Biden Panic Buying. The Energy Report 03/28/2024

What does it say that the Biden administration is starting to buy oil back for the Strategic Petroleum Reserve (SPR) above their stated $70.00 to $67.00 a barrel buying price, purchasing oil at $81.32 a barrel? Is it possible that the Biden administration is fearful that we’re going to get another spike in price? Or are they trying to fill it up in anticipation of something more ominous? Are they worried about the report from energy consultancy Wood Mackenzie that warns that more than one firth, or 21%, of global refining capacity is at risk of closure due in part because of what Saudi Aramco Chief Executive Amin Nasser said this week was a failed and flawed energy transition? Are they starting to worry that major reporting agencies like the International Energy Agency are starting to predict an oil deficit something The Energy Report of course has been warning about for over a year? Perhaps they are starting to worry about more predictions like that of Morgan Stanley about calls for a return to $100.00 a barrel of oil. Are they worried that heading into an election year, we’re seeing gasoline prices start to rise and the defense of their green energy policy is not going to play well on Main Street America?

Perhaps they are concerned that their political motivated use of our strategic reserves has left the country more vulnerable as the Biden foreign policy has failed to reduce risk to global energy supply and global supply chains. Biden’s presidency has seen the risk to global energy supply higher than it has been in at least a half of century. The easing up on Iran has allowed Iranian oil production to hit the highest level since 2018 and has put billions of dollars in their coffers so they can fund their friends in Hamas, Hezbollah, and the Houthi rebels. Perhaps there is worry that the country is not going to be able to respond to a major oil price disruption.

Of course it doesn’t help that the Biden administration has demonized the US oil and gas industry and created more regulations with heavy-handed tactics that are not based in real science and is discouraging investment in the US oil and gas space which is leading some people to predict that US energy production will peak and start to fall. It doesn’t help that the Biden administration killed the Keystone XL pipeline for purely political purposes. Government studies show that the Keystone Pipeline would not have added to greenhouse gas emissions so the decision to kill the Keystone XL pipeline was purely political. Now with the  global supply of oil being exceedingly tight, especially that of heavy oil, the Keystone Pipeline could have moved oil much more efficiently and safely than it’s being moved today.

Regardless of the oil and oil products, the fundamental outlook must be putting major pressure on this administration that is trying to convince you that they have reduced inflation even as everyone knows that the opposite is true. Perhaps they are upping the purchases or the SPR regardless of price because of previous comments by Energy Secretary Granholm’s impossible promise to refill the reserve by the end of the year. She was quoted as saying, “By the end of this year, because of crude purchases, the reserve is expected to “be back to essentially where we would have been had we not sold during the invasion of Ukraine,” after accounting for the cancellation of 140 mn bl of congressional mandated crude sales that were scheduled through 2031. Or maybe it’s just a realization that they’re starting to panic because they used the Strategic Petroleum Reserve as a measure to lower gasoline prices before the war in Ukraine started and now the world is at risk of a major supply shortage and they might not have enough well in the bank to cover in the event of a global disruption.

The Biden administration misused the SPR by changing the definition of the reserve as a reserve to be used in the event of an emergency not in the event of a political crisis. It was never meant to be used as a price control mechanism.

What does it mean when a People’s Bank of China adviser admits that the Chinese past regulatory tightening has hurt the confidence of investment in China? No, US Treasury Secretary Janet Yellen has the nerve to call out China saying that they should never flood the world with cheap energy exports saying it would disrupt global markets and harm workers. Of course, that’s pretty funny because she supported Biden’s release from the Strategic Petroleum Reserve. Is she trying to say that Biden’s release from the Strategic Petroleum Reserve didn’t distort global markets and harm workers? Is she saying that the killing of the Keystone Pipeline didn’t harm workers? Is she saying that the drilling moratorium and regulatory environment didn’t hurt workers in the US oil and gas industry?

Well, the reality is that we’re starting to see oil prices start to react to the global situation. Crude oil prices are surging back to the high after they put into perspective yesterday’s Energy Information Administration report that wasn’t nearly as bearish as the American Petroleum Institute report. Gasoline supplies on the West Coast seem to be tightening significantly which means California is going to see another price spike in gasoline and leave the nation with higher prices.

The EIA said that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.2 million barrels from the previous week. At 448.2 million barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year. Total motor gasoline inventories increased by 1.3 million barrels from last week and are about 1% below the five-year average for this time of year. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 1.2 million barrels last week and are about 6% below the five-year average for this time of year. Total commercial petroleum inventories increased by 5.3 million barrels last week. Total products supplied over the last four-week period averaged 20.1 million barrels a day, up by 2.2% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.9 million barrels a day, up by 0.9% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels a day over the past four weeks, up by 2.2% from the same period last year. Jet fuel product supplied was up 0.4% compared with the same four-week period last year.

Berkeley, CA had to reverse its ban on natural gas. Hopefully the rest of the country will do the same, especially in New York where the natural gas ban and new building is going a have devastating effects on the New York economy. Of course the New York economy it’s a mess anyway. Natural gas traders are hoping for a resumption of the Freeport LNG terminal quickly so LNG exports can start to surge. Natural gas production is showing some signs of easing off.

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