GasBuddy analyst Patrick DeHaan argues that the price at the pump is rising due to increased demand associated with the fact that ‘OPEC is not turning on the tap’.
OPEC has always been ultra-competitive, but the cartel’s latest move is completely stealthy and could leave global energy markets thirsty.
While the globe is becoming optimistic about a post-COVID-19 economic recovery with vaccine distribution becoming more widespread, the OPEC Plus cartel stealthers are using this as a golden opportunity to steal the global economy while the Biden government remained in silence.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| USE | UNITED STATES OIL FUND LP | 43.50 | -0.94 | -2.12% |
US ENERGY INDEPENDENCE IS WALKING
Last week, OPEC and the Russians shocked the market by not increasing oil production at a time when oil markets signal that they need more supply as prices rise.
PART OF NEW OIL AND BIDEN GAS PERMISSIONS ON FEDERAL LANDS HAVE LAWYERS REQUIRING ANSWERS
The structure of the oil market is in what is known as “backwardation”, where upcoming futures contracts are negotiated at higher prices than that of oil in the future, suggesting that the oil supply is tight and needs more supply. At the moment, the setback discrepancy is so great that it is almost as if the market is screaming for help.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| BNO | UNITED STS BRENT OIL FD LP UNIT ETV | 17.10 | -0.40 | -2.29% |
That’s why market watchers expected OPEC Plus to respond to market demand and increase production and restore up to 1.5 million barrels from previous cuts to calm rising oil prices and feed the hungry global oil market. . They also hoped that Saudi Arabia, which just unilaterally cut production by an additional 1 million barrels a day of oil, will begin to return this to the market. However, it seems that the temptation to squeeze the market line in their pockets is very tempting for OPEC Plus, mainly because now there is no one to stop them.
Instead of increasing production, the cartel left production unchanged, with a few modest exceptions. Saudi Arabia has expanded its cut by 1 million barrels per day. This caused a huge increase in prices, driving prices to a two-year peak, as well as an increase in gasoline and diesel prices already plagued by the Texas winter storm, which plagued refineries.
TEXAS STORM HANGOVER CAN ACCELERATE THE PUMP PRICE JUMP
OPEC Plus cried all the way to the bank. These oil ministers are feeling invincible and feel that they can cut production whenever they want. OPEC Plus knows that they once again control the global oil market, as the Biden government has given up trying to be a leader in oil and gas production. OPEC Plus saw an opportunity, took advantage and is now the undisputed leader in the global oil markets.
Under President Trump, OPEC Plus was not so bold. He realized that when OPEC cut oil production just to raise oil prices, it was a direct blow to consumers, especially those at the bottom end of the wage scale. He realized that when OPEC Plus cut production, when the market signaled it needed, it was just a transfer of wealth from oil-consuming nations to their own pockets. Trump called OPEC on Twitter at least eight times between 2018 and 2019 and OPEC Plus listened to him. They not only reversed one of their production cuts, but also canceled plans to cut production in the future. This helped American consumers and families with their budgets. This allowed them to buy other things for their children, instead of putting that money in the gas tank.
The Biden government, on the other hand, seems to quietly endorse OPEC Plus. Not only did it not call Saudi Arabia for its unilateral 1 million barrels a day production cut, it also fell silent on oil prices, although the cost of oil has been 80% higher since Biden was elected four months ago. Some parts of the country are already paying more than $ 3 a gallon for gasoline and soon the rest of the country will join them in this dubious tribute.
You could say that the Biden government is happy with what OPEC Plus has done, because it needs much higher prices to achieve its carbon targets. What you will experience at the gas station in the coming weeks is just the beginning of the New Green Biden Agreement.
This means that gasoline and all the carbon in President Biden’s plan must cost more.
How much more?
A report by energy consultant Wood Mackenzie Ltd. says that if you intend to prevent global temperatures from rising above 1.5 degrees Celsius from pre-industrial levels, carbon prices are expected to rise to $ 160 per tonne of CO2 until 2030, up from a global average of $ 22 at the end of last year. This is an increase of 600%.
This could give you an indication of rising oil and gas prices under the Biden government plan, which will suffer from unnecessary increases in gas and heating bills in the coming weeks and years.
Manufacturers facing higher costs will be forced to restrict hiring or keep wages low due to rising energy costs. This will mean fewer job opportunities. Manufacturers can also go abroad to avoid some Biden policies.
If the price of oil and gas gets too out of control, it could also be a risk to the economy as a whole. The story is clear: most recessions are preceded by a rise in the price of oil caused by factors other than the fundamentals of supply and demand.
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With OPEC Plus unchecked and the Biden government supporting it, we will face some important economic challenges. However, do not work with the OPEC Plus cartel thefts, they will be like children in a candy store making the most money out of the United States economy as they can, because no one is going to stop them.
Phil Flynn is a senior energy analyst at The PRICE Futures Group and a contributor to Fox Business Network. He is one of the world’s leading market analysts, providing individual investors, professional traders and institutions with an updated investment and risk management vision in the global oil, gas and energy markets. His accurate and timely predictions have come to be in high demand by industry and the media around the world, and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as a writer for The Energy Report. You can contact Phil at (888) 264-5665 or at [email protected].