A legislative embrace of policies allowing increased hydrocarbon production could move world energy markets. A remarkable political consensus has emerged: the world needs more oil. Confirmation of that reality didn't come from any oil executive but from President Biden, who recently admonished U.S. oil companies "to deploy these record-breaking profits to increase production." That was a telling pivot from his earlier petitioning of Saudi Arabia to increase production and then, more recently, not to cut it. It's also a pivot from the administration's strategy, now extended, to sell oil from the Strategic Petroleum Reserve–self-evidently a stopgap measure, using oil produced (and stored) years ago.

Cynics call this naked electioneering to tamp down prices. It is, for good reasons. Consumers and markets don't like energy inflation. Despite years of hyperbole and massive spending on an "energy transition" to alternatives, the cost of oil and gasoline remains critical. It requires reminding: hydrocarbons constitute over 80 percent of the world's energy supplies, and oil powers over 95 percent of all transportation of goods and people. Those realities have been laid bare by the scramble to find alternatives to Russia's enormous share of world oil production and its hydrocarbon cousin, natural gas.

In Europe, supply constraints and escalating prices have already caused a cascade of industrial shutdowns that, as Belgium's prime minister put it starkly, risks a "massive deindustrialisation of the European continent." An economic collapse in Europe would be catastrophic not just there but also for the U.S. because of the magnitude of our economic interdependencies. Politicians and pundits who profess glee at high energy prices as a means to accelerate the "energy transition" are making a mistake, both for their careers and for their cause. New, better energy technologies succeed over time and at scale when they lower costs for society.

Doubtless all this was behind the recent and equally stark statement by JP Morgan CEO Jamie Dimon that America should be "pumping more oil and gas . . . almost as a matter of war at this point, nothing short of that." Even as unlikely a source as Tesla co-founder and CEO Elon Musk has called, more than once, for increased oil and natural gas production.

The problem with this epiphany is that neither America's nor the world's oil and gas industries are ready to produce enough either to fuel growth or to delink from Russia. Collective spending on new production by global energy companies is down about 70 percent from normal levels, a collapse that began back in 2015. That will have consequences.

Producing oil (and natural gas) is a lot like farming. If you don't continually invest in new production, the near-term outcome is foretold. Output from the world's existing oil wells, collectively, decreases by about 6 percent each year. That's a quantity of oil equal to replacing Russia's total output every two years. In normal times, investment in exploration and production is sufficient both to replace the natural decline and to meet economically driven growth in demand–but that hasn't been true since 2015. The economic damage from the global lockdowns served temporarily to hide the consequences.

The price spikes and turmoil triggered by Russia's invasion of Ukraine is a foretaste of the fragility of global energy markets. Investing now in new oil production is the obvious key to avoiding, or at least minimizing, the economic, social, and geopolitical carnage from a longer period of energy chaos and high prices. The brutal effects of another severe recession or depression would indeed reduce energy demand. But that would only slightly delay the inevitable need for more oil production. In fact, vastly more investment in new production will be required than is now in play even if the world sees oil demand peak within the decade, as the International Energy Agency hopes in its latest (and wildly unrealistic) forecast.

Which brings us to the question of the decade: Will the need for more oil be an OPEC story, or can the United States radically increase production?

If the U.S. were to expand production by only half as much as the shale-boom delivered, that would again shift geopolitical alignments and drive down energy prices. But that possibility faces two problems.

The first problem for the oil (and gas) industry is political–that is, whether it's possible to resolve the obvious contradiction between lambasting the Saudis and Texans for under-producing while implementing anti-oil policies. Today's state of affairs–anti-oil policies that amplify, if not cause, supply shortages and price spikes–didn't happen overnight, and it didn't start with the last U.S. election, either. The Biden administration's "whole of government" green policies and massive spending are the apotheosis of long-running, multifaceted campaigns involving myriad national and state agencies, mandates, regulations, disincentives, and social opprobrium to convince banks and pension funds to "divest" from oil.

For a bellwether, look no further than policies in more than a dozen U.S. states, or to the Glasgow Financial Alliance for Net Zero, a global network of 500 bankers representing $150 trillion in assets that wants to "phase out" financing of hydrocarbons. Or the UN's Net Zero Banking Alliance, which claims to represent 40 percent of global banking assets and is on a mission to starve hydrocarbon companies of capital and credit. (The latter program is the target of an investigation by attorneys general from 19 U.S. states.) One would have to conclude that these programs succeeded, given the global collapse in investing in new oil production.

No one should be surprised that, despite a sustained period of high prices, U.S. production has remained stubbornly below pre-Covid levels, even as demand has rebounded. Ditto, and more so, for European production. The economists' gold standard mantra for commodities–that "the solution to high prices is high prices," because it stimulates more production–is only true if governments allow it. Given what's at stake economically and geopolitically, one might reasonably assume that there may yet be the possibility of political compromise at least to allow, if not to encourage, production. After all, lost in the mists of history is the fact that the Obama administration allowed the shale boom to flourish.

But now the prospects for a renewed domestic oil boom are complicated by some oil executives' cautioning against expecting it. Their mood emerges from supply-chain and labor challenges, inflation's impact on supplies and services, and a resurrection of peak-oil theory. The latter is, in effect, about resource exhaustion. We've heard that story before.

In 1998, a feature article in Scientific American made the case for an impending and inevitable exhaustion of oil supplies–one that would happen at a time of peak imports for the U.S. That set off a half-dozen years of frenzied media and policy preoccupation with the idea of "peak oil." Then, seemingly out of nowhere, came the shale revolution, adding more energy to world supply than had the rise of Saudi Arabia decades earlier. Importantly, the shale boom didn't happen because of any resource discovery (or government stimulus). The hydrocarbon-rich shale fields were well known, having been mapped out by the U.S. Geological Survey more than a century ago. What changed was technology. The reason the shale resources were unleashed has been compressed to a single, now-vilified term, "fracking," but the real story is one of decades of development with complementary-technology progress across numerous fields–not just the use of hydraulic pressure to fracture rocks (to release oil and gas) but also progress in horizontal drilling (to follow the meandering shale seams), in combination with superior drilling machines and materials.

This time, the outcome won't be different. Yes, the specifics are always different, but the central claim–resource exhaustion, along with constraints and high costs for existing systems–is subject to the same kind of complementary-technology progress that we've seen for the two centuries of hydrocarbon expansion. With the benefit of hindsight, historians will likely label the next boom as the arrival, finally, of "digital oil fields."

It's not as if the industry hasn't been deploying digital tools for years with modest success. But the evidence now before us that software, especially artificial intelligence (AI), and automation tools, especially mobile robots, have finally become useful enough to be put to work in the "hard" worlds of machines and supply chains. The early digital successes have all been in the soft worlds of news, finance, business processes, and entertainment.

The popular trope that AI and robots will take work away from humans has it backward. Every major industry is complaining about a labor shortage, especially the oil and gas industry. Rather than seeing automation, as one report put it, "eliminating one out of every five jobs" in the industry, it's far more likely it will instead let the three people currently employed do the work of five. As Tom Blasingame, president of the Society of Petroleum Engineers, recently said, "pervasive digitalisation is the only way I can envision our future activities."

Augmenting and amplifying the "labor pool" are the path to accelerating the production of anything–as well as being the path to broad societal wealth expansion. It always has been. The combination of AI and cloud technologies democratizes the upskilling of employees and moves decision-making closer to the front-line, speeding things up and cutting costs. To consider just one indicator of the state-of-play: a Barclays analysis sees the global, energy-focused software-services industries growing from under $5 billion today to $150 billion before the decade is over.

Added to the "digital" trend is a new class of long-awaited industrial robots, especially untethered ones made possible by a combination of advances in software, sensors, materials, and power systems. A robot that's mobile and can work alongside people differs dramatically from the class of machines bolted to floors in factories (though these machines continue to proliferate). Currently, the biggest and fastest-growing market for this first-generation of mobile robots, already at some $15 billion in sales, is in handling materials in warehouses. Soon, such mobile robots will be able to operate in more challenging places, including outdoors, and to take on a wider range of tasks.

For evidence of optimism on the front lines, look to a post-pandemic survey of more than 1,000 professionals in the oil and gas industries, which found that, of "all the cost-efficiency levers, digitalization is the one with the most remaining potential." Nearly 70 percent of respondents reported that their organization was planning to increase such investments, the "highest level ever" in that long-running survey. Following a familiar pattern in other domains touched by digital transformation, we see hundreds of venture-backed tech start-ups focused on some aspect of the energy logistics value chain, and all the tech giants, from Microsoft to Google to Amazon, are engaged in major business activities involving digital oilfield collaborations, as are traditional energy and industrial-service companies.

The important feature of the technologies of digitalization and automation is that they're as useful for a $10 billion offshore platform as they are for a $10 million onshore shale well. Shell has documented, for example, using hyper-realistic digital simulation to accomplish an offshore planning task in 20 minutes that used to take 24 hours. The effect of the combination of many such tools is visible in the fact that it now takes half as much time to put an offshore oil platform into service. Exxon, to cite another example, has brought into production in only a few years oil from a massive, OPEC-scale, deep-water oilfield in the southern Caribbean Sea, off the coast of Guyana. Output from that one field will approach 1 million barrels per day within five years. That's lightspeed in the offshore world. For context, that's double Germany's total oil imports from Russia.

And the offshore oil fields will matter in the near future, given the magnitude of future global oil demand, even with the planned billions of dollars of spending on alternative energy. Global offshore rigs today account for nearly one-fourth of all the world's oil, or more than double Russia's or Saudi Arabia's total production. Deep-water domains off the coast of America, and elsewhere in the Gulf of Mexico, are the only other places with readily accessible resources of a scale potentially comparable to U.S. onshore shale. The unique velocity with which shale production can be brought online can now be complemented by the remarkably higher velocity (though still slower than shale) of offshore development.

But back to the politics: while nations around the world welcome and encourage offshore oil and gas development, more than 90 percent of the U.S. offshore is off-limits to exploration, never mind production. Opening access to just a fraction of that in areas adjacent to where production is currently permitted would radically expand U.S. reserves. No administration in recent decades has successfully taken on the task of opening significantly more offshore access. The Biden administration, indeed, has radically reduced potential access.

America's offshore and onshore oil industries now share a common feature: the need to secure political permissions to be allowed to take the financial risks entailed in putting new technologies to work. It's true, as some now claim, that granting such permissions can't change in any significant way the energy challenges the world is facing in the next few months. Those consequences were baked in by decisions made over the past decade. But it is also true that expectations for the near future affect today's prices. That's what trading in commodities and stocks is all about: expectations. And that's what elections are often about, too.

There is a clear way for the U.S. government to shock the world's critical energy markets: a full and legislated embrace of policies that allow–not subsidize–increased hydrocarbon production. Doing so wouldn't even require backing away from favored commitments to alternative energy. But to make that happen, neither rhetoric nor executive orders are enough: legislation is needed. A change of legislative heart would move world markets because leaders everywhere understand what the American system of entrepreneurs and financiers are capable of in these traditional energy domains. Such a policy shift would dramatically influence expectations and thus moderate today's prices while also resetting the energy landscape, because the world needs more oil.

Mark P. Mills is a senior fellow at the Manhattan Institute and a strategic partner in the energy-tech venture fund Montrose Lane. He is the author of The Cloud Revolution: How the Convergence of New Technologies Will Unleash the Next Economic Boom and a Roaring 2020s and the Manhattan Institute report "The 'Energy Transition' Delusion: A Reality Reset," and he hosts The Last Optimist podcast.