Treasury Secretary Scott Bessent said no one gave him credit or the administration credit for falling oil prices or lower interest rates. What that means is that Scott Bessent has not been reading my daily Energy Report. The Phil Flynn Energy Report has indeed pointed out that the Trump Policies will lead to lower prices even as we see challenges in natural gas.
Many remain in denial, ignoring that smart energy policies can benefit both the economy and American consumers and energy companies. For years, there has been debate about whether presidential policies impact energy prices. The answer is clear: it is yes. Maybe not for every penny up or down in gasoline or crude, but policies matter from a production standpoint, from a regulatory standpoint and from an economic growth standpoint.
Biden’s regulatory policies, including the cancellation of the Keystone Pipeline and numerous executive orders aimed at curtailing U.S. oil and gas production, influenced investment in the industry. Additionally, Biden’s use of the Strategic Petroleum Reserve had effects on U.S. energy producers and future investments needed to meet demand. The administration’s policies show that presidential actions can affect energy prices.
Now, under the Trump Administration, we are seeing signs that his policies are reducing oil prices and interest rates for consumers. Despite expectations that tariff threats would lead to a surge in oil prices, they have remained subdued. Trump reduced geopolitical risk by trying to create peace in Ukraine as well as Iran.
President Trump told Maria Bartiromo on Sunday Morning Futures that he sent a letter to Iran’s Supreme Leader Ayatollah Ali Khamenei last week asking that the two leaders “negotiate” over the Islamic Republic’s nuclear program. On Saturday, the Iranian leader mentioned the effort by an unnamed “bullying governments” to make a deal over the program.
Trump told Maria that, “There are two ways Iran can be handled, militarily or you make a deal.” Trump said. “I would prefer to make a deal because I’m not looking to hurt Iran. They’re great people. I know so many Iranians from this country.”
Concurrently, natural gas prices are rising as Canada threatens to cut off supply and construct a new pipeline. This could result in a natural gas surplus due to the potential loss of their primary customer.
Regulatory changes are expected to lower long-term energy prices, saving consumers billions. Industry professionals are optimistic as the reduced regulatory burden allows them to operate safely and more effectively. They support fair and effective regulations that enable the industry to contribute to the economy.
But natural gas prices were the story last night as they gapped open higher, hitting the limit up circuit breaker before cooling off. In fact, natural gas prices actually hit the highest level since December 2022 in part because inventories have fallen well below average at a time when the projections of this summer’s temperatures are going to be much warmer than normal and at a time when Canada is continuing to make threats to cut off supplies.
Natural gas prices increased yesterday when former Prime Minister Jean Chrétien endorsed a natural gas pipeline from Alberta to Quebec. He stated that, “If necessary, the governments can consider going further,” by affecting the American economy “by imposing an export tax on oil, gas, potash, aluminum, and electricity.”
Canada could then use the funds from the export tax to build infrastructure needed in Canada, for instance, to construct a natural gas pipeline from Alberta to Quebec. This move may require Canada to find new customers for its natural gas products. Chrétien referred to the U.S. as the most powerful country in the world, built upon a rules-based order that has brought peace and prosperity.
Chrétien’s threat was inspiring. Some were disappointed there was no mention of extending the pipeline through Quebec. They need to lift another tariff between provinces. He even mentioned that Ben Franklin went to Montreal to try to get Canada to join the American Revolution. And while he seemed proud about that, in retrospect, it was probably a bad move for Canada.
Additionally, Ontario’s threatened 25% surcharge on electricity exports to the U.S. could increase prices for 1.5 million homes in Minnesota, Michigan, and New York. Trump may be able to offset that somewhat.
In the short term, US buyers will try to find cheaper sources, but we are going to have some issues with supply constraints and grids and such. This type of price spike from Canada could do long-term damage because the US will find other ways to provide that energy to these areas.
So Canada has to be very careful, and they’re going to lose their best customer, and if they lose their best customer, they’re going to have to build more than one pipeline if they want to sell their gas.
A recent cold snap resulted in the fourth-largest withdrawal from U.S. natural gas storage, with January withdrawals nearly reaching 1 trillion cubic feet. Inventories are 4% below the previous five-year average after being 6% above at the start of the heating season.
The US is considering a plan to disrupt Iran’s oil transportation by halting vessels at sea.
The Premier of Ontario, Canada’s most populous province, threatened to cut off energy supplies to the U.S. if President-elect Donald Trump implements proposed tariffs on Canadian goods. This highlights potential trade conflicts between the two nations.
“We will go to the full extent depending on how far this goes. We will consider cutting off their energy supplies to Michigan, New York State, and Wisconsin,” Ontario Premier Doug Ford said following a virtual meeting with Canadian Prime Minister Justin Trudeau and other provincial premiers to discuss Trump’s tariff threat. “I don’t want this to happen, but my priority is to protect Ontario, Ontarians, and Canadians as a whole since we are the largest province.”
In November, Trump threatened to impose a blanket 25% tariff on all products from Canada and Mexico unless the countries address the flow of drugs and unauthorized migrants to the U.S..
Bloomberg reported that Ukraine claimed a strike on an oil refinery owned by Rosneft PJSC in Russia’s Samara region, continuing attacks on a key industry on almost on a daily basis. Drones hit the Novokuibyshevsk refinery overnight, a Ukrainian security official said, asking not to be identified because of the sensitivity of the matter.
The facility is of “a strategic importance” for the Russian army as it ensures “a stable supply of fuel for military operations,” Andriy Kovalenko, head of the Ukrainian Center for Countering Propaganda, said in a post on Telegram. Rosneft didn’t immediately respond to a request for a comment, and it wasn’t possible to verify Ukraine’s claims independently. Samara regional governor Vyacheslav Fedorischev said in a post on social network VK that three Ukrainian drones were shot down overnight in the town of Novokuibyshevsk, with no fire or damage registered.
Oil prices are still locked in the range but are building the base for a catapult higher when the seasonality’s kick in later in the month. Natural gas is in an explosive upward move but may be a bit ahead of itself. As we have talked about for some time, natural gas prices are being influenced not only by the fact that we use more natural gas this year than we have in the years past but also by the fact that we have seen projections for a much warmer summer than normal. That means it will be more difficult to get supplies built up ahead of next winter.
Fox Weather reports that millions in the Midwest and Southeast may face another severe weather outbreak this week. March typically marks the beginning of the active spring severe-weather season, and this renewed risk comes after a deadly severe-weather outbreak swept across the nation last week. This week, forecasters will monitor the potential for strong to severe thunderstorms as we approach the middle of the week and again as we get ready to welcome the weekend.