So far the Biden administration has been quiet as OPEC meets about its plans for oil production. It appears OPEC has a new outlook on global oil supply but it is unlikely that the group will change from the script and will raise output by its expected 400,000 barrels a day.
Early reports from the OPEC meeting, as reported by Amena Bakr, suggest that OPEC previously expected we would see an oil oversupply in Q1 and Q2, but now OPEC’s numbers point to a deficit in both quarters. The demand destruction that the cartel was expecting due to Omicron has not happened, That comes as global oil inventories continue to tighten.
Reaction to the early talk out of OPEC is rather muted and oil prices are rising after a big sell-off going into the New Year’s Day holiday where we saw prices fall on very light volume. The market seems to be rising on a risk-on mode and on reports of threats to global supply.
Reports came out that Libya expects its oil production to fall by another 200,000 barrels a day as crews are working on a damaged pipeline. Reuters and Bloomberg report that the latest outage came less than two weeks after militias shut down the OPEC member's biggest field causing the output to drop by 350,000 barrels a day. This becomes a bigger issue because OPEC is predicting the deficit in the next two quarters and this should be very supportive for prices, especially if they can’t get this back online soon.
After this report, one might assume that the Biden administration would be on the phone with the cartel trying to pressure them to raise production more than the expected 400,000 barrels a day. That probably is not going to happen because the Biden administration realizes that the last time they tried to pressure OPEC into raising production it backfired. Besides, the Biden administration is now going after a new scapegoat on rising inflation and that is the U.S. meatpacking industry; but more about that later.
The green energy backlash is hurting the Biden administration and their poll numbers show it. Their failure to involve anybody in the US oil and gas industry in their administration and their total lack of understanding about the influences that can impact the price of oil is glaringly evident.
It wasn’t just about the direct fundamentals regarding the killing of the Keystone Pipeline, but the signal that was sent to the entire energy industry. That is why many analysts missed the coming surge in oil and gasoline prices last year. They didn’t understand that policy has ramifications. When you talk about increasing taxes and making it a toxic environment for investors, you see a pullback and that’s going to cost people at the pump.
The Biden administration’s energy policy is incoherent and is failing and there are growing expectations that somebody is going to have to take the blame. An obvious scapegoat might be Energy Secretary Jennifer Granholm who had the nerve to laugh when asked about the possibility of encouraging U.S. oil and gas producers to raise output.
We know Europe’s economy is in shambles due to surging energy costs and is backtracking from their failed green energy policies. Zerohedge reports that,
“The European Commission is expected to propose rules in January deciding whether gas and nuclear projects will be included in the EU 'sustainable finance taxonomy.' Gas and nuclear power generation would be labeled green because they are 'transitional' activities – defined as those that are not fully sustainable, but which have emissions below industry average and do not lock in polluting assets. The project has a plan, funds, and a site to safely dispose of radioactive waste. New nuclear plants must receive construction permits before 2045.
"Natural gas has green requirements.
1. Investments in natural gas power plants would also be deemed green if their emissions are below 270g of CO2 equivalent per kilowatt-hour (kWh).
2. Replace a more polluting fossil fuel plant
3. Receive a construction permit by Dec. 31 2030,
4. Plan to switch to low-carbon gases by the end of 2035."
"Point number 4 is interesting. To be classified as green, they only have to “plan” and not “do” switch to low-carbon gasses. Low carbon gasses are defined as biogas, biomethane, or hydrogen produced via electrolysis by using renewable-generated electricity.
"Since methane is methane, a plan to switch to low-bio methane costs nothing (no plant retooling needed).The “doing” is another matter. But maybe it’s a lot easier in 2035.
"Previously the EU proposed a 100g CO2e/kWh emissions limit, based on climate fearmongering and steps needed to avoid disastrous climate change. That went out the window when citizens started moaning about the cost of electricity and heating. French President Macron did not want another “Yellow Vest Movement” energy protest on his hands ahead of French elections in April. France derives about 70% of its electricity from nuclear energy, due to a long-standing policy based on energy security. France aims to reduce this to 50% by 2035.
"Practical And Environmental Sense
"The new policy makes for both practical and environmental sense in contrast to the ridiculous path Angela Merkel took Germany. Merkel gave into the greens and agreed to phase out nuclear. As a result, Germany became more dependent on coal. That makes no environmental sense whatsoever.
"Solar and wind are not exactly reliable as Spain found out, and its citizens are bitching the loudest. Mothballing plants that have decades more useful life also makes no practical sense. A cold winter and soaring prices knocked some sense into the EU. Inflation trumped green ideology.
"In the US, Biden hasn’t learned his lesson yet. Elizabeth Warren and AOC still set a green policy."
Big Beef is under pressure as Bloomberg News reports that Joe Biden will announce plans Monday to combat the market power of the giant conglomerates that dominate meat and poultry processing, ratcheting up a months-long campaign that has blamed anti-competitive practices in the industry for contributing to surging food inflation.
Bloomberg reports that Biden will join Agriculture Secretary Tom Vilsack and Attorney General Merrick Garland to meet virtually with ranchers and farmers to hear complaints about consolidation in the industry, while a newly launched portal will allow them to report unfair trade practices by meatpackers.
The White House will also highlight initiatives it is taking to counter meatpackers’ economic power, including $1 billion in federal aid to assist the expansion of independent processors and new competition regulations under consideration. Yet breaking up big meatpackers may cause more problems. Trying to break them up could reduce capacity and cause prices to rise even higher.