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
Biden on one hand signals that he wants to engage Iran in rejoining the Iranian nuclear accord and on the other hand is bombing their strongholds. The AP reported that, “President Joe Biden said Friday that Iran should view his decision to authorize U.S. airstrikes in Syria as a warning that it can expect consequences for its support of militia groups that threaten U.S. interests or personnel. “You can’t act with impunity. Be careful,” Biden said when a reporter asked what message he had intended to send with the airstrikes, which the Pentagon said destroyed several buildings in eastern Syria but were not intended to eradicate the militia groups that used them to facilitate attacks inside Iraq. Administration officials defended the Thursday night airstrikes as legal and appropriate, saying they took out facilities that housed valuable “capabilities” used by Iranian-backed militia groups to attack American and allied forces in Iraq.
Iran does not seem to be happy with that and that may complicate Biden’s dream of re-entering the Iran nuclear deal. The Wall Street Journal reports, “Iran rejected a European Union offer to hold direct nuclear talks with the U.S. in the coming days, risking renewed tension between Tehran and Western capitals. Senior Western diplomats said Iran’s response does not quash the Biden administration’s hopes of reviving diplomatic efforts to restore the 2015 nuclear deal, struck between Iran and six world powers and abandoned by the Trump administration in 2018. But they said it seemed to set a deadlock: Iran wants a guarantee it would not walk away from a meeting with the U.S. without some sanction’s relief, which Washington has so far ruled out. The Wall Street Journal says that, “With Tehran escalating its nuclear activities in recent months in breach of the 2015 nuclear deal, the U.S. conducting airstrikes on Iranian-backed militias in Syria, and Iranian presidential elections in June, diplomats have warned that opportunities to ease tensions might now be imperiled.”
The Biden approach with Iran is raising concerns to American allies in the Middle East, mainly Israel, Saudi Arabia, the UAE as well as others. Iran was boxed in by the previous administration. Now with Iran upping its enrichment, Israel is talking about a preemptive strike against the country and Saudi Arabia is feeling like the Biden administration is pulling away from the historical strategic relationship between the two countries.
More regulations on U.S. business are also taking a bite not only on oil companies but small businesses across the spectrum in the U.S.. The Western Journal reports that since taking office, President Joe Biden has made a point to repeal as many of former President Donald Trump’s policies as he can. One such repeal will likely cost the United States massive amounts of money. According to The Washington Times, the Trump administration’s efforts to end unnecessary regulations saved American businesses approximately $160 billion. Trump was the first president to issue a “regulatory budget,” which Ballotpedia refers to as “policies that limit the total costs that a federal administrative agency may impose through rulemaking.” Trump issued the regulatory budget via executive order in 2017. It included a “one in, two out” rule for new regulations, meaning that two regulations must be repealed for every one passed. “The American Action Forum’s report also estimated that the Trump administration added an average of $10 billion annually in regulatory costs, compared with an annual average of $111 billion during President Obama’s eight years in office,” The Times reported. Those numbers represent over a 90 percent decrease in regulatory costs. On his first day in office, Biden rescinded the executive order despite the private sector largely supporting the regulatory budget. If Biden takes regulatory spending back up to Obama-era levels, it will be over a 1,000 percent increase. Too bad for companies trying to recover from covid. So higher regulatory costs mean more job losses, but Biden does not care about jobs unless they are green jobs. This will also directly hurt earners at the lower end of the spectrum and earners are already being hurt by sharply rising pump prices.
Triple-A reports that the national average gas price for regular unleaded has hit $2.720 a gallon. The price increase is going to take more money away from the much-needed stimulus check that the Biden administration is pushing. It is so sad and wasteful that so much money in that bill has nothing to do with relief for Americans. Gas prices are headed towards $3.00 a gallon and if Biden continues to restrict U.S. oil producers, the odds are it is going much higher than that. The energy risks are rising and it will be the little guy that gets hurt.
U.S. manufacturers need to get hedged as natural gas supplies may get squeezed as the Biden administration cracks down on fracking and rejoins the jobs killing Paris Climate Accord. The U.S. manufacturers have had an ace card in the global market with some of the cheapest natural gas prices in the world due to fracking. Yet Biden is giving up that advantage and no doubt the jobs that were created because of that advantage.
This comes as the Energy Information Administration (EIA) reports that Significant demand for natural gas in mid-February led to the second-largest reported withdrawal of natural gas from storage in the United States, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). Weekly stocks fell by 338 billion cubic feet (Bcf) in the week ending February 19, 2021, nearly three times the average withdrawal for mid-February. A record amount of natural gas, 156 Bcf, was withdrawn during that week in the South-Central region, which includes Texas.
Colder-than-normal temperatures across much of the Lower 48 states, especially in Texas, led to increased demand for space heating. Population-weighted heating degree days (HDDs) represent temperature deviations lower than 65 degrees Fahrenheit and are weighted based on population distributions across the country. For the week ending February 19, U.S. HDDs reached 254, or nearly 40% colder than normal, according to the National Oceanic and Atmospheric Administration.
The oil market will look to the OPEC Plus meeting to see how they plan to raise global oil production. Without U.S. shale being a threat as it is being restrained by the Biden administration, they will have more sway on global supply and price. Amena Bakr the Deputy Bureau Chief & Chief Opec Correspondent of Energy intel says that OPEC plus may discuss this week: the total supply to be distributed over April, May and June is around 2.3m bpd. So perhaps 1.4m in April, and the remainder divided between May and June.