If you wonder why U.S. consumer confidence is as bad as it is, just look at oil and gasoline.
The price of oil is 8.7% higher than it was a year ago. The cost of gasoline is higher, even as consumers are consuming less of it. According to AAA, the cost of Regular Unleaded Gasoline is $3619 a gallon up from $3.537 a gallon a year ago.
This comes as the Energy Information Administration reported that over the past four weeks, gasoline demand averaged 8.6 million barrels a day, down by 4.0% from the same period last year. And while we expect to see an uptick in demand as the weather warms up, it’s clear that consumers are feeling more stress from the inflationary policies of the government.
Oil is trying to bottom out as it looks ahead to what should be a very tight market globally. The demand for oil should be very close to a record high even as we seem to be sputtering a bit here in the United States.
The global supply and demand balance for oil, gasoline and diesel is still extremely tight. The oil market recently has taken a lot of war premiums out of the price of oil. While the world is still a dangerous place with the Israeli movement on Rafah and the threats from Hezbollah and Houthi rebels, we haven’t seen a major disruption due to these tensions. We do know that the tightness of supply of oil and gas really is going to put more pressure on the Biden administration that is seeing its approval ratings plunge in every major poll.
Why? It’s the economy stupid.
The Biden administration’s green energy policies have had a major part in raising the cost of oil and gasoline. Their policies discouraged investment in gas but overregulation and threats against the oil and gas industry are going to increase inflationary pressures.
You can give tax breaks to electric cars, but you can’t make people buy them. The amount of money US automakers are bleeding with electric cars is almost amazing. The auto industry only moved into electric cars because the Biden administration promised massive subsidies and even with massive government subsidies you can’t sell an inferior product. Most Americans realize, for their needs, the electric car is impractical. Still the Biden administration refuses to back down on this electric car fantasy.
I have always supported all exploration and sources of energy from the very beginning. For many years I pointed out that this dream of an electric car transition was not possible.
We do not have the power grid to support this along with the new demands for power coming from artificial intelligence, cryptocurrency mining and other power-generated businesses. It also never makes sense from an environmental standpoint because it takes so much more fossil fuels to create an electric car and there’s very little benefit until these cars are on the roads for a very long time.
While electric cars can be part of the solution, they will never be efficient enough to carry the entire U.S. economy on its back or on its wheels.
US carmakers are losing so much money on EVs, the Biden administration’s only plan is to try to put on sanctions on Chinese electric vehicles.
Bloomberg News reports that, “Joe Biden will quadruple tariffs on Chinese electric vehicles and sharply increase levies for other key industries this week, unveiling the measures at a White House event framed as a defense of American workers, people familiar with the matter said.
Biden will hike or add tariffs in the targeted sectors after nearly two years of review. The total tariff on Chinese EVs will rise to 102.5% from 27.5%, the people said, speaking on condition of anonymity ahead of the announcement. Others will double or triple in targeted industries, though the scope remains unclear according to Bloomberg.
Oil traders were very nervous over the weekend that Iraq did not plan to go along with the OPEC plus production cuts. Reuters reported that, “Iraq is committed to voluntary oil production cuts agreed by the Organization of the Petroleum Exporting Countries (OPEC) and is keen to cooperate with member countries on efforts to achieve more stability in global oil markets, Iraq’s oil minister told the state news agency on Sunday.
The minister’s comments followed his suggestion on Saturday that Iraq had made enough voluntary reductions and would not agree to any additional cuts proposed by the wider OPEC+ producer group at its meeting in early June.
In Fact according to S@P Global OPEC crude oil production contracted 210,000 b/d in April to its lowest since August 2023 (not including Angola), but members subject to output quotas were still a collective 249,000 b/d above their caps.
Vindictive Joe Biden and his team of regulators are now going after big oil in the US adding to OPEC’s dominance. Last week they accused Scott Sheffield, the former CEO of natural resources, of attempting to collude with OPEC and its allies to increase prices.
That opened a can of worms according to the Financial Times that will add even more to the cost of oil and gasoline. Not only do U.S. oil and gas industries have to compete with the likes of OPEC but they really have to compete and defend themselves against US regulators that seem to have a target on their backs.
The Financial Times reported, ”The US shale oil industry faces a barrage of lawsuits alleging some of the largest companies in the sector colluded to curb output and raise prices, after similar claims were made by US antitrust regulators.
ExxonMobil (NYSE:XOM), Occidental Petroleum (NYSE:OXY) and Diamondback (NASDAQ:FANG) Energy are among the companies named in at least 10 class actions alleging they conspired to co-ordinate and constrain shale oil production, which had the effect of raising US retail petrol prices.”
Of course what they don’t tell you is that if the US oil and gas industry didn’t crack the shale oil code, we would all be paying much higher prices for oil and gasoline. Without the US shale industry we would be totally dependent on OPEC and Russia and Canada for our supplies.
Our economy would be subservient to these oil producers. The Biden administration seems to want to lash out with regulations as opposed to understanding the challenges that the US oil and gas industry has to deal with in the real world not in the fantasy electric car world. This is a world where’re the demand for oil and coal and gas will reach all-time highs. This is a time when we should allow the US oil and gas industry to prosper because they are trying to power the US economy and increase our national security.
We all know about the vicious boom and bust cycles in the oil and gas market. It was not too long ago where we saw the oil and gas industry in the United states brought to its knees because of production war in OPEC. They saw the prices fall below zero and that threatened to put many U.S. oil and gas producers out of business. Without quick and decisive action by President Donald Trump, we would already be more dependent on Russia and OPEC for supply. Trump’s actions have kept prices from being much higher than they are today.
This comes from an administration that has put a target on the backs of the US oil and gas industry from day one. Biden killed the Keystone Pipeline for purely political reasons and added a slew of new regulations that could force many U.S. oil and gas producers out of business. Biden’s drilling moratoriums on federal lands and the politically motivated pause of LNG export terminal approvals have hurt us economically. This administration has total disdain for U.S. oil and gas industry yet they don’t have a realistic replacement. Instead, they push billions of dollars of taxpayer money into green energy boondoggle to try to show how they have virtue on climate change while the reality is sadly the opposite.
Despite the challenges last week in the week market action we do expect the market to bottom very shortly. Look to get hedged on oil and gas and look to buy option plays. Need ideas and which ones to buy, give me a call.
Natural gas is back from the dead! EBW analytics reports: the June contract launched higher last week as pipeline maintenance ratcheted back supply, Freeport returned all three LNG trains to service, and the technical outlook invited algorithmic buying—collectively sparking a short squeeze leading prices as high as $2.344. Over the weekend, ebbing pipeline maintenance allowed pipeline scrapes to indicate a five-week high in production and near-term consolidation is probable. Still, the rapid surge in NYMEX futures is indicative of medium-term upside potential into the summer season.