Oil prices are breaking out again on renewed oil demand optimism despite the negative speech and dangerous policies laid out by Joe Biden. He proposed steep increases in taxes on rich Americans and raising corporate taxes on corporations that create jobs to cover a whopping 4.0 trillion dollars in new federal spending. Biden said that, “My fellow Americans, trickle-down economics has never worked, It’s time to grow the economy from the bottom and middle out.”
Yet the president is wrong! Trickledown does work. It has worked every time it’s been tried. The U.S. economy has always flourished when the government lowered the tax burden. Jobs are created and wages rise. Wage growth at times has been slow but that has been because of innovation and if anyone thinks wages would have seen strong growth with higher taxes, then show me the evidence. The biggest problem with trickle-down economics is that it increases tax revenues to the government but the politicians spend it faster when they see new revenues. They can’t keep their hands off the money.

So all we have to do to fix an economy is to tax the rich where the top percent of taxpayer already pays 80% of the tax burden! And the top end pays even more when figuring in that that money goes into reckless government spending, lining the pockets of lobbyist companies and that will somehow make everything all right. If the government controls more of our money, then somehow the world will be a better moral and upright place. We are supposed to trust a Biden politician with our money to make better decisions than we do. Not in this life time.

Yet the war on oil and gas is short sighted and is already raising inflation risk that the Fed yesterday acknowledged but prayed was transitory. Yet the pullback in traditional energy projects is going to create economic pain as the country and the world will face higher prices and the government will mis-spend money because they have no skin in the game. If you want a recipe for how to created stagflation, the Biden administration economic plan is exactly what you are looking for.

Yet Biden’s folly will be China’s gain. Already the oil demand recovery in China is more impressive than the United States. Royal Dutch Shell PLC’s Chief Financial Officer Jessica Uh said after a strong earnings report that China’s oil demand is strong. China benefited from Obama’s green energy plan and helped them become the world’s dominant player in cheap solar panels, not to mention controlling the global supply chain for rare earth minerals and just about everything else.

Profits and shale oil are not something you hear a lot about. Gillian Rich of the Investors Business Daily reported that not only did Continental Resources (CLR) top Q1 views and said dividend payments will resume, after rebounding oil prices produced profits again following four straight quarters of losses. Less is more but drilling discipline is key to success not to mention some good hedges. Shell also raised its dividend by around 4%, its second increase in six months, as the oil major seeks to reassure investors it has gained a more stable footing. It comes after Shell slashed its payout for the first time since World War II in April last year as reported by NBC.

The Biden administration is taking credit for the number of vaccinations that are also dramatically rising demand expectations for travel and oil. We are on the verge of an oil and gas demand surge and that should keep the oil breakout on track.

Phil Flynn

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