DOGE The FED. The Energy Report 04/23/2025

Although there are concerns regarding the layoffs of numerous government employees by the Department of Government Efficiency, at least one position within the federal payroll remains secure. Turn around Tuesday in the stock market couldn’t have looked any more exciting after President Trump came out and said that he had no intention to fire Fed Chairman Jerome Powell. President Donald Trump said Tuesday he isn’t going to “play hardball” with China during tariff negotiations and believes a deal could be made “pretty quickly” and that he was going to be “Very Nice”.

President Trump did say that that he hoped that the Fed would lower interest rates because inflation is coming down and President is right about that. The Federal Reserve’s reluctance to cut interest rates seems to suggest that they are very political, or they just don’t understand that tariffs are not inflationary. Of course the Powell led Fed had issues with inflation before. It didn’t seem to realize that the massive government spending that the Biden administration embarked on created the worst inflation in the 1970s. They continued to say that inflation was transitory until they were forced to admit they were wrong. They also said that they would do everything they could to correct their mistake even if it meant more pain for Main Street because at the end of the day the Fed’s focus is to continue to support Wall Street.

Yet as this economy goes through this transition, reports that more countries are close to cutting deals with the United States suggests that the stock market weakness was way overdone. While some think this recovery is a bear market rally, there is a chance we are near a major bottom. If trade deals are finalized, the stock market could surge later this year. In fact if you look at the stock market rally over the last couple of years it was mainly led by the Magnificent 7 stocks: Apple, Microsoft (NASDAQ: MSFT), Nvidia, Amazon, Alphabet, Meta Platforms, and Tesla. Now with President Trump’s trade deals we could see a stock market rally with more participation than just one area of the market sector.

Energy underperformed during the recent stock market rally. The energy space of course has been knocked down by burdensome regulations and mixed signals by the Biden administration and to their goals to put fossil fuels out of business. As we’ve said before the Biden administration energy policy was really an anti-energy policy based in politics and platitudes and not in reality.

In California, another refinery is closing, causing Governor Gavin Newsom to panic due to his strong stance against fossil fuels. Chevron moved its offices out of California because of the governor’s negative attitude towards the industry. Newsom has done everything he can to put pressure on refineries, even threatening to take the refineries over and he may have to do so if he doesn’t want California gasoline prices to go to $50.oo a gallon. Bloomberg News reported that Governor Gavin Newsom is urging California’s energy commission to work with the oil industry on maintaining fuel supply and refining in the state, less than a week after Valero Energy Corp. said it is planning to close its San Francisco Bay area refinery. Newsom directed Siva Gunda, vice chair of the California Energy Commission, to work closely with refiners, including through “high-level, immediate engagement,” to ensure affordable and reliable supply, according to a letter seen by Bloomberg News. He asked that Gunda reinforce the state’s “openness to a collaborative relationship.”

Now that I am officially a Wisconsin-ite, I thought it was good that an old-line Menomonee Falls, WI based company Harley-Davidson is starting to see some positive news mainly because of the Trump Administration’s dealing with countries that used to put massive tariffs on US products. Bloomberg News reported that, “Harley-Davidson motorbikes could be about to get a whole lot cheaper in India. Officials are considering cutting tariffs on motorcycles with an engine capacity of 750cc or more to zero, people familiar with the matter said. The deliberations are part of New Delhi’s efforts to cut a trade deal with President Donald Trump without conceding too much of its own protectionism. The market for such high-capacity bikes in India is a tiny fraction of the nearly 16 million units sold every year, making the potential concession relatively painless for the local industry.” Of course India may never have sold 16,000,000 units every year if Harley-Davidson was allowed to compete fairly over the last few decades and now, we’ll see if Harley-Davidson gives some of these India motorcycles producers are run for their money.

The American Petroleum Institute (API) oil inventories report yesterday showed strong demand, suggesting that trade issues have not impacted demand in the United States or globally as of yet. The API reported a significant crude draw of 4.56 million barrels, including a drop of 364,000 barrels at the Cushing, OK delivery point. Gasoline inventories fell by 2.180 million barrels, indicating increased demand ahead of the holiday weekend. Distillate inventories decreased by 1.640 million barrels.

Before departing, we hope the Department of Government Efficiency will review US reporting agencies and their supply and demand reports. Both the Department of Energy and as a Department of Agriculture and the Bureau of Labor Statistics need improvements for more accurate data, which will benefit the economy and the markets. The inefficiencies in various government agencies, revealed by DOGE, need smart individuals to fix the software, enhance reporting, and improve overall data.

Recently, natural gas prices in the US struggled to maintain $3, down from $4. Despite seasonal weakness, many believe that above-average summer temperatures could hinder storage levels for next winter. Increased global demand and LNG exports are likely to push US prices higher.

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