"Energy Crunch"
Gas hits new records as oil soars above
$120 ahead of summer driving season
by Jeffrey Tucker
Copenhagen, Denmark - "Well, if that was the big market bounce cheery optimists were looking for, it was certainly short lived. Stocks in the US went... nowhere this past week. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq all ended Friday’s session within one percent of where they began trading Monday. Sideways, in other words. Gold was last seen treading water around the mid $1,850s. It’s up 1.65% for the year in dollar terms.
Oil closed over $120/barrel on Friday, while the national average at the pump clocked another record: $4.67 a gallon, according to the American Automobile Association. On the one hand, persistently high energy prices (like persistently high inflation), is a bane to politicos who depend on happy voters to keep them in office. (The Big Guy’s dismal approval ratings are in no small part a reflection of just such pocketbook issues – turns out American consumers don’t like “everyday higher prices.” Amazing.)
On the other hand, the current energy squeeze provides those waving their big green stick around with the kind of ammunition they need to advance their “energy transition” agenda… the one that Janet Yellen reckons will cost $100 trillion (of money the world hasn’t yet earned and doesn’t have to spend).
Folks like Transportation Secretary Pete Buttigieg and Energy Secretary Jennifer Granholm can’t understand why you haven’t solved your $5 per gallon gas problem by simply snapping up a brand-new electric vehicle. (See our column about this here: “Let Them Drive Teslas.”)
Never mind that the average electric vehicle goes for about $20,000 more than the average “deplorable mobile.” And never mind that the component ingredients for those lithium ion batteries are in short supply... or that they’re extremely energy intensive to build... or that the elements come from (ahem…) “unfriendly” places like China and The Congo. Or that the mining required to extract these metals is terrible for the environment. As long as it’s not dreaded carbon-based fossil fuels...
Which brings us to the current state of the energy market, as Dan Denning explained to Bonner Private Research subscribers in his note on Friday. Here’s a choice snippet...
"Oil closed at over $120/barrel today. Gas prices continue to rise across the country. Interestingly enough, the White House announced President Biden would be visiting Saudi Arabia later this month. That’s after OPEC announced earlier this week that it would bring-forward planned output increases to try and curb the loss of Russian oil from international markets.
OPEC says it will increase production by 640,000 barrels per day in July and August. We’ll see if they actually do. But if President Biden expects that lower gasoline prices in time for the summer driving season (and head of the mid-term elections in November) he’s going to be disappointed. Why?
There’s a structural shortage of refining capacity in the United States. Total capacity has actually fallen by 5.4% and almost a million barrels a day (to 17.9 million barrels per day) since the beginning of the pandemic. In 2021, five separate refineries shut down. News reports this week said the Biden Administration was asking companies to re-open some of those closed down facilities.
The refineries that ARE operating are running at near capacity. Even if the President could get the Saudis to pump more oil, it would have to get here on a tanker. And there’d have to be a place where it could be turned into refined fuels. And we’d have to keep those refined fuels here, rather than exporting them to Europe to make up for lack of Russian exports. In other words, the energy sector has been underinvested in for years. No green energy transition will solve the problem this year. Or next. Or the year after that."
○
$6.89 Gas Prices Sign Los Angeles California USA June 4, 2022
No comments:
Post a Comment