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Phil Flynn

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

Looks like it pays off to be a pariah state these days as Saudi Aramco’s profits explode. Reuters reported that, “Saudi Arabian state oil producer Aramco on Tuesday posted a 39% jump in its third-quarter net income that beat analysts’ forecasts, boosted by higher crude oil prices and volumes sold. Aramco’s net income rose to $42.4 billion for the three months to Sept. 30 from $30.4 billion a year earlier, it said in a regulatory filing. It was just above the median net profit forecast of $41.7 billion from 16 analysts.”

Biden vowed if he came into office he would make Saudi Arabia a “pariah state” and end fossil fuels in America. He soured the relationship with Saudi Arabia and because of the way that the administration treated the Saudis, they were not very helpful when Biden asked them to raise oil production. Yet Biden’s attacks on US oil and gas have helped Saudi Arabia gain global market share and helped their bottom line.

It wasn’t just Saudi Arabia that booked big profits. Overnight it was reported that British Petroleum also booked big profits. The Wall Street Journal reported that, “BP PLC BP 0.39% increase; green up pointing triangle reported a robust underlying profit for the third quarter and said it would buy back another $2.5 billion of shares, as a strong performance in natural-gas trading offset weaker refining margins.

Investors might be looking at those profits and some may throw money at non-us oil companies because oil investment is being shunned by the Biden administration here in America. Biden wants to bring back the failed economic policies of the past. Yes, US oil companies are also experiencing record-breaking profits, and to assure that investors stay invested, they must repay them in exchange for sticking with them when they had record-breaking losses.

Biden tweeted, “The oil industry has a choice. Either invest in America by lowering prices for consumers at the pump and increasing production and refining capacity. Or pay a higher tax on your excessive profits and face other restrictions.” Yeah, Biden is making it toxic to invest in America. His policies say America is not a safe place to invest because if you’re successful, you can be falsely accused of war profiteering and forced by the government to take away the profits of the money that you’ve already invested. Biden fails to mention that oil companies were suffering record-breaking losses just a few years ago and that these record-breaking profits suggest that they need even more investment to meet demand in the future.

Biden gave a speech where he slandered the US oil and gas industry accusing them of “war profiteering” as he stood next to Treasury Secretary Janet Yellen and Energy Secretary Jennifer Granholm. Energy Secretary Jennifer Granholm is famous for laughing when she was asked a question by Bloomberg News about what she could do to raise U.S. oil and gas production and has no experience in oil and gas. It’s clear as an energy secretary she’s really out of her element.

I used to think that Treasury Secretary Janet Yellen, economist and former Chairperson of the Federal Reserve, had a brilliant economic mind. Yet now she is shredding her credibility by touting failed policies like energy price caps and windfall profit taxes. I’m beginning to wonder if it seems her great economic mind was washed away when she joined the Biden administration. Treasury Secretary Yellen stood behind the President as he touted economic policies for short-term political gain that could have long-term devastating consequences for the US economy. I wish that Treasury Secretary Janet Yellen would step up and reason with the president that these policies are detrimental to the people of the United States.

Yet windfall profit taxes send a signal that you don’t want to invest in America. Short-term politically driven economic decisions are the type of things that you do in a third-world country, not the things you do to the United States of America. We are the country that should be setting an example about good economic policy, not rolling out these destructive policies that have failed in the past for short-term political gain.

On top of that, Biden is blaming the US oil and gas industry for not increasing refining capacity and increasing drilling. But when on the campaign trail, he promised he would end drilling on federal lands and end fracking.

Biden’s czar is at odds with him on this. He said there is, “No need for new fossil fuels anywhere in Climate the world, says John Kerry Speaking in London, last year. The US climate envoy said the world did not have ‘the luxury of waiting until Covid is vanquished to take up the climate challenge’ last year.

Oil prices are looking up. Yesterday prices were under pressure as the dollar surged and concerns swirled about the Federal Reserve is a bit more aggressive with rate increases. The Fed, moving further away from a pivot, put downward pressure on oil prices. China may start reopening its economy and travel is bouncing back and at the highest level since 2019.

 We should get an oil inventory draw this week as well which should support crude oil prices and products. The SPR release is small at 1.9 million barrels this week compared to what we have been used to. Supply is now below 400 million. Now the White House energy advisor Amos Hochstein is admitting that the US is going to have to buy back 200 million barrels to refill the SPR. I think they’re starting to get how dangerously low the supplies are and I think they’re starting to realize if they continue to withdraw supplies without adding, it could cause long-term damage to the Strategic Petroleum Reserve.

The heating oil crack should improve again as well. John Kemp at Reuters writes that “US East Coast distillate fuel oil inventories were just 24 million barrels on October 21, compared with a pre-pandemic five-year seasonal average of 50 million barrels. The East Coast deficit (-26 million bbl) accounted for nearly all the nationwide deficit (-29 million bbl).

Natural gas prices spiked as the forecast for a cold November moved the market sharply higher. This is a reminder that despite the fact that we’ve seen some impressive injections in recent weeks, the overall supply situation is very tight. Natural gas is a weather market and if we get cold weather, we could see new record highs this winter.

Make sure you invest in yourself! Tune to the Fox Business Network! Invested in you!

Call for the Phil Flynn Daily Energy Report at 888-264-5665. It was great seeing so many of you at the Money Show. We had a fantastic crowd.


Phil Flynn

The PRICE Futures Group

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network


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