Tapping strategic petroleum reserves will be short-lived, says Flynn
The Biden administration may be starting to panic as $100 a barrel of crude and record-breaking heating bills become a louder and harsher reality.
|anchor||the protection||The last||Change||Change %|
|Use||United States Oil Fund LP||54.90||+0.77||+1.42%|
|Spoiled||United States Natural Gas Fund LP Unit (Post Rev Split)||19.37||-0.37||-1.87%|
Faced with oil prices hitting seven-year highs and natural gas prices at their highest since 2008, they are now desperate to do something about it. US Energy Secretary Jennifer Granholm floated using the US Strategic Petroleum Reserve in an interview with the FT, but on Thursday the administration backtracked.
Shares jump as debt limit deal
“As always we monitor the market and that means considering all the tools in the tool box to protect the American people. DOE will work with our agency partners to determine if and when action is needed.” But there are no plans at this time,” an Energy Department spokesperson told Granthshala News, noting her comments were referencing a planned release mandated by Congress.
Energy Secretary Granholm Talks SPR Release
Yet a release from the US reserves would only be a short-term fix and would only serve to discourage more US oil and gas production. The oil and gas market is structurally deficient and requires more investment and more production by US producers. A release from reserves would only artificially lower prices and encourage more demand and further tighten supply down the road. Granholm even said she would reject the ban on crude exports, which was lifted in 2015 under Obama’s presidency. “It’s a tool we haven’t used, but it’s also a tool,” according to her interview.
Still, the Biden administration should know that it owns this energy price hike. The track record of dismantling the Keystone Pipeline, drilling moratoriums on Federal Lands, and reneging on the Paris climate agreement while discouraging investment in the US oil and gas industry has helped stem what has already become a global energy crisis. It has been a US oil and gas producer in recent years that has kept global oil and gas prices low, fueling global economic growth.
At the same time, the green energy transition and movement towards a 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 has made poor policy decisions leaving it short of energy supplies and putting economies and the global economy at risk. It decided to shut down power plants and shut down oil and gas production which reduced its supply. Europe also closed nuclear power plants in Germany and became more dependent on Russia for natural gas supplies.
In China and India, we are seeing massive power shortages which can add to the current supply chain issues that we are seeing across the world. It could slow global growth because those two countries are a big part of that equation. China, for its part, pledges that it will do whatever it takes to keep the lights on and pay any cost to its competitors to rebuild supplies.
The Biden team placed its trust in OPEC and Russia rather than on US energy producers. Its policies have resulted in reduced oil and gas production in the United States. Rather than go to US producers to try to address oil and gas shortages, the administration decided to beg OPEC for more oil. That backfired. Longtime US ally Saudi Arabia, the de facto leader of the OPEC cartel, was in no mood to help the US and bail us out like it has other administrations when they have asked for more oil.
To avoid a major US energy crisis and save the economy, the Biden administration must begin to see US energy producers as part of the solution, not part of the problem. The US oil and gas producer is one of the cleanest in the world and one of the most efficient in the world. We need to work with them, not against them if we want to avoid the coming energy crisis. If you want to make a successful green energy transition, you have to grapple with the reality that oil and gas are going to be with us for years to come, rather than fighting that reality.
We need to work efficiently to make it better and clean. This is the only chance for a successful green energy transition.
Read more about Granthshala Business by clicking here
Phil Flynn is a senior energy analyst and Granthshala Business Network contributor at Price Futures Group. 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 insights into the global petroleum, gasoline and energy markets. His accurate and timely forecasts have become in great demand by industry and media around the world and his impressive career spans nearly three decades, drawing attention from his market calls and energetic personality as the author of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email [email protected].