The Biden administration is feeling the heat from rising inflation with rising oil prices. They are taking desperate measures to deflect the blame. Not only did consumer prices rise 5.4% in July from a year earlier, the same pace as in June, it was the highest 12-month rate of inflation since 2008 before the start of our last major financial crisis.
Oil prices broke hard after the White House issued a statement saying:
“Higher gasoline costs, if left unchecked, risk harming the ongoing global recovery." The price of crude oil has been higher than it was at the end of 2019, before the onset of the pandemic. While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022. At a critical moment in the global recovery, this is simply not enough that they were going to pressure OPEC to raise oil production.”
Oil later fell when the White House was asked whether they asked U.S. oil producers to do the same and raise oil output and Biden said no. This sent mixed messages to the market and this disjointed flip-flopping energy policy has both critics and supporters of the administration scratching their heads.
The Biden administration asking OPEC to raise production but telling U.S. producers to stand down is the type of foolish energy policy that puts our economy at risk. The Biden administration does not look at reality when it comes to the energy transition they desperately want to put in place. They want low gas and oil prices, but their policies do everything to increase those prices. They want to discourage oil and gas production before we have a plan to reduce demand and that is just making us more dependent on foreign oil and sending U.S. dollars and jobs overseas.
This disastrous energy policy is going to leave the U.S. economy at risk, and even the Biden administration has acknowledged that in their own statement. They also have given OPEC plus Russia more power as they know that they have the U.S. economy over a barrel. White House press secretary Jen Psaki said the outreach to OPEC+ was aimed at long-term engagement to end anti-competitive practices, not necessarily to garner an immediate response according to Reuters.
The Wall Street Journal Reported that:
“OPEC delegates on Wednesday said they saw no need to bring back oil faster. Saudi officials said they were confused by the Biden administration’s stance, which is seeking to reduce oil consumption, while asking OPEC to pump more oil. Isn’t [Biden] about climate change and the impact of oil on the environment?” asked a Saudi oil official. “How come now they are asking for more?”
"Other delegates also said the world had yet to turn the page on the pandemic. 'The Delta variant is still there,' said a representative from an African OPEC country, referring to a strain of the Covid-19 virus that has devastated India and China, the world’s fastest-growing oil consumers. 'We are not out of the woods yet when it comes to the pandemic.'
"OPEC delegates also warned that lower oil prices could hinder spending on oil and gas projects, which could in turn bring about a bigger spike in prices in the future, particularly at a time when big oil companies are already under pressure to cut fossil-fuel investments in response to climate change.”
The Biden administration needs to wake up to the realities of energy demand in this country and around the world. They must realize that energy transition is going to include fossil fuels. We should not tell U.S. energy producers to stand down and allow other countries to pick up the mantle. That is not good energy or economic policy.
So, when you have a failed policy the best thing you can do is launch an investigation to try and deflect blame. Biden also got the National Economic Council to get the Federal Trade Commission to use “every available tool” to monitor the U.S. gasoline market and look for any illegal activity that might be causing gas prices to jump while the cost of a barrel of oil is going down.
“That’s not what you’d expect in a competitive market,” Biden said, “I want to make sure that nothing stands in the way of oil price declines leading to lower prices for consumers.”
This is just another fake investigation and a waste of taxpayer money. Politicians always investigate to cover for their own failed policies. The oil and gas industry has been one of the most investigated industries on the face of the earth, every time gasoline prices go up, they try to blame energy companies or oil speculators or gas stations for so-called gouging.
They refuse to admit their own failures of energy policy and taxes that caused the price increase. Taxpayers should resent the fact that they’re wasting money on a phony investigation when I can tell them why prices are rising. All they have to do is read my daily Energy Report.
We’ve been saying since Joe Biden got elected that his policies were going to lead to this type of price spike. Time and time again we warned that his policies of canceling pipelines and discouraging investment in U.S. oil and gas was going to hurt the economy and raise prices.
Reuters reported that refiners also had to pay more for U.S. renewable fuel credits, which touched a record $2 in the quarter. The cost for Renewable Identification Numbers (RINs)—the credits used for compliance with U.S. biofuels blending laws—increased by 22 cents each to $1.54 at the end of June from $1.32 at the end of the first quarter. That goes into the price of gasoline and is being driven by Biden's EPA. Save the money on an investigation unless the Biden administration want to investigate itself.
The Wall Street Journal reports:
“The economic impact of the COVID-19 Delta variant and rebounding output mean that expectations of global oil demand outstripping supply are fading, the IEA and OPEC said Thursday. In its closely watched monthly market report, the International Energy Agency said that the worsening of the pandemic, as well as revisions to historical data, mean its global oil demand outlook has been “appreciably downgraded,” with some of this year’s forecast recovery shifted to 2022.
"The IEA cut its 2021 global oil demand growth forecast by 100,000 barrels a day, while upgrading its 2022 forecast by 200,000 barrels a day. Both the IEA and OPEC expect the world’s thirst for oil to return to pre-pandemic highs in the second half of next year.
"The Paris-based IEA said the timing of the variant’s spread has coincided with planned supply increases from the Organization of the Petroleum Exporting Countries and its allies “stamping out lingering suggestions of a near-term supply crunch or super cycle.” OPEC, in its own report, significantly upgraded supply-growth estimates for its non-cartel counterparts for both 2021 and 2022. The Vienna-based cartel raised its 2022 supply-growth forecast by 840,000 barrels a day to 2.9 million barrels a day. While OPEC expects Russia to increase its production by a million barrels a day next year, it said “the U.S., with year-on-year growth of 0.8 million barrels a day, together with Brazil, Norway, Canada and Guyana, will be the other key drivers.”
My take on the IEA report is they are usually more pessimistic about demand than reality. Well I acknowledge that if COVID starts to do more significant shutdowns, it could ease the supply crunch that is undoubtedly coming. But I think there’s more risk of a supply crunch in the future because of the lack of investment and because of complacency.
I also believe there’s going to be a supply crunch because the Biden administration’s policy is not going to allow U.S. energy producers to do what they do best and that is react to supply and demand. In other words, let the energy industry produce oil based upon free market conditions not government overreach and restrictions.
For the oil market it’s the same old story. We still have a bullish outlook and are still concerned about COVID-19 and its impact on demand. But we still believe there’s more risk of a supply squeeze than oversupply. Obviously we’re going to continue to watch the COVID-19 situation very carefully, but our base case is that we’re still going to be under supplied as we head into the end of the year.
Natural gas prices continue to be strong as supplies are on track to end the season at the lowest level in at least ten years or at least close to a ten year low. We’re going to continue to monitor tropical storm Fred to see its impact on supply and demand. Stay tuned and look to buy breaks going into winter for natural gas.