You want to ban fossil fuels but make them cheap at the same time. This is not only impossible, but it is dangerous. This is something the Biden Administration does not understand or maybe they do not want to do.
After spending years bashing the US energy industry and going easy on our adversaries like Iran, Venezuela, and Russia because they need to keep gas prices low to try to win elections. Sanctimonious lectures about climate change being the biggest existential threat to the world while allowing some of the dirtiest oil producers to thrive.
The global oil pie is shifting away from the US and to producers that do not have our best interest at heart. Nor do they care about what President Biden says is “environmental justice” that he says is at the center of what his administration does do when it comes to making decision about our nation’s energy policy and energy security.
So. I guess that is why the he Biden Administration continues to work to undermine the US oil and gas industry which happens to be one of our nation’s most important industries and the cleanest oil producers on the entire planet. This policy has to rampant inflation as well as global instability. US oil producers are flashing peak oil production while Iran. And Russia benefits from the Biden Administration policies.
As loyal readers of the Energy Report know I have been talking about this for years and it was great to see the Wall Street Journal called the administration out for the politicization of their energy policy and the failure to effectively enforce sanctions against our advisories and allow the US oil and gas industry work to stabilize the market.
The Wall Street Journal wrote:
“The Biden administration wants to keep gas prices stable ahead of the election by encouraging oil to flow into global markets".
The effort has run square into another priority: being tough on adversaries Russia, Iran and Venezuela.
The policy has led to softer-than-expected sanctions on major oil producers, according to diplomats, former government officials and energy-industry players briefed by current officials.
The Journal says that:
“A case in point arrived on Tuesday when the U.S. levied fresh sanctions against Iran. The measures affect a fraction of the country’s oil exports and are unlikely to gum up global markets", analysts say.
WSJ went on to say that:
“There is frustration among some staffers in the U.S. Treasury Department over the lack of action against oil-trading networks that ferry Russian and Iranian oil, including one that officials are currently investigating, according to U.S. diplomats and some of the energy-industry players briefed by current officials.”
Yet Biden must turn a blind eye to bad actors so he can come to try to sell Americans on his green energy fantasies that weaken our country and strengthen our advisories.
Today oil is stymied awaiting the Energy Information Administration data (EIA) and real inflation data on Friday. The American Petrolem Institute report API wasn’t exactly bullish, but the market took it in stride as the API seems to be out of step with the EIA data.
The American Petroleum Institute reported a increase of 914,000 barrels in crude supplies but the market expectation really was for a draw of 3,000,000 barrels.
Their Cushing supplies fell slightly by just 35,000 barrels.
Gasoline inventories surprisingly increased by 3.843 million barrels and that could be a concern because the demand numbers for gasoline have been suspect. That was offset by a drop of 1.178 million barrels and distilled supplies.
This comes as traders wonder if Fed Governor Michelle Bowman really believes what she is saying or is she just trying to massage market expectations.
The Fed governor caused some selling in oil and other commodities like metals after she said that:
“The Federal Reserve should not be considering cutting interest rates given the continued risk that inflation remains sticky or even move higher. We are still not yet at the point where it is appropriate to lower the policy rate.” Reducing rates too soon or too quickly could cause inflation to flare", she warned.
Those hawkish comments are right in theory but are they correct based on current market conditions? It seems that she is more hawkish than most of the other members of the Fed and out of line with the preponderance of economic data and she is probably an outlier.
This type of rhetoric coming from a Fed official will put more focus on Friday’s inflation data and that will be a key driver for the next oil move as well as of a lot of other commodities.
Obviously, the dollar is starting to have an impact on the price of oil more directly let’s say fundamentals for oil are well priced in current levels.
While there is still a significant risk of an upside move in oil and products in the short term the perception that supplies are only a little tight is giving the markets some pause from moving from dramatically higher.
The talk about the demise of the dollar might be greatly exaggerated concerns about central banks buying gold to offset their relationship to the dollar because of politics and because of the surging U.S. debt might be overstated this is something. I will look at this a little bit more closely in the Phil Flynn Manic Metals report this morning. If you are not signed up for the Manic Metals report, email me so we can fix that.
Is It prices or is it Biden’s anti-Fossil fuel agenda that is causing the market to flash signs of peak US oil production?
Probably a bit of both.
Yet industry insiders say that Biden’s crazy energy policies are causing a lack of capital spending and changing plans on investment in US projects because of the power-hungry and erratic EPA and the so-called social justice aspect of drilling a hole.
The potential peak in U.S. oil and gas production is a major growing threat to the US and global economy and at this point, the market seems to be somewhat oblivious to the fact that we could be heading into a major structural shortage in global oil and gas supplies.
Oil Price points out that:
“While last week’s rig count from Baker Hughes showed U.S. oil drilling activity still in a downward trajectory, hitting a 29-month low, Standard Chartered suggests that neither the output slowdown nor the seemingly hesitant drilling has been priced into the market yet.”
They point out that “since November 2022, U.S. drilling activity has plunged 23%, with Standard Chartered noting that “several large companies seem to have moved far away from growth maximization and are now close to a policy of simple output maintenance,” despite rising crude oil prices.’
In the course of the past nine months, StanChart says that there has been no indication whatsoever of sustained growth in US crude oil production. Right now, production is sitting at around 13.2 million barrels per day. And while there was a nice growth spurt last December of over 1 million bpd, for June this year, it has been downhill, with growth at only 0.3M bpd for June.”
Right now we think the long-term options for oil and products are very good value at these levels start to look at long-term strategies for oil we should also see a surge in investing in oil and gas which continues to be undervalued and should really start turning the corner.
Natural gas prices are still being dictated by the weather. There has been some talk about increasing production as some of the players say that we’re withholding supplies or starting to bring back some supplies.
That could get us back into a glut mentality if the temperatures across the US start to moderate.
The spike in the price of gas seems to suggest that the producers can bring on a little bit if they don’t go crazy and as long as the demand doesn’t fall off the map.