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
They are more signs that the Biden Administration energy policies are failing miserably. Oil prices are again surging to new highs on the years on war concerns, diesel shortage fears while behind the scenes wind and solar companies are failing. While the Biden Team looks to restrict mining that we will need to produce the rare earth minerals we will need to move toward his electrification of the US economy and at the same time increase our defense for those minerals in China and on OPEC and Russia for oil.
Let’s get to the nitty gritty first. Oil prices did a dramatic reversal yesterday after shaking off Chinese deflation fears and Moody’s downgrade of US banks as the reality of potential oil and product shortages took center stage. Part of the rebound was inspired by threats by Ukraine to respond to Russia’s port attacks putting risk not only to global grain supplies but also Russian oil exports. Ukraine President Zelensky said that “If Russia continues to dominate the Black Sea, outside its territory, blockading or firing at us again, launching missiles at our ports, Ukraine will do the same. This is a just defense of our opportunities, of any corridor.” This morning Russia is threatening to build up their forces as their western borders.
This risk to supply is raising diesel shortage fears again that were enhanced after yesterday’s American Petroleum Institute (API) report. A drawdown in diesel fuels adding to our supply deficit is supporting the entire complex. The API reported that diesel supply fell by 2.093 million barrels overshadowing a 4.067-million-barrel crude oil build and a 413,000-barrel gasoline draw. For crude this build is going to be the best we get as refiners will be sucking down oil and exports are going to be much in demand. Do not look for SPR barrels to bail us out because the short-sighted use of the SPR is one reason that US production is 2 million barrels below what it should be and the fact that Saudi Arabia and Russia can double down as they did yesterday on their pledge to stabilize the market by reducing oil supply. The Saudi Arabian cabinet yesterday announced its continued support for the precautionary measures implemented by OPEC+ to stabilize the oil market, according to state media. The report helped with oils recovery.
The war in Ukraine that happened on Joe Biden’s watch has been a major drain for US taxpayers as US foreign aid to Ukraine has surpassed the amount of all foreign aid made to any country from the US in history. The Biden administration has failed to bring peace and seems tro want to continue to fight this war. This was a war that they seemed to encourage when President Biden kept predicting that Russia would invade Ukraine as opposed to taking steps to stop it. He Famously said that “I think what you’re going to see is that Russia will be held accountable if it invades. And it depends on what it does. It’s one thing if it’s a minor incursion and then we end up having a fight about what to do and not do.”
Today the US involvement is growing with US weapons that have been banned by many nations. The Wall Street Journal reported that “newly delivered, American-made cluster munitions have given fresh impetus to Ukraine’s campaign to retake territory captured by Russia, after weeks of little progress. Ukrainian soldiers say they have used the cluster bombs—which release dozens of smaller bomblets and can cause devastation over a broader area than ordinary artillery shells—to hit concentrations of Russian infantry, groups of vehicles and other targets, clearing the way for ground advances. Kyiv’s counteroffensive operations have struggled in the face of wide minefields and Moscow’s superior air power, which have impeded large-scale efforts to use Western-supplied tanks and armored vehicles to reach and punch through lines of entrenched Russian forces.”
Of course, to win wars it is always a good idea to have energy security, which Europe found out that they did not really have. Short sighted and impossible energy transitions goals left them more dependent on Russia and has to scramble to get supply. President Biden also is taking away America’s energy security with his green energy pish that is not based and is already failing America as it adds to inflation and reduces our energy security, His policy of slandering US oil and gas companies and his touted of solar and wind companies that is showing his misplaced and misguided priorities. Let’s profile just a few stories that show his plans are going.
Reuters is reporting that ‘- U.S. power plant owners warned the Biden administration on Tuesday that its sweeping plan to slash carbon emissions from the electricity sector is unworkable, relying too heavily on costly technologies that are not yet proven at scale. Top utility trade group the Edison Electric Institute (EEI) asked the U.S. Environmental Protection Agency (EPA) for revisions of the proposed power plant standards, which hinge on the widespread commercial availability of carbon capture and storage (CCS) and low-emissions green hydrogen, adding the agency’s vision was “not legally or technically sound.”
Powe relines reported that Wind Energy may be doomed. They point out that “the Wall Street Journal reports that the wind industry has fallen on hard times. The wind business, viewed by governments as key to meeting climate targets and boosting electricity supplies, is facing a dangerous market squall. After months of warnings about rising prices and logistical hiccups, developers and would-be buyers of wind power are scrapping contracts, putting off projects and postponing investment decisions. The setbacks are piling up for both onshore and offshore projects, but the latter’s problems are more acute. Why might prices be rising, and supply chain issues emerging?
The Journal mentions Bidenflation and rising interest rates, but the more intractable problem is supply and demand. Because of their minuscule productivity, wind turbines use extraordinary amounts of steel, concrete, copper, cobalt, zinc, and numerous rare earths. As governments around the world have mandated “green” energy, demand for these materials has skyrocketed. Prices are only going higher, as massive new mines for minerals like copper and cobalt will have to be developed.
They Say that “Europe’s strong winds and shallow waters have made offshore wind one of its fastest-growing renewable technologies. But a 40% cost increase recently halted a giant project in the U.K., a global leader in offshore wind, while developers delayed two investment decisions in the Baltic Sea. Another three projects in the North Sea totaling about $19 billion in planned spending are potentially delayed or revising terms too, said Peter Lloyd-Williams, a senior analyst at Westwood Global Energy Group. There have been similar cancellations and delays of offshore projects in the U.S., too. Quality problems are also adding insult to injury. Wind turbines are at best disposable power plants, lasting only 20 years or so. They are also costly to maintain.
Manufacturers have been struggling with profitability as they deliver ever-larger and more advanced machines, which are more efficient at making electricity. Now some say they are running into problems with wear and tear. “We have problems both offshore and onshore,” said Tim Proll-Gerwe, spokesman with Siemens Energy. The company, which had previously said quality issues related to its subsidiary’s flagship onshore turbines could cost up to $1.1 billion to fix, on Monday raised that estimate to about $1.75 billion.
Blade supplier TPI Composites, which has agreements with several wind manufacturers, issued a profit warning last month that it was seeing higher inspection and repair costs. The struggling wind industry faces other problems that likely cannot be overcome at any cost. Robert Bryce describes the popular revolt against “green” energy that is taking place world-wide.
They also point out ‘ In 2016, shortly before his death at age 46 from cancer, David J.C. MacKay, a physics professor at the University of Cambridge, said wind turbines are “a waste of money.” Eight years earlier, MacKay had published Sustainable Energy — Without the Hot Air, a remarkable book that hammered home the land-use impacts of renewables. MacKay, who recognized nuclear must be part of any effort to reduce carbon-dioxide emissions, calculated that wind energy needs about 700 times more land to produce the same amount of energy as a fracking site. In the same 2016 interview, MacKay called the idea of relying solely on renewables an “appalling delusion.” He continued, “There’s so much delusion and I think it’s so dangerous for humanity that people allow themselves to have these delusions that they’re willing to not think carefully about the numbers and the realities, and the laws of physics and the realities of engineering… humanity really does need to pay attention to arithmetic, and the laws of physics.” Maybe they can use that as an excuse not to build wind turbines in the Hamptons.
The Free Beacon reported that President Biden Said EV Maker Proterra Was ‘Getting Us in the Game’ has declared bankruptcy. President Biden repeatedly praised green energy company as Energy Secretary Jennifer Granhom held stock in the company. The Free Beacon reported that ‘Proterra—the electric vehicle maker whose buses routinely failed to stay on the road—from declaring bankruptcy. Proterra cited “various market and macroeconomic headwinds” in a Chapter 11 filing on Monday, which came after the California-based firm cut hundreds of jobs earlier this year and restructured hundreds of millions of dollars in outstanding debt. The declaration marks a stunning downfall for Biden’s favorite green energy company. Biden took part in a virtual tour of a Proterra facility in April 2021 to promote his $1.9 trillion infrastructure plan, which included billions to boost the electric bus industry. Biden said during the event that Proterra was “getting us in the game” and predicted that Proterra and other electric vehicle companies would “end up owning the future.” He went on to praise Proterra in a March 2022 speech, and less than one year later, in February, the Democrat appointed Proterra CEO Gareth Joyce to serve on the President’s Export Council, which provides advice on international trade. Energy Secretary Jennifer Granholm, meanwhile, held 240,000 shares in the company at the start of her tenure, prompting ethics concerns. While Proterra shares tumbled more than 60 percent in after-hours trading Monday, Granholm will not have to worry about losing her investment. Granholm, who served on Proterra’s board of directors, sold the shares for $1.6 million in May 2021, weeks after Biden publicly touted the company. Granholm’s shares would be valued at just $340,000 based on Proterra’s current share price.
So I thought we wanted electric cars and Nuclear power! I guess we also want to buy rare earth minerals and be dependent on China. Fox News reported that President Biden is to announce a historic national park designation for the Grand Canyon Tuesday as part of a $44 million commitment “to strengthen climate resilience across our national park system.” The move effectively blocks future mining of uranium, the key element used to power nuclear reactors and for other medical, industrial and defense purposes. “
All this drama is sending gasoline prices back up again. AAA says regular unleaded gasoline average is back up to $382.5. Diesel fuel is also back up to 421.8 a gallon and poised to go higher especially if the Energy Information Administration (EIA) confirms the drawdown that we saw from the API. this supply squeeze looks like it’s on and this is one of the reasons we continue to look for opportunities to hedge against upside price risk.
Natural gas is poised to test upper resistance and could see a major breakout especially if the hot temperatures that are being predicted come to fruition. Natural gas which after its huge collapse in price has been in a sideways trading pattern and could be breaking out which could signal sharply higher prices at this point, we’re not sure if the fundamentals justify it but we do think that it might be a good time to put on some options going into winter because the market signaling there could be at some point a major upside move.
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