The oil market is putting at least some fear of the Omicron variant behind it and is surging on a path back to the pre-Omicron price collapse that went far beyond reason. Even the Biden administration says that a federal response to COVID lockdowns may not be the solution as they wave the white flag on defeating the virus.
The Hill reported that “Biden is resisting school closures and other shutdown measures in the face of the highly transmissible Omicron variant as the public grows increasingly wary about a seemingly never-ending pandemic and confusion over mixed messages from health officials.” Biden is trying to urge people to take precautions, but his speech on Tuesday represented a shift from earlier messaging.
Biden is facing the limits of what he can accomplish. No longer is he endorsing strict mitigation measures, such as nonessential business closures, but also the concept of social distancing is hardly ever mentioned anymore. Instead, the administration is pushing testing and vaccines, which it cites as part of the reason for not needing stricter pandemic measures. Still, “there is no political appetite for anything stronger.”
Now the energy markets are facing the reality of a sharp drop in oil inventories that should accelerate in tonight’s American Petroleum Institute report, where we could see crude supply fall by close to 6 million barrels. That is even after the fact that the Biden administration announced it released 50 million barrels from the Strategic Petroleum Reserve, which helped drive US oil exports to record highs but did little to lower gas prices.
While gas prices did dip on Omicron fears, the reality is that today’s national average of $3.28 is 11 cents less than a month ago and $1.03 more than a year ago. This is still a historically high gasoline price and is a drag on the poor and middle class.
Biden’s war on energy and Europe’s energy transition are accounting for explosive gas prices around the globe. Biden’s desire to add billions of dollars of taxes on the US oil and gas industry, as well as an Energy Department leadership that has no experts in oil and gas whatsoever, has created an adversarial relationship with this industry. While they try to point to the fact that permits are up and production is up under Biden, those comments failed to grasp the reality of what was going on in the global oil market and why the Biden apologists missed the biggest run-up in gasoline and oil prices in the last year and continue to get it wrong.
In her much anticipated quarterly “Energy Détente,” Trilby Lundberg pointed out that world motorists are now hard-pressed with high prices curtailing mobility and strained economies. Her report finds that 28 nations are subsidizing gasoline, trying to shield citizens, or deliberately delaying a sluggish government response. Trilby Lundberg points out that Western Europe remains the highest price for gasoline due to extreme taxation, with the average price in Western Europe at $7.21 a gallon. That is up to $1.81 since June of 2020 and is the most extreme price hike among the regions. The second-highest spike in gasoline prices is in the Asia Pacific region, which saw an increase of $1.13 a gallon. Eastern Europe prices were hit less hard as a Roach is $0.71 per gallon.
Reuters reports that an earthquake of magnitude 4.5 struck near Stanton in West Texas on Monday. USGS said that the quake struck at a depth of 7.8 km (4.8 miles).
Natural gas prices are trying to break out as cold temperatures are supposed to hit and the export market continues to be strong. The U.S. LNG exports will continue to surge near record highs.
We hope that the hedgers took advantage of the low prices to lock in their hedges. They may have missed their opportunity but we continue to look to buy brakes on both oil, gas and products.