Events in the Middle East demonstrate that the position of the United States as the world’s leading producer of oil and natural gas, including liquefied natural gas, provides the nation with a large economic and national security advantage in this period of global turmoil.
A focus of President Donald Trump’s administration should be to implement policies that provide incentives for oil and natural gas producers in the Permian Basin to increase production of the two fossil fuels on a sustained basis. Just as the U.S. dollar is the global reserve currency and U.S. Treasuries are the safe-haven asset of the global economy, the vast oil and gas reserves located in the basin could possibly enable the U.S. to become the world’s oil and gas supply buffer in times of crisis in the Middle East. The economies of the world, including the U.S. economy, should not be vulnerable to energy blackmail by Iran or other rogue states.
The Permian Basin holds approximately 76 billion barrels of oil reserves and about 175 trillion cubic feet of natural gas. Daily oil production is around 6.7 million barrels per day, with daily natural gas production of up to 27 billion cubic feet. With appropriate policies, production of both fuels could be significantly increased.
Prior to the Iran war, global oil supplies exceeded global demand by around 4 million barrels per day. A sustainable increase in daily production from the basin of just a few million barrels would provide both the domestic and global economies with a secure buffer against supply disruptions such as the partial closure of the Strait of Hormuz. So what should be done?
First, Congress and the president must fix the country’s broken permitting system. Today, energy infrastructure projects, from pipelines to export terminals, face years of delays and litigation risk. Production growth in the Permian is increasingly constrained not by geology but by the inability to move oil and associated natural gas to market. A streamlined, time-limited federal permitting framework would unlock investment without sacrificing environmental review. Congress should establish firm deadlines for National Environmental Policy Act reviews and limit duplicative state and federal processes that create uncertainty.
Second, the U.S. must accelerate investment in energy infrastructure. Shale production is dependent on pipelines and export capacity. Recent bottlenecks have physically capped production even in a strong price environment. Federal and state governments should prioritize pipeline approvals and support the modernization of ports and export terminals.
Third, policy should ensure consistent access to federal lands and offshore resources. Roughly half of production in parts of New Mexico’s Permian Basin occurs on federal acreage, meaning federal leasing policy has a direct impact on national output. Stop-start leasing policies discourage investment and shift capital to overseas opportunities. A predictable schedule of lease sales, coupled with clear regulatory terms, would provide the stability and certainty necessary for producers to plan multiyear drilling programs.
Fourth, tax and financial policy should incentivize capital investment in shale oil and gas production. Federal and state tax laws should preserve provisions such as expensing for drilling costs and incentivize technological innovation, including enhanced recovery techniques and water recycling systems that lower costs.
Finally, policymakers should encourage innovation in oil production. Theoretically, the basin holds over 100 billion barrels of oil. Price and technology can dramatically increase production from the shale formations of the U.S. southwest.
CONGRESS SHOULD APPROVE IRAN WAR SUPPLEMENTAL FUNDS
Significant, sustainable shale oil growth is achievable, but only with serious policy reforms. Streamlined permitting, expanded infrastructure, stable access to resources, and appropriate incentives would strengthen both the U.S. economy and its position as the global leader in energy production.
The war in Iran and threats of future wars with Russia and/or China underline the need for urgent action.
James Rogan is a former U.S. foreign service officer who later worked for over 30 years in law and finance. Today, he writes a daily note on markets, economics, politics and social issues.
