I've noticed there appears to be a fundamental misunderstanding about how the oil and gas industry actually works, especially in the US. So let me try to put this into proper perspective.
You can’t dramatically increase oil output without bringing new wells online. There is no magic dial you can just turn up when ever you need more.
From leasing and permitting, to site prep, to drilling, to completion, to production, the process can take anywhere from 4 to 12 months.
So companies don’t respond to today’s prices, they respond to where they expect prices to be over that entire window. If the expectation is that current conditions are short-lived, there’s very little incentive to ramp activity.
If the message being communicated is that the conflict is already over, or close to it, that reinforces the idea that by the time new wells come online, prices will likely have normalized.
Because of that, we’re unlikely to see a meaningful increase in rig count in the US in the near term, and in fact, activity has already begun to trend lower.
The only thing that reliably drives higher activity is sustained confidence that elevated prices will persist long enough to justify the investment.
In other words, they are waiting for a clear signal that current conditions will last, not just spike.
In this case that signal would probably be an openly communicated commitment to a lengthy ground war.
Everything I've just stated is basically a fact, although I'm sure some will disagree about specific details. Now here's where the speculation starts.
If someone were trying to plan for this potential disruption in advance without a clear understanding of how the industry works, they might assume Venezuela, the country with the largest oil reserves, could simply be brought in to offset any future supply disruption.
And from that perspective, you could imagine taking aggressive action in an attempt to force that into reality.
But that was never a realistic short-term solution. Even under ideal conditions, increasing production there would require tens of billions of dollars in investment and many years of development before meaningful volumes reach the market.
Unfortunately, having reserves is not the same thing as having supply.
What's really important in Albo's announcement was what he didn't say.
He did not say the war would end soon.
He did not say Australia would not send in ground troops.
He did not say we have enough fuel long term.
That's the signal.
Information by omission.
For any Americans new to this, yes it’s a centuries-old parliamentary custom to have the Benny Hill theme playing at all times during political interviews