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
Oil Election Day. The Energy Report 11/08/2022
Before Biden was elected and thereafter, I said a vote for Biden was a vote for higher energy prices. Now Americans have a chance to change the tide of the disastrous short-sighted energy policies that have harmed the economy, hurt the poor, and already are causing shortages of supply. While a Republican Sweep of the House and Senate may not be able to undo all the damage from Biden’s attacks on US oil, gas and refineries, it will be a major step to bringing the country back to the energy market and economic realities.
The inflationary energy policies from the Biden administration of becoming more dependent on foreign supply are clear. The lack of experience surrounding oil and gas from this administration is quite clear and their aspirational energy policy does not fit with the realities of the world. Instead of depending on U.S. oil and gas producers to save the world and their energy needs, they decided to drain our U.S. Strategic Petroleum Reserve. The same reserve they refused to fill up when prices were cheap. If we indeed get a republican sweep of the Senate and the House as the polls suggest, it will be a repudiation of Biden’s disastrous energy policy.
We should get some oil price support from this week’s inventories. The SPR reported a release of 3.6 million barrels last week and that should not be enough to build the weekly inventory. As the SPR releases become smaller, the crude draws will become larger as we head into winter.
I’m hearing from a lot of my heating oil dealers who are very concerned about the availability of supply going into winter. Bloomberg News is now reporting, “Heating oil delivered to New York is the priciest ever. Retailers in Connecticut are rationing it to prevent panic buying. New England’s stockpiles of diesel and heating oil – the same product, taxed differently – are a third of normal levels. Natural gas inventories are also below average. A Massachusetts-based utility is imploring President Joe Biden to prepare emergency measures to prevent a gas shortage.”
Of course, this has been an accident waiting to happen and why The Energy Report, for well over a year, has been warning about hedging the risk for oil heating oil, gasoline and natural gas going into winter. Biden’s anti-fossil fuel policies have created the environment that has not allowed the US oil and gas industry to thrive. We are seeing a reduction in the drilling of uncompleted wells due to lack of investment and we’re seeing a lack of employees wanting to go into an industry that the Biden administration says they’re trying to kill.
Joseph R. Nolan, junior president and chief executive officer of Eversource Energy, wrote a letter to the president of the United States calling for action to avoid shortages of natural gas and diesel. He warned that, “The natural gas pipelines that serve New England operate at maximum capacity during the winter. During very cold weather, and for extended periods, the pipelines cannot fully supply heating demand or provide enough fuel to power gas generators without significant injections of LNG on the eastern and northern parts of the New England gas system. Because New England is at the end of the interstate pipeline system and lacks large-scale, long-duration energy or fuel storage, both the gas distribution system and the electric power system have a dependence on imported LNG, and this reality will persist until the region invests in access to alternative long-duration energy storage infrastructure. Pipeline deliveries are routinely supplemented by shipments of foreign-sourced LNG delivered to the LNG import facility in Everett, Massachusetts, on foreign-flagged vessels. However, because of the war in Ukraine, imported LNG is not available to the New England region in the volumes necessary to meet this winter’s needs without causing further stress on European markets and the American economy. Additionally, increasing reliance on foreign-sourced natural gas poses a particular national security threat at this time given the war in Ukraine. To the extent in New England, power generators are forced to increase their reliance on foreign sourced natural gas – if that is even possible – it will exacerbate well-documented shortages in Europe. More fundamentally, from a national security perspective, it will put upward pressure on prices in the international market for natural gas. As a major gas supplier, Russia will directly benefit from higher prices, and that in turn threatens to subsidize the Russian military and prolong the war in Ukraine. The federal government has at its disposal a number of emergency authorities that could relieve the risk to electric reliability, New England faces this winter, if exercised in a timely way.
At a minimum, federal agencies, acting within their existing established authorities, could provide relief through: An emergency order under Section 202(c) of the Federal Power Act, 16 U.S.C. § 824a(c), which may be authorized due to a sudden increase in electricity demand, a shortage of electricity, a shortage in facilities, fuel, or water for generation, or for “other causes.” This authority permits the Secretary of Energy to order “temporary connections of facilities and such generation, delivery, interchange, or transmission of electric energy” as in the Secretary’s judgment “will best meet the emergency and serve the public interest.” I know that you share my concern for the people and businesses of this great region. I ask your administration to take all necessary measures without delay.
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