$100 oil talk pushes Department of Energy into panic mode
Tapping the Strategic Petroleum Reserves would be short term fix, says Flynn
The Biden administration may be starting to panic as calls for $100-per-barrel crude oil and record-breaking heating bills are becoming louder and harsh reality.
|USO||UNITED STATES OIL FUND L.P.||60.98||+0.01||+0.02%|
|UNG||UNITED STATES NATURAL GAS FUND LP UNIT (POST REV SPLIT)||7.33||+0.15||+2.09%|
Faced with oil prices near seven-year highs and natural gas prices at the highest prices since 2008, they are now becoming desperate to do something about it. U.S. Energy Secretary Jennifer Granholm, in an interview with the FT, floated using the U.S. Strategic Petroleum Reserve, but on Thursday the administration backed off.
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"As always we monitor the market and that means considering all tools in the tool box to protect the American people. DOE will work with our agency partners to determine if and when actions are needed, but there are no plans at this time," a Department of Energy spokesperson told Fox News while noting her comments were referencing congressionally mandated planned releases.
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Yet a release from the U.S. reserve would only be a short-term fix and would only serve to discourage more U.S. oil and gas production. The oil and gas market has a structural shortage and needs more investment and more production by U.S. producers. A release from the reserve would only artificially lower prices and encourage more demand and further tighten supply down the road. Granholm even went as far as saying that she would rule out a ban on crude oil exports, which was lifted in 2015 when Obama was president. "That’s a tool that we have not used, but it is a tool as well," according to her interview.
Still, the Biden administration should know that it owns this energy price spike. The track record of killing the Keystone Pipeline, the drilling moratorium on Federal Lands, and the rejoining of the Paris Climate Accords while discouraging investment in the U.S. oil and gas industry has already helped to add to what has become a global energy crisis. In recent years it has been the U.S. oil and gas producer that has kept global oil and gas prices low while feeding global economic growth.
At the same time, the green energy transition and the movement toward the Green New Deal are putting the global economy at risk. Europe put the cart before the horse. In its quest to become more carbon-neutral, it made bad policy decisions that left it short of energy supply and is putting the economies and the global economy at risk. It chose to close power plants and shut down oil and gas production that left it short of supply. Europe also closed nuclear power plants in Germany and became more reliant on Russia for natural gas supply.
In China and India, we are seeing massive power shortages that could add to the current supply chain issues that we're seeing around the world. That could slow down global growth as those two countries are a big part of that equation. China, for its part, vows that it will do whatever it takes to keep the lights on and will pay any price over its competitors to rebuild supply.
The Biden team put its trust in OPEC and Russia instead of the U.S. energy producer. Its policies have led to less oil and gas production in the United States. Instead of going to U.S. producers to try to alleviate what is a shortage of oil and gas, the administration decided to beg OPEC for more oil instead. That backfired. Long-time U.S. ally Saudi Arabia, the de facto leader of the OPEC cartel, was in no mood to help the U.S. and bail us out like it has other administrations when they have asked for more oil.
To avoid a major U.S. energy crisis and to save the economy, the Biden administration needs to start looking to U.S. energy producers as part of the solution, not part of the problem. The U.S. oil and gas producer is the cleanest in the world and the most efficient in the world. If we want to avoid the coming energy crisis we need to work with them not against them. If you want to have a successful green energy transition, you have to deal with the reality that oil and gas are going to be with us for years to come instead of fighting that reality.
We need to work efficiently to do it better and cleaner. It's the only chance to have a successful green energy transition.
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Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He 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. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at email@example.com.