I was humbled and honored after President Donald J. Trump gave me a shout-out on his Truth Social account after my interview with the awesome Rachel Campos Duffy on Fox and Friends Saturday morning on the Fox News Channel. In the interview, I was saying that while we could see an increase in some prices temporarily, it is, “Not Going to Be As Bad As Many People Think”. On Truth, Social Donald J. Trump @realDonaldTrump ‘Ellie Cohanim on Israel, and Phill Flynn on Tariffs, were GREAT on Fox & Friends this morning. Real “Pros!” DJT. It was amazing that the leader of the free world could find time to give me a shout and I thank him and pray for him.
The last time I came close to such an honor was when President George W Bush mentioned me in a press release when he was running for president against Al Gore. That was regarding my comments about then-President Bill Clinton and his politicization using the Strategic Petroleum Reserve to try to help Al Gore get elected. President Clinton said it was to cool off rising heating oil prices and released 30 million bbl from the Strategic Petroleum Reserve over 30 days. I called it a sweetheart deal it allowed companies of dubious suitability to make bids on buying the SPR oil because it offered the possibility of an almost riskless cash bonanza.
Based on the market reaction overnight, my point that the tariffs wouldn’t have as bad an impact as feared is already coming true. Despite weeping and the gnashing of teeth, we’re already seeing some prices go higher but other prices go lower. In fact, the movement in the market, though a big gap moves on the opening, is already recovering. A lot of the markets haven’t even moved out of their normal expected daily or weekly deviations. Be greedy when other people are fearful.
The rising US Dollar and the plunging USD/CAD in EUR/USD currency might serve to lower commodity prices. Many commodities are priced in dollars and a stronger dollar means lower commodity prices. And it also proves that tariffs aren’t inflationary just because tariffs may increase some prices. The bottom line is that the main cause of inflation is government spending and printing too much money.
With the Trump Administration Department of Government Efficiency run by Elon Musk and Vivek Ramaswamy, it could offset the impact of rising prices by reducing government wasteful spending thereby reducing our debt and thereby reducing inflation.
The other thing that causes inflation is government over-regulation. Just consider that the regulation on the oil and natural gas industry comes out to be trillions of dollars. Streamlined regulations for the approval of products could lower the cost of production thereby keeping a lid on inflation.
And while the risk of driving Canada and Mexico into a recession, the reality is that both countries could do a lot more to secure the border and stop the flow of illicit drugs and fentanyl.
As far as crude oil is concerned, even though the market is higher today it is not as high as it was last month. Oil products are taking a big leap as refiners will have to scramble to find heavier crude. Natural gas prices are higher as well. Yet despite the shock at the system of tariffs staying in place the market is going to adjust. And while it may be difficult for us to replace heavy Canadian crude for refiners, natural gas could present a situation where we could totally reduce our demand for Canadian natural gas.
John Moran at Moran Logistics pointed out that he believes we could easily live without the 9% of natural gas that Canada supplies us. He believes the United States has the ability to produce either 108 or 109 BCF a day and that’s basically overnight. Mr. Moran doesn’t think that Canada has a lot of storage so it would be a direct hit to them from a sales point. Canada will have to shut in wells. In the US he thinks the lack of Canadian gas could offset the storage problem that we’ve had in the United States.
Natural gas today is getting a big boost not only on the tariff news but also on the weather forecast that suggests that the spring fling is going to turn into another Arctic blast. Fox Weather is reporting that, “Northeast, Midwest face potentially crippling ice storm that could knock out power, snarl travel this week. One scenario could bring notable ice to cities like Des Moines, Iowa; Chicago, Illinois; Syracuse, New York; and Burlington, Vermont. A second scenario would likely spare Des Moines and Chicago from the worst of the icing while transitioning Syracuse and Burlington (NYSE:BURL) to an all-snow event.
John Kep At Reuter reported that, “U.S. PETROLEUM IMPORTS from Canada totaled 4.1 million barrels per day in 2023 consisting of crude (3.8 million b/d) and refined products (0.3 million b/d), according to data compiled by the U.S. International Trade Commission (USITC) from customs declarations. Total imports had grown by an average of 4.7% per year from 2.3 million b/d in 2010. The data on “imports for consumption” is petroleum classified under the harmonized tariff schedule at HTS 2709 and HTS 2710, released from customs control and entering the domestic commerce of the United States, and excludes oil remaining subject to customs control in bond or for re-export.
There is currently a debate about whether the tariffs apply to all Canadian oil entering the United States or exclude oils in transit to be re-exported to third countries. But the terms of the president’s executive order imposing the tariffs are clear it applies to items “entered for consumption” so excludes items that remain in bonded storage or are subject to customs control in transit to re-export.
It’s going to be interesting to see if OPEC who meets this week will change their plans as far as their plans to increase production only gradually. Traders will need to keep an eye on President Trump’s truth social account to see if he starts to put pressure on the OPEC plus cartel. President Trump has a very good relationship with Saudi Arabia. Today there are reports today that President Trump could go to Saudi Arabia or the United Arab Emirates to have a summit with President Vladimir Putin to try to find a way to end the Russian-Ukraine war. That would save the US a lot of money with too many lives lost.
News 18 reports that, “As the Russia-Ukraine war approaches three years, Ukrainian President Volodymyr Zelenskyy has clarified that Kyiv has only received $75 billion out of the $177 billion military aid approved by the United States under the Biden administration. The revelation came after US President Donald Trump’s administration froze virtually all foreign aid with the exception of Israel and Egypt. However, Zelenskyy had then said that the US had not “stopped” military aid for Ukraine.”
The largest oil trader in the world (Vitol): “Crude oil demand will remain at current levels over the next 15 years at least” according to the FT.
For commodity traders, it’s going to be very exciting. We’re going to be able to see good trades on both the long side and short side of the market. Ultimately the oil market was undersupplied before the tariffs, so we are still generally bullish but not because of the tariffs. But because of good old-fashioned supply and demand.