analysts estimate that by 2032, Permian petroleum companies will need over three times the amount of power that New York City uses daily, raising concerns about the feasibility of rapidly expanding power capacity.

To address these issues, power-hungry Permian producers have built their electric substations and pushed for more infrastructure through legislative action. Diamondback, for instance, has developed a microgrid to power significant developments. The company collaborated with energy startup VoltaGrid to create a system that utilizes natural gas engines and distribution lines to provide electricity for thousands of homes because the grid simply cannot produce.

The irony lies in the fact that these oil companies supply the world with the very oil that environmentalists claim is responsible for harmful "carbon emissions." However, pumping it out of the ground with electricity makes everyone feel good that something for the environment has been accomplished.

A central contradiction remains unaddressed despite the ongoing discussions around infrastructure and overtaxed power grids. Oil companies are undeniably engaged in a losing battle. In their pursuit of earning environmental credibility by reducing carbon emissions by unreasonable deadlines, they are, ironically, consuming far more electricity than they did when utilizing traditional drilling methods while moving the pollution from the oil fields to some coal plant in another region!

While innovation is commendable, it appears that the current measures are not resulting in a cheaper, more efficient and more productive process. Sadly, the consumer will soon shoulder these costs at the pumps.

Instead of creating more problems to please the very unhappy and unsatisfiable climate activists, it would be wiser for these companies to stick to proven methods that work efficiently. This effort for oil going green will be a textbook example of virtue-signaling in college business courses soon.