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
Sold Out. The Energy Report 03/10/2023
Oil prices are fluctuating wildly on renewed fears of Fed interest rate increases. Yet when it comes to oil in Saudi Arabia, they are all sold out. Despite raising their official selling price of oil to Asia, for the second month in a row it appears that according to Reuters they will supply full volumes of oil to four refineries in Asia. This is another clear sign that China’s oil demand will have a big impact on global oil supplies. Yet in the meanwhile, oil prices are being thwarted by a Federal Reserve that is messaging that recent jobs data is too strong for their liking.
Fears are rising that if today’s monthly non-farm payrolls are too strong, the Fed will act and that means in traders’ minds it will all but guarantee a 75-basis point rate increase at the March Fed meeting.
There is also talk about the possibility that the Federal Open Markets Committee (FOMC) federal funds rate could exceed 6% in the future. Yet can the Fed be so aggressive when it’s possible that their blunt instrument to deal with government spending-led inflation could already be causing risk in the banking sector?
The US stock market tried to ignore concerns of the crashing shares of SVB Financial Group or Silicon Valley Bank, which has heavily funded start-ups in the tech space until late in the session as the shares of that bank dropped by over 60%. Silicon Valley Bank (SVB) caused panic after it announced plans to shore up its finances. Bloomberg wrote that, “By Thursday morning, the bank’s chief executive officer, Greg Becker, was urging clients to “stay calm.” Many investors and banking clients failed to take his message to heart. The company’s stock plunged 60% during the day Thursday, shedding almost $10 billion, and then fell as much as 30% in after-hours trading.
That had impacts on other banks as the four largest US banks lost more than $50bn in market value. That caused bank shares in Asia and Europe to fall sharply on Friday. This raises the complexities of today’s jobs report. On the one hand, Fed Chair Jerome Powell said he will do whatever it takes to fight inflation but does that include causing a banking global banking crisis?
If you think that is crazy, it is no crazier that the green energy movement madness that makes you wonder what the heck these politicians are thinking. Green question of the day. How does the climate get better if you close nuclear power plants and replace them with coal?
Dan Molinski at Dow Jones wrote, “Coal remained the top energy source in Germany for electricity generation last year, and in fact, its piece of the pie is growing. The Federal Statistical Office of Germany says in a statement that coal-generated 33% of all electricity in 2022, up from 30% in 2021. “This means that coal-generated electricity increased by 8.4% compared with the previous year,” the government agency says. “Wind power was the second most important energy source. After the previous year had been relatively windless, its share increased by 9.4% to just under one quarter (24.1%) of electricity production (2021: 21.6%).” Natural gas generated 11% of electricity in Germany last year, and nuclear generated 6%.
The details of the final Strategic Petroleum Reserve release were announced. The US SPR Offered: 26mb, sold 26mb, to be delivered from April to June Buyers in million barrels Marathon Petroleum 8.4 Equinor 7.3 Shell 3.6 Aramco Trading 3.5. Macquarie 1.6 Phillips 66 1.6. Now there should be no more new oil coming out unless Biden starts to panic about gas prices again.
Biden’s crazy tax proposals in his budget, if passed, will cause a recession and severely reduce US energy production and give Russia and OPEC energy dominance over the next decade. Not only this madness of taxing unrealized gains in the stock market that will shake global money out of our markets, but taxes on oil and gas that will make it impossible for the US energy sector to thrive. Fox Business reported, “The administration views eliminating fossil fuel tax benefits as part of the administration’s stated effort to reduce the budget deficit. Office of Management and Budget Director Shalanda Young said on a press call, “This year’s budget cuts the deficit by nearly $3 trillion over the next decade by asking the wealthy and big corporations to begin to pay their fair share and by cutting wasteful spending on Big Pharma, Big Oil and other special interests.”
Fox Business says that Biden’s budget blueprint calls for the elimination or modification of more than a dozen fossil fuel tax policies, which the administration says would reduce the budget deficit by about $3 billion per year and nearly $30.8 billion over the next decade. Some of the more significant proposed changes include ending the use of percentage depletion related to oil and gas wells, which would reduce the deficit by more than $13.8 billion over the decade, and repealing the expensing of intangible drilling costs, which would reduce the deficit by nearly $8.5 billion over the same time frame.
I can tell you that those tax changes will have a devasting impact on US oil and gas production. Small producers will be forced out of business and investment in US oil and gas will flee. This will cause a major price spike in oil and gas prices. This will kill the middle class. It will also take away a key advantage for the US manufacturing sector that has benefited from cheap oil and gas. That will lead to job losses.
You can’t continue to make policies that hurt Americans. You can’t keep spreading the false notion that the oil companies are making record profits without acknowledging they had record losses. You can’t base policies because you covet someone else’s goods. Or worse, to push an agenda that makes the green energy elite rich on the backs of the poor.
Biden’s foreign policy is backfiring and hurting Americans in a big way. His inept handling of Saudi Arabia when he vowed to make our long-time ally a ‘pariah state’, has backfired. Not only has it driven Saudi Arabia closer to Russia and China, it now appears that Saudi Arabia is even restoring ties with its arch-enemy Iran. Bloomberg is reporting that Saudi Arabia confirmed the deal to restore its ties with Iran and within two months they’re going to reopen their embassies in both countries. Can anybody explain to me how the world’s a safer place under Joe Biden’s foreign policy? Well, at least he can bring Saudi Arabia and Russia closer together and can bring Saudi Arabia and Iran closer together. And he can make China and Saudi Arabia chummy. How is this in our country’s Interest? We have been sold out.
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