Image Source: Unsplash
 

Oil prices fought off the irrational Fed-inspired pessimism most commodity prices suffered after Russia yielded its energy weapon by banning exports of diesel and gasoline in a market that is short of both. History will not judge the Biden administration’s energy policies kindly as every move he made to disparage the US oil and gas industry and discourage investment has only empowered our adversaries and has added to inflation. It is not only the massive debt that Art Berman points out that just the interest alone is more than 2 billion dollars a day, yet it was his pipeline ban and drilling moratoriums and encouraging frivolous lawsuits against our oil and gas industry that make many question what he is thinking.

In fact, the war in Ukraine is really the first war of the ‘Green New Deal’. A war that should have been and could have been avoided now has enacted not only a devastating toll on the Ukrainian and Russian people but also a negative economic impact on the US economy. I am not only talking about the trillions of unaccounted-for tax dollars to support the Ukrainian war effort but also the energy policies put in place to try to respond to the fact that Europe, in their push to move to green energy, only forced more energy reliance on Russia. Russia continues to use that fact to its advantage and despite sanctions and the laughable Biden price cap has allowed Russia to not only get back energy revenues from before the Ukraine war but also regain dominance over the market where it can cut diesel and gasoline exports and move the entire global market.
Add to that the policy to make Saudi Arabia a “pariah state” which instead made the country less responsive to US calls to help with oil production. It was just a year ago that White House National Security Adviser Jake Sullivan said Biden does not intend to meet with Saudi Crown Prince Mohammed bin Salman at the G20 summit and accused Saudi Arabia of aligning with Russia in the war with Ukraine.

The Crown Prince responded, “We are astonished by the accusations that the kingdom is standing with Russia in its war with Ukraine. It is telling that these false accusations did not come from the Ukrainian government.” He also posted a thank-you note from Volodymyr Zelenskyy that said, “Spoke to Crown Prince of Saudi Arabia Mohammed bin Salman. Thanked for supporting Ukraine territorial integrity, and resolution at the UN General Assembly. We agreed to interact in the release ofprisoners of war. We agreed on the provision ofmacro-financial aid to Ukraine.” Breit Baier reported in his interview with the Crown Prince on Fox News.

The AP reported that, Saudi Crown Prince Mohammed bin Salman said in a rare interview with Fox News on Wednesday that negotiations over Israel means the prospects of normalized relations between both countries get closer” every day, but that treatment of Palestinians remains a “very important” issue to be resolved. Saudi Arabia is discussing a major agreement with the United States to normalize relations with Israel in exchange for a U.S. defense pact and aid in developing its own civilian nuclear program. The Saudis have said any deal would require major progress toward the creation of a Palestinian state, which is a hard sell for the most religious and nationalist government in Israel’s history. “For us, the Palestinian issue is very important. We need to solve that part,” Saudi Arabi’s de facto leader, widely known as MbS, said on “Special Report with Bret Baier” in an interview conducted in English, adding that there had been “good negotiations” so far.

Some people believe that Bidens’ heavy-handed approach to Saudi Arabia set back Middle East relations and they also believe that Biden’s inviting a small incursion into Ukraine gave Putin the green light to invade.
The US energy response to tightening supply is a far cry from what it should have been as it is estimated that the US would be producing 2 to 4 million barrels more oil today if they were not hampered by this administration. Those who thought the killing of the Keystone pipeline would have no impact on product prices now have to admit that the free flow of Canadian oil through that pipeline could have helped alleviate some of the product market tightness. Or not admit that they were wrong and blame it on something else without grasping cause and effect.

We know that this administration has not grasped cause and effect in energy markets as their policies are erratic and haphazard. Not exactly the type of regulatory environment that invites investor confidence. The cause and effect of their heavy government-subsidized electric car push on the US auto industry or the impact on the environment for electric cars that are not ready for prime time. Yet the impact of inflation is being felt now on oil and electricity costs as well as causing the Fed to have to decide on how to fight inflation.
Today we get a doctor of inflation doom Neel Kashkari,  president and CEO of the Federal Reserve Bank of Minneapolis, who seems to break oil every time he speaks. Yet the issue with oil and products, that we have been warning for months, is at a point where demand is exceeding supply.
Predictions of drops in oil and gasoline demand did not keep up with reality. The prediction that a China slowdown would cause a drop in oil prices did not match with the reality of near record-breaking Chinese demand and refinery runs.
Oil looks like it will run into tough resistance near 9450 to 9500. That should hold but any breech of that area due to and supply issue, could send us spiking as far as $111.00. Products, especially heating oil and distillate, need to be hedged because of significant risks of price spikes. Gasoline also has that risk, to a lesser extent as it is out of season. Yet the focus on keeping distillate supplied will keep gasoline uncomfortably tight.
Natural gas could also run if the winter is cold. Start looking at winter hedges. Also, stay on the Fox Weather app as the Atlantic is seeing more hurricane risk. Fox Weather says that, “Tropical Storm Warnings issued as Potential Tropical Cyclone Sixteen takes aim at the East Coast this weekend The National Hurricane Center says Tropical Storm Warnings have been issued along the East Coast as Potential Tropical Cyclone Sixteen begins to gather some steam and make its way north off the southeastern coast of the U.S. that will eventually bring it on a path to the mid-Atlantic.

More By This Author:

The Energy Report: Fed Sleight of Hand
The Energy Report: A Mad Scramble
The Energy Report: The Cumbersome Gap