Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
Bloomberg reports that, “U.S. President Joe Biden’s push to slash carbon emissions may inadvertently give a short-term boost to energy companies in one of the world’s biggest polluters. Investors are betting that Russian oil giants such as Lukoil PJSC, Rosneft PJSC, and Statnett PJSC will rally as they mop up market share from rivals in the U.S. and other countries seeking to switch to clean energy. An index of Russian energy stocks has returned 8% in dollar terms so far this year as crude prices rallied, compared with 2% for European oil and gas companies. “Governments will likely limit global companies’ capacities to drill and extract resources,” said Eduard Karin, who helps oversee $1 billion of assets at Alfa Capital Asset Management in Moscow. “The global majors are entering a new market, a new industry where there are a lot of unknowns, and the return on capital is unclear.”
Bloomberg says that Russia is the world’s fourth-biggest carbon emitter, but unlike other major polluters, the government does not have a plan to transition away from fossil fuels. Instead, its state-owned energy companies benefit from some of the world’s lowest production costs and tax breaks, making them well placed to gain in the short term.
Of course we predicted that would happen and we are predicting more pain for U.S. consumers that will be the economic hardship of President Biden’s green dreams. Bloomberg says that it is only a short-term boost but if Biden’s policies are not changed, we believe the loss of U.S. oil market share will be permanently lost. That means that we drivers will up the tab in a big way as we start to consume more Russian oil.
Just look at gas prices. Our friends at Gas Buddy reports that, “For the fifth consecutive week, the national average has increased, rising 3.7 cents per gallon over the last week to $2.45 today according to GasBuddy data compiled from more than 11 million individual price reports covering over 150,000 gas stations across the country. The national average price of diesel has risen 3.8 cents in the last week and stands at $2.68 per gallon.” While all the price increase can’t’ be blamed totally on Biden, the reality is he has done nothing or presumably will do nothing to bring those prices down. By killing pipelines and drilling pauses and reviews, he is already installing an invisible tax on all Americans. That tax will be paid in large part to foreign oil producers that will prosper off the backs of working Americans.
Oil is also getting a push from the stimulus push by the Democrats. If they can get it through, it will give oil and production a big reflationary boost. Stay tuned.
Short term oil is at a new yearly high and may turn a bit cautious as Brent crude hit the magical $56.00 point. We may be due for a consolidation correction even as the fundamentals for oil and product remain bullish. We should see more evidence of the crude oil supply drain as demand globally is rising quickly. In the U.S., based on miles driven, we are seeing a big improvement in freight traffic in the U.S. and is still booming. Use the break to get hedged if you have failed to do so.
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