OPINION:
With the Strait of Hormuz closed and Brent crude near $95 per barrel, the political class has rediscovered the value of American oil.
They want barrels, and they want them now. They cannot understand why the rigs are not multiplying.
The answer is that the rules of energy were quietly rewritten over two decades by a handful of asset managers and activist investors who never drilled a well in their lives.
They captured the boards of the largest oil companies and extracted commitments that, in a global energy crisis, are making American oil and gasoline more expensive than they should be.
In the Permian Basin, America’s most strategic oil field, the regional benchmark price for natural gas has been negative for most of this year. On April 24, prices at the Waha Hub hit a low of minus $9.60 per million Btu.
Prices have averaged negative $1.84 year-to-date, compared with a five-year average of positive $2.88. For more than 47 consecutive days this spring, Permian producers were paying buyers to take their gas away.
A typical well brings up 2,000 to 4,000 cubic feet of associated gas for every barrel of oil. The negative pricing today imposes a $9- to $20-per-barrel cost on Permian oil production compared with a normal year.
That is a self-inflicted tax paid by American consumers during a war, driving up global crude prices.
When pipelines are full, producers have two real options for the stranded gas: They can pay a buyer to take it, as is happening now, or flare it. Flaring is an emissions-control practice that safely burns off waste gas and has been an industry standard for more than a century.
Federal law permits flaring under sensible conditions, and President Trump and Environmental Protection Agency Administrator Lee Zeldin have rolled back the worst Biden-era flaring restrictions to restore that flexibility.
So why are the majors not flaring? Because their boards committed to investors that they would not.
In 2021, a tiny activist hedge fund called Engine No. 1 won three board seats by securing the backing of BlackRock, State Street and Vanguard. That campaign forced Exxon Mobil to commit to eliminating all routine flaring in the Permian and achieving net-zero emissions across all Permian operations by 2035.
Occidental, Shell, BP and dozens of other majors made similar pledges under the World Bank’s Zero Routine Flaring by 2030 initiative. Banks joined the Net Zero Banking Alliance and curtailed lending to producers and midstream companies that did not align with these commitments.
Help is coming on the pipeline side. By year’s end, more than 4.5 billion cubic feet per day of new takeaway capacity will move Permian gas to market, and the acute Waha pricing crisis will ease.
Yet the structural problem does not end with pipelines. Permian production keeps growing, new takeaway fills up, and each cycle repeats the same brutal math: The cost of producing oil rises by as much as $20 per barrel because the gas that comes with it has nowhere to go, and the companies that produce it have promised investors they will not burn it.
If those same companies flared excess gas, production costs would drop overnight. Lower costs would unlock new drilling, accelerate supply and put downward pressure on global crude prices. Every gas pump in America would feel the effect within weeks.
The reason it is not happening has nothing to do with federal law and everything to do with commitments made by oil company boards to asset managers in Manhattan.
Wall Street rewards dividends and buybacks, not production growth. The Dallas Fed’s most recent E&P survey found that, despite the price spike, half of the operators have not changed their 2026 drilling plans because they know their investors will punish them if they do.
These are not regulations that have been signed into law. They are private financial commitments, made by unelected money managers, with measurable national costs that show up at every gas pump.
American producers are pumping a record 13.6 million barrels per day of crude, which is why gasoline is not at $7 a gallon. On May 29, the Securities and Exchange Commission proposed rescinding its climate disclosure mandates, calling them a “dramatic overreach.”
That is a start. The question is whether Washington will dismantle the rest of the financial architecture, imposing a 20%-per-barrel ESG tax on consumers, or let Wall Street keep writing energy policy from a New York City boardroom.
• The Honorable Jason Isaac is the CEO of the American Energy Institute. He previously served four terms in the Texas House of Representatives.
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