The Energy Report: There Goes 2021

Should this whole year be forgot and never brought to mind? Should all the bad day’s be forgot and days of auld lang syne? For auld lang syne, my dear. For auld lang syne. We’ll take a cup of kindness yet. For days of auld lang syne.

2021 is coming to a close and in many ways it was not much better than the year before. COVID-19 still weighs on the global economy and inflation is roaring and the geopolitical landscape looks more dangerous than it did before.

In Biden’s July 4 speech he said that “we’re closer than ever to declaring our independence from a deadly virus” turned out to be misplaced optimism. His ill-advised and poorly planned Afghanistan retreat that left 13 Americans dead was done on his order and against the advice of his top military advisors. He has failed to get Iran back into a nuclear deal as Iran has become more dangerous and is closer to a nuclear weapon. The country is less isolated than they were when Biden took office. Iran has also increased their oil exports dramatically since Biden has led.

Today the Biden administration’s foreign policy is going to be put to the test as Russian President Vladimir Putin has reached out for a phone call with the president to ease tensions.

Fox News reported that,

“Biden and Russian President Vladimir Putin are set to hold their second call in a month Thursday amid geopolitical tension threatening Ukraine’s sovereignty. A senior administration official said the two world leaders will discuss the parameters of an upcoming meeting scheduled for the week of Jan. 10, where the U.S., NATO and the Organization for Security and Co-operation in Europe permanent council (OSCE) will discuss a “range of security and strategic issues.”

But will they talk about oil? Novak is saying that OPEC is sticking to its plan to raise output modestly.

As I wrote for Fox Business,

“When we look back at 2021, we know that this was a year of the great inflation expansion. Inflation is unlike anything we’ve seen in a generation. In November inflation was up 6.8%, the highest since 1982 and while supply chain issues due to covid were a big part of what was pressuring prices higher, a look at the big picture showed it was the cost of energy that was one of the root causes.

"Rising energy costs were not just covid related but a self-inflicted wound by the Biden administration as they signaled an ill-advised war on fossil fuels during a pandemic that sucked dollars from the U.S. economy into the economies of Russia and OPEC. Even the Saudi Arabian energy minister Abdulaziz bin Salman warned that the reduced investment in oil [and] gas would cause global oil production to fall by 30 million barrels a day and would only enhance the cartel’s dominance in the global oil and gas space."

"For many years economists were stunned that we could see the economy grow at a rapid pace while inflation remained subdued. Federal Reserve officials were confused as to why we were not seeing inflation creep back into the marketplace. Yet a big part of that was to the credit of the U.S. energy producer.

"The shale revolution provided plentiful and cheap energy which allowed businesses to grow without seeing their costs increase and that kept price pressures low. That also created jobs, not just in the energy industry but from manufacturers that benefited from low U.S. fuel costs. Businesses both large and small flourished, powered by the cheap U.S. produced oil and gas.

"Now inflation is on the rise as U.S. oil and gas production has faltered. One might think cheap, plentiful, affordable energy would be a godsend but fixations over climate change and a green energy agenda have discouraged much-needed investment in the U.S. energy and gas space. Biden will bear responsibility for this underinvestment."

The border crisis has been a national disgrace. The Biden administration’s use of migrants as political pawns has led to s sharp and under-reported rise in human trafficking with migrants being put into inhumane conditions.

The Biden administration’s snubbing of the U.S. oil and gas industry has been a major mistake. On New Year’s Eve 2020 I wrote,

“for 2021 the outlook for oil is more positive. Record OPEC Plus cuts along with a major drop in U.S. production have seen the global supply-demand balance tightened. If the trend continues and demand continues its comeback, it is likely the market will be undersupplied in late 2021.

"The tougher regulatory environment with an incoming Biden administration will also hamper the U.S. oil production recovery. Demand will recover before production and that means higher prices in 2021 and beyond.”

I have to say that was correct and will be correct for the upcoming year as well. As I fell short of my $88.00 a barrel price target for this year, it was still fairly close. The Omicron variant delayed that price objective. Yet in 2022, we should target $95.00 and a shot to test near $100.00 unless the Biden administration reverses its short-sighted war on the U.S. oil and gas industry.