Oil prices are coming back strong as it is becoming clearer that the Omicron virus fears were overstated as far as oil demand destruction is concerned. The Iranian nuclear talks are going nowhere so the risk of legal oil coming out of Iran is less likely, even as the black-market barrels flow.
Geopolitical risks are running high with Russia on the border of Ukraine and continuing tensions with China, not to mention another Houthi rebel missile attack on Saudi Arabia.
The comeback in oil prices reflects a tight global market and the Biden administration once again is trying to bite the hand that feeds us, the US oil and gas industry.
They continue to point fingers at others for the increase in oil prices and their failed energy policy instead of owning what historians will view as one of the most self-destructive energy policies from not only an economic, but also from an environmental and a national security standpoint. Bloomberg News reported that,
“The Biden administration’s No. 2 energy official was heckled at an international oil conference after admonishing U.S. drillers to step up production in the industry’s de facto hometown. Deputy Energy Secretary David Turk told shale explorers on Monday that the government already has done its part to lower fuel prices by offering up part of its strategic crude reserve.”
Maybe someone should tell Deputy Energy Secretary David Turk that releasing the oil from the strategic petroleum reserve does not encourage more oil drilling, it encourages less. When the government steps in and starts playing with the market by releasing oil reserves, it discourages private investment. It becomes more dangerous to invest in oil because you don’t know if the government is going to step in and try to crash prices at a time when you’re trying to sell the commodity.
This is just another example of the Biden administration either having no clue about how the global energy market works, or perhaps it is done on purpose to increase prices so alternative energy sources do not look so expensive. Then when prices go up, the Biden administration blames the oil companies when their policies start giving them heat at the polls.
Bloomberg goes on to say that, “Mr. Turk said that, '“Now there’s needed leadership by our domestic producers,”' Turk said in opening remarks at the World Petroleum Congress in Houston. '“The reality is the Biden administration is not standing in the way of increasing domestic oil production to meet today’s energy needs.”' His remarks provoked a heckler in the audience: '“Why don’t you help us then?”'
The heckler is absolutely right! He called out Mr. Turk’s false assertion that the Biden administration is not standing in the way of increasing domestic oil production is false.
In fact, we know it is factually incorrect to say that the Biden administration has not stood in the way of increasing US oil production. The administration put on a drilling moratorium on federal lands and promised stricter regulation on oil companies along with higher taxes.
The Biden administration has created a level of uncertainty for oil investment that has cut into the entrepreneurial spirit of the oil and gas industry. The canceling of the Keystone Pipeline is just one example.
There was absolutely no reason to cancel the Keystone Pipeline as it did not substantially add to greenhouse gas emissions. The company built the pipeline in good faith that the US government would treat them fairly. Investors in that company were burned by Biden’s political decision and investors once burned will look to other areas to invest their money.
The risk of investment in oil and gas only becomes riskier with arbitrary decisions that have no basis in fact. The administration wants to raise taxes on the oil and gas industry and cancel all federal subsidies to it as well.
When you have a party in power that calls big oil companies down to Congress and accuses them of hiding the truth about climate change and threatening them with legal action, it does not bode well for investment and risk-taking by the oil companies.
When you talk about putting a drilling moratorium on federal lands and talk about raising royalty rates and talk about tougher regulation, it does not encourage more drilling but less. This heavy-handed short-sighted approach by the Biden administration has discouraged investment in U.S. oil production.
This is the administration that has falsely accused oil companies of conspiring to raise gasoline prices and now they’re accusing them of not raising oil production. They are telling the oil industry that they need leadership. Maybe they should look in the mirror.
Biden wants OPEC to supply our oil and gas needs even though those countries produce oil less efficiently and less cleanly than the United States. They’re getting tough policy on Saudi Arabia has backfired and now the Biden administration is desperately trying to repair relations with Saudi Arabia because they realize that they need them in the region.
The Biden administration, as far as energy goes, has gotten everything wrong. It is because they don’t come from a perspective of energy realities but of energy ideology. They think US oil and gas are the problem, but they are so short sighted they don’t see that our energy industry is actually the solution.
Biden complains that U.S. oil and gas companies are making profits. The leader of the free world believes free enterprise is bad and making profits is unacceptable? These are the type of things that are hurting the US economy and Americans' pocketbooks.
Bloomberg reports that,
“The U.S. and European allies are weighing sanctions targeting Russia’s biggest banks and the country’s ability to convert rubles for dollars and other foreign currencies should President Vladimir Putin invade Ukraine, according to people familiar with the matter."
That should scare him.
Your prices might get a little bit of help from inventories tonight. The American Petroleum Institute reports its version of weekly supplies. Our estimates shows that we should see draws across the board somewhere in the area of 2,000,000 barrels.
Natural gas prices got obliterated yesterday on the warm weather forecast. We should try to recover here a bit as it’s clear that the market got beat up pretty badly. There’s a lot of talk about increasing domestic production as well as the possibility that winter will be delayed until January, yet other weather forecasters are still saying that there’s a possibility of cold in late December. We will have to wait to see.