The Energy Report: Fire And Rain

Just yesterday, they said inflation was gone. The old man’s plan put an end to it. I walked out this morning and found they were wrong. Joe can’t remember what he said to do. I’ve seen fire and I’ve seen rain, I’ve seen prices rise that I think will never end. I’ve seen lonely times when I have no cash to spend. But at least we’ll see James Taylor one more time again.

Really? Having James Taylor show up at a party to celebrate the Inflation Reduction Act as consumers see the highest prices that many have seen for goods and services perhaps in their lifetime. James Taylor has seen fire, but does he realize it added to greenhouse gas emissions? This was Jams Taylor’s biggest gig since he sang to France apologizing for Obama for not showing up with other world leaders after a series of attacks in and around Paris, most prominently at the Bataclan theatre, killing 129, injuring more than 400; the Islamic State of Iraq and the Levant claims responsibility. At that time our current climate Czar John Kerry said, “I really wanted to come here and share a hug with all of Paris and all friends, I wanted to express to you personally the sheer horror and revulsion of all Americans for the cowardly and despicable assault on innocent lives." He bought James Tayor on that famous fabled trip because when you’re down and troubled and you need a helping hand somebody better go with them, they just call out his name and he’s there. So James Taylor sang “you’ve got a friend.”

I have stated before, the Inflation Reduction Act is actually a fossil fuel tax. While the Biden administration is following through with its promises to Senator Joe Manchin as far as lifting some restrictions on offshore drilling and approving a pet project natural gas pipeline, the reality is that the greenhouse tax rebates are going to come at the expense of fossil fuels and will make them more expensive and, therefore, add to overall inflation for some time to come.

Oil prices gave up some of their gains overnight after the nation’s rail strike was averted. Yesterday, the rail strike caused natural gas prices to spike pretty dramatically because of concerns that if power generators couldn’t get coal by rail, they would have to revert to using natural gas for power generation. Gasoline prices also increased on the futures markets on concerns that the inability to move ethanol to refiners could cause increased use of gasoline.

Yet, the big story yesterday with the plunging ultra-low sulfur diesel contract claims by some Europeans that they have built up enough supplies to get through winter seems to have taken a little bit of heat off of this market that is still, by any measure, undersupplied around the globe. We saw major unwinding of the long heating oil short gasoline spread. The recent price crash though may be short lived, especially if we get an early start to winter. Some forecasters are saying that that may actually happen and they’re looking at a polar vortex. But it’s obviously too early to declare that summer is over because right now we are seeing another blast of summer that should descend over major parts of the Midwest in the nation.

Speaking about the weather, tropical activity in the Atlantic is causing some concern. Tropical storm Fiona has developed in the Atlantic. Fox Weather reports, “Tropical storm watches have been issued for several island nations in the northeastern Caribbean ahead of the arrival of any gusty winds and heavy rain associated with Tropical Storm Fiona. A tropical storm watch means sustained winds of 39 mph or higher are possible within the next 48 hours. The NHC warns tropical-storm-force winds are possible in the watch areas by Friday evening. Additional watches and warnings will likely be issued on Thursday along the path of Fiona. Fox Weather seems to suggest that the track of the storm, while uncertain at this point, has a low probability of getting into the Gulf of Mexico, but there is an outside chance it could track toward the western part of Florida, according to some models. 

The Energy Information Administration petroleum report yesterday was very bullish considering the fact that crude oil supplies only built because we saw massive release from the Strategic Petroleum Reserve. On top of that we saw a big drop in gasoline inventories. Distillate inventories had a huge build which partly explained the big sell-off in recent days.

The EIA reported, “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.4 million barrels from the previous week." At 429.6 million barrels, {{8849|U.S. crcrude oil inventories are about 2% below the five-year average for this time of year. Total motor gasoline inventories decreased by 1.8 million barrels from last week and are about 6% below the five-year average for this time of year. Both finished gasoline and blending components inventories decreased last week. Distillate fuel inventories increased by 4.2 million barrels last week and are about 21% below the five-year average for this time of year. Propane/propylene inventories increased by 3.8 million barrels from last week and are about 6% below the five-year average for this time of year. Total commercial petroleum inventories increased by 5.5 million barrels last week.Total products supplied over the last four-week period averaged 19.7 million barrels a day, down by 7% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.6 million barrels a day, down by 9% from the same period last year. Distillate fuel product supplied averaged 3.6 million barrels a day over the past four weeks, down by 11.0% from the same period last year.