What Is The Answer To Rising Fuel Costs

October 22, 2021 10:30 AM
No near-term solution to rising gas prices
The energy spike could be prolonged
Putin says OPEC Plus is increasing oil supply
The Energy Report

The Energy Report

The Phil Flynn Energy Report 

I Don’t Have An Answer

In an answer in a CNN Town Hall Metting regarding gas prices, President Joe Biden doesn’t have a near-term solution. The President blamed OPEC and suggested that OPEC was withholding supplies for political reasons yet failed to mention that his Administration has policies that have also withheld supply. "I don't see anything that's going to happen in the meantime that's going to reduce gas prices significantly." A lot of Middle Eastern folks want to talk to me," he said. "I'm not sure I'm going to talk to them. But the point is, it's about gas production."  

The President also said that "My guess is you’ll start to see gas prices come down as we get going into the winter, I mean excuse me, into next year in 2022.” However, I'd be more inclined to bet with France’s President Macron, who is warning EU leaders that the energy price spike will be prolonged.

President Biden also suggested that he might release oil from the SPR to which he said might lower gas by 18 cents but said it would still be above $3 bucks. Then he said he promised not to tax anyone making less than 400k yet touted that he was against a gas tax. Biden blaming OPEC while withholding U.S. supply is just ridiculous. What is scary for the country is that some of the warmongers in the Democratic Party want to give more war powers to the President to start a war with China over Taiwan. Some are calling for military intervention in Haiti. God help us.

Russian President Vladimir Putin seemed to be in a giving mood by saying that OPEC Plus is increasing oil supply by an amount that was slightly more than agreed to by the group. At the same time, he warned that “Not all countries can considerably increase oil production. He also warned that “curbs on investments in oil development will cause shortages in coming years” Putin: We're ready to start pumping via Nord Stream 2 as soon as we get authorization.  Russia can increase gas supplies to Europe. Russia can quickly begin to gas supplies via Nord Stream 2. It's possible but not a sure thing, I suppose, until he negotiates the contracts.

The comments by Putin dipped the market but came back as they realized that the market needed more than a slight amount of oil from OPEC.

One of the laws of markets that we should all take to heart is that if you show me a price cap, I will show you a shortage. Maybe not today, perhaps not tomorrow but someday. Well. that day is here in Europe. Oil Price. Com reports, “More than a dozen power suppliers in the UK have exited the retail energy market in recent weeks. The UK has a so-called Energy Price Cap in place, which protects households from too high bills by capping the price that providers can pass on to them, which additionally burdens energy providers. 

As a result, another 20 energy providers in the UK could go bust in what looks like a “massacre” in the coming months unless the government reviews the energy price cap, the chief executive of one of the largest providers said on Thursday. More than a dozen power suppliers in the UK have exited the retail energy market in recent weeks, and more are likely to do so as wholesale gas prices rally.

Europe’s tight gas market, low wind speeds, abnormally low gas inventories, and record carbon prices have combined in recent weeks to send benchmark gas prices and power prices in the largest economies to record highs.

The UK has a so-called Energy Price Cap in place, which protects households from too high bills by capping the price that providers can pass on to them, which additionally burdens energy providers.

The Wall Street Journal reported that Natural-gas prices had shed 19% since hitting a 13-year high earlier this month, reversing some of a run-up that has prompted fears of exorbitant heating bills and higher manufacturing costs at a time of already high prices. In addition, the U.S. Energy Information Administration said Thursday that about one-third more gas than normal was added to domestic stockpiles last week, the latest in a stretch of above-average weekly builds. As a result, inventories that ended August 7.7% below the recent average are now just 4.2% short, according to EIA data.

While recent increases in supply are encouraging data and warm weather could avoid a significant price squeeze. The Nat gas market, in my opinion, is not out of the woods. Any change in the weather should get the market hopping.

We still are very bullish drawdowns for oil in Cushing OK are getting the supplies down to critical levels. We mentioned this a few weeks ago, and we believe that that should keep the WTI well supported. China is trying to slow down gasoline demand by raising prices on customers. Still, it’s just a reminder about how tight supplies are. President Biden’s failure to admit that his energy policies are playing a big part in what's going on with energy prices means that the globe will probably continue to be undersupplied. President Biden doesn't realize that the US energy producer was a significant log in the wheel that kept global energy prices low by going after that industry by killing pipelines by threatening new regulation he is creating the situation where supplies are going to continue to be tight let's president Biden changes course we are going to be faced with sharply higher prices for energy for years to come.

Oil products should be bought on breaks as well. The demand numbers for products continue to be strong despite high prices. Refiners will have to ramp up production to meet demand, which will be very bullish for oil.

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About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.