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Biden is blamed for downturn in new oil drilling, but fossil fuel companies are the ones hitting pause

(CNN) OPEC+'s decision this week to slash oil production -- and now the looming threat of higher gas prices -- has pushed Republican rhetoric into familiar territory: President Joe Biden's green policies are making Americans pay more at the pump.

Republicans in Congress have slammed Biden's attempts since he took office to curb new oil drilling in the US and grow the country's clean energy infrastructure. A fresh volley of criticism came after this week's OPEC+ move.

In an interview with Fox Business, Sen. John Barrasso of Wyoming said the Biden administration is "attacking American energy." Sen. Lisa Murkowski of Alaska said in a statement Wednesday that the administration must "reverse course and work with our energy producers, instead of against them" to lower prices at the pump.

But energy experts tell CNN recent attempts to open up new parts of the US to oil drilling have failed mainly because of the lack of interest from oil companies themselves, rather than Biden's "green" policies.

New exploration for oil and gas has fallen sharply worldwide this year. Still bruised by an oil-price crash prolonged by the Covid pandemic, fossil fuel companies are now focusing on areas they know will make money, and far less on exploring for new locations to drill.

"I would say it's 60% financial markets are telling them 'no,'" said Robert McNally, president of energy consulting firm Rapidan Energy Group and an energy adviser to former President George W. Bush. "It's 30% they're still fearful of another bust, and then 10%, 'the politicians, they're not going to make it easy for me.'"

There is perhaps no better evidence of this shift than in the Arctic National Wildlife Refuge, which for decades had been a Republican focus for new oil drilling. Congressional Republicans successfully reopened ANWR to oil drilling in a 2017 bill, but when the lease sale happened in the final days of the Trump administration, only three companies offered bids -- one of which was Alaska's state-owned energy corporation. The other companies that bid ended up canceling their leases this year.

The ANWR sale "was a total bust," said Erik Grafe, an attorney for environmental law firm Earthjustice. "There were no oil majors who bid on leases."

The Cook Inlet in Alaska.

In May, the Biden administration canceled an offshore drilling lease sale in Alaska's Cook Inlet, owing to "lack of industry interest." The Inflation Reduction Act will force the Interior Department to offer it again by the end of the year, but there aren't expected to be many -- if any -- bids on it.

Oil and gas companies around the world are driving this trend as they approach new oil and gas exploration tepidly. Total acreage of new oil and gas leases has fallen to "near all-time lows," according to an analysis from Norwegian energy firm Rystad.

Rystad expects a total of 44 global lease sales to be completed in 2022, the lowest level since 2000. As of August, 21 lease sales were completed globally, just half of what was held in the same period the previous year.

Aatisha Mahajan, Rystad's vice president of upstream analysis, told CNN the downward trend in oil drilling is owed more to companies' actions than governments'.

"Governments are doing their bit," Mahajan said. "Every government has to think about their energy security. It's more often interest from the company side, which is less."

'It's a bad bet'

There are several reasons oil and gas companies are pulling back on new exploration, experts told CNN, but chief among them is the financial landscape.

Fossil fuel companies and markets are still reeling from the economic downturn during the pandemic and the associated oil price crash, according to Rachel Ziemba, an energy expert and adjunct senior fellow at the Center for a New American Security.

Now they are trying to limit their risk by sticking to projects that are assured to generate oil.

Investors are still "somewhat wary of green lighting new projects," Ziemba said. "People are mostly doing the most solid projects."

Ziemba pointed out that even this year, with countries scrambling to lock up energy supplies after Russia's invasion of Ukraine, there hasn't been a wave of new leasing activity.

"Overall, I think there has been a structural shift over five and six years," Ziemba said. "There's been a shift with financial backers, increasing concerns not only about geopolitical risk, but also pressure about financing new fossil fuel projects."

Experts tell CNN fossil fuel companies are sticking to drilling in regions that are sure bets for oil and gas, like the Permian Basin shown here in Texas.

Grafe said big banks and insurance companies are also warning oil and gas companies that drilling in the Arctic could be seriously risky -- and in some cases flat out refusing to fund or insure the projects.

"There is a lot of recognition by financial institutions that it's a bad bet to be trying to get oil out of the Arctic in particular," Grafe said. Part of that is social and political pressure, he said. The other part is that permafrost is melting, making the terrain more unstable and more difficult to drill on.

With traditional fossil fuel organizations like the International Energy Agency warning the world needs to back away quickly from new oil, gas, and coal projects to stave off catastrophic climate change, Rapidan's McNally sees a small but growing long-term shift away from fossil fuels.

But even as the clean energy transition is starting in earnest, McNally doesn't believe the world is ready to give up fossil fuels, or even that demand for fossil fuel will peak by the end of the decade. Instead, he told CNN he thinks the global oil market is at the very beginning of another multi-year boom cycle, which he predicts will bring about new leasing in Canada and the United States, as well as new exploration in South America and West Africa.

"We're going to realize we need more investments in hydrocarbons," McNally said. "Anyone who's got opportunities, capital and political will, I think all of that is going to come back into vogue."

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