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 Biden administration is undecided on how to respond to the energy crisis they helped create. Political pressure is rising as the people are starting to understand that the policies of the Biden administration are erratic and not well thought out and are driven by ideology as opposed to what is good for the American people.
Not only are Americans being hit by inflation and high gas and heating bills, we are also being hit with the reality that the Biden administration pledge to not raise taxes on Americans earning less than $400,000 is not true. The nonpartisan Tax Policy Center says that Biden’s social spending bill would violate his pledge. Add to that the ill-advised war on fossil fuels has its first causalities and that is the poor and middle class. “Taking into account all major tax provisions, roughly 20 percent to 30 percent of middle-income households would pay more in taxes in 2022,” according to the Tax Policy Center. The think tank determined tax increases would be “very small,” with low- and middle-income households that were subject to a hike paying an additional $100 or less on average. Households earning between $200,000 and $500,000 would pay an average of approximately $230 more per year if the plan is implemented.
Now they are thinking about taking band-aid measures to lower gasoline costs that could end up having longer-term, more damaging consequences. There is a divide in the Biden administration with people who understand the energy industry telling the Biden administration to wait and let the markets take care of themselves because they realize that release from the reserve would probably backfire. Releasing the SPR oil would leave less supply in the reserve, number two, it would create stronger demand and number 3, it would discourage U.S. production and probably caused OPEC to cut production.
Banning U.S. oil exports not only would be wrong because of the quality of U.S. oil, it would just end up causing U.S. oil fields to close down therefore laying off more U.S. workers. Doing so would also get our trade partners angry with us and in the long run have little impact on gasoline prices.
Ethanol and biofuel waivers are probably a quicker way to bring prices down at the pump but that, of course, might be viewed as environmentally unfriendly and raise criticism from his environmental base.
In the meantime, global inventories are tight and they’re going to continue to be tight. As I have said before, the best way to attack this problem is to regain U.S. energy dominance. There is no way to win the war against fossil fuels unless fossil fuels are produced. We must wake up to the reality that fossil fuels are going to be a part of the energy mix for some time and this policy of not knowing which way to turn is damaging the economy and hurting the American people. It’s time the Biden administration reverse course and tell the world that the U.S. is going to get seriously back in the fossil fuel production business and we’ll produce it cleaner than anybody on the face of the earth.
Reuters reports that the oil and gas rig count, an early indicator of future output, rose by six to 556 in the week to Nov. 12, its highest level since April 2020, energy services firm Baker Hughes Co (BKR.N) said on Friday.
Meanwhile the Organization of the Petroleum Exporting Countries (OPEC) last week cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day (bpd) from last month’s forecast, as high energy prices hampered an economic recovery from the covid-19 pandemic.
Yet in India, they are lifting some covid restrictions. India said travelers arriving from a set 99 countries will be allowed to skip a post-arrival covid tests but must monitor their health for the next 14 days even if the country they are coming from is deemed “at-risk.”
We believe the main reason that oil is selling off this morning is the worry that the Biden administration will make a futile and stupid gesture to lower gasoline prices. Hopefully, cooler heads will prevail. Our expectations are that whatever happens today, the market is probably getting overdone to the downside and we should see a snapback on Tuesday.
EBW reports that, “Natural gas posted its largest weekly loss of the year last week as bearish technicals and weak near-term fundamentals—led by inconsistent LNG feed gas demand and strong production—pulled the front-month lower to test support at the 100-day moving average. Over the weekend, firming LNG demand, tapering production scrapes, and cooler weather model runs point to gains for the December contract early this week. If technical support at the 100-day moving average can withstand downward pressure, natural gas could move higher in the near-to-medium term. Losses remain likely by mid-to-late winter, however.
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