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
The re-opening trade in the U.S. and around the globe has Brent crude within a hair of $70.00 a barrel as the supply side for oil will start to get tighter. Not only did the American Petroleum Institute (API) report a 7.688-million-barrel crude draw, but 5.308-million-barrel gasoline draw as the gasoline demand heats up. As well there was a 3.453-million-barrel distillate draw as farmers get back in the fields and airlines see the most flights since the pandemic shutdown. U.S. refinery capacity is lower as well. This comes against a backdrop of rising geo-political risk to supply as reports say that a group of Iraqi militants attacked an oil field in Kirkuk and reports that Iran is ready to walk away from nuclear talks unless the Biden administration immediately removes all sanctions on the terrorist nation.
It is also getting harder to find capital as banks and pension funds are striving to be greener and do not want the sign of oil on their portfolio. This shortsighted move is going to create a growing risk to the U.S. economy as the radical plans by the Biden administration to transition from oil won’t be possible without natural gas and a big investment in nuclear power. The efficiency of the government will plummet as they switch to electric vehicles and the Biden administration will have to find a way to deal with all the negative environmental impacts from a big surge in electric cars. Of course nations that produce minerals will be the biggest beneficiaries of the Biden electric push. China will be a major benefactor as their rare earth minerals are going to be needed.
In the meantime, we still need a lot of gasoline. Supplies are below normal, and demand may approach normal. Refining capacity is lower and we have a wave of pent-up demand. Widely reported distribution issues as far as driver shortages are concerned that many drivers dispute. They say solving the driver shortage is easy. Pay them. Still, there are certification issues, and companies putting more personal lawsuit risk on drivers is also a bone of contention.