Happy Liberation Day! The Energy Report 04/02/2025

Today Is Liberation Day! I am apt to believe that it will be celebrated, by succeeding generations, as the great anniversary festival. It ought to be commemorated, as the day of deliverance by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp and parade, with shews, Games, Sports, Guns, Bells, Bonfires and Illuminations from one End of this Continent to the other from this Time forward forever more.

You will think me transported with Enthusiasm, but I am not. — I am well aware of the Toil and Blood and Treasure, that it will cost us to maintain this declaration, and support and defend these States. — Yet through all the Gloom I can see the Rays of ravishing Light and Glory. I can see that the End is more than worth all the Means. And that Posterity will triumph in that Days Transaction, even although We should rue it, which I trust in God We shall not.

The war for real free trade has begun and as our second President and Founding Father John Adams reminds us of that Freedom and Free trade must be won at some cost. President Adams made those comments when our freedom was far from assured and it should also be put in perspective that the fears of a trade war having devastating impact on stocks and inflation are generally hyped and misguided,

America has faced tougher challenges and prevailed. The United States will win this trade war, and President Trump’s plan to remove unfair trade restrictions, protect intellectual property rights, eliminate waste and fraud, reduce the deficit, and cut unnecessary regulation costs will strengthen the economy and put us in better position to compete in the new artificial intelligence.

Economists can debate the benefits and the pitfalls of tariffs and trade wars; however, historically, tariffs have not resulted in inflation.

Free trade has enabled consumers to benefit from lower-priced goods from other countries. However, unfair practices such as intellectual property theft and dumping commodities backed by exploited labor have distorted the market and harmed businesses that cannot compete against these practices. President Trump aims to level the playing field for fair competition among all parties rather than implementing protectionism.

Should we stand idly by as we see that Ross Perot was right when he said, “We have got to stop sending jobs overseas. It’s pretty simple: If you’re paying $12, $13, $14 an hour for factory workers and you can move your factory South of the border, pay a dollar an hour for labor, … have no health care—that’s the most expensive single element in making a car— have no environmental controls, no pollution controls and no retirement, and you don’t care about anything but making money, there will be a giant sucking sound going south.    … when [Mexico’s] jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it’s leveled again. But in the meantime, you’ve wrecked the country with these kinds of deals.”

Should we stand by as global elitist look to the US to piggy bank their agenda, with tariffs taxes and the green deal scam cash. Is that not taxation without representation. While I’d prefer a world with free trade we can’t always just pretend that we have it when we don’t.

China has announced that they will restrict companies from investing in the US, which likely means stopping the purchase of farmland. This may lead to TikTok being sold, and there could be changes regarding technology acquisitions from companies like NVIDIA. Other countries might also announce retaliatory tariffs, like those implemented by President Trump initially. If other countries wish to end the trade war, Israel could potentially remove all trade tariffs on US goods.

Barrons reports that “In a worst-case scenario, there could be a 20% across-the-board increase to tariffs on U.S. imports. The resulting price rises would cost the average household the equivalent of between $3,400 and $4,200, depending on the level of retaliation by other countries, according to the Budget Lab at Yale. More moderate options would include a 10% universal tariff, or a sliding scale of reciprocal levies on a limited number of trading partners, with exemptions in some industries.

Oil prices have been rising due to supply and demand, not concerns about tariffs or trade wars. Yesterday, oil prices faced difficulty after the American Petroleum Institute reported an astonishingly significant 6,0376 million barrels increase in weekly crude supplies. Despite skepticism about these numbers, it has slowed the market’s level. The monthly EIA report indicated a supply deficit as January’s demand hit record highs and supplies fell short of expectations. API reported that Cushing, OK was also up by 2.244 million barrels, Gasoline down 1.628 million barrels and distillates down -0.011 million barrels.

Prices also have been relatively subdued even with heightened geopolitical risks. President Trump has been hammering the Houthi rebels reducing their ability to continue with their pirate and terror attacks, and even though there’s a lot of rumors that the US and Israel will attack Iran’s nuclear facilities, overnight comes news that President Trump is seriously considering Iran’s offer of indirect nuclear talks. My assumption that talks are not going to be like when the Biden administration had nuclear talks and basically gave away the store. President Trump is going to negotiate from a position of strength and make it very clear that Iran’s support of terror groups like the rebels and Hamas must stop.

Today we got the Energy Information Administration report and we’ll see if it confirms the big crude build that we saw from the API. We’re keeping an eye on the big picture. While the tariff announcements may shake up oil and gasoline prices for a little while, the bottom line is is that any increase in prices that we see from the tariff and the retaliation from Canada will be modest. Canada may raise the price of their oil to the United states while other countries may sell it to us at a discount. Not that there won’t be some issues with paying more money for Canadian crude, the impact on overall inflation will be minimal and because oil is a global market and basically undersupplied, we think that we’ll get back to supply and demand fundamentals fairly quickly. In fact if tariffs do raise the cost of oil and gasoline it would be offset by weakening demand. High prices cure high prices and it could impact the demand side thereby putting downward pressure on prices. At the end of the day though the big picture is the fundamentals are still solid for oil and there’s still upside risks in the market.

Natural gas continues to be pushed to and from based mainly on conflicting weather reports and maintenance for some pipelines and LNG export terminals. Natural gas has a love hate relationship with the four dollar level if we close above 4 it will look bullish. If we close below 4 be careful for a further correction.

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