A newsflash. You’ll recall that it was only 18 months ago that the world had so much oil, its price fell below zero.
‘US crude finished April 20, 2020, at minus-$37 a barrel, blowing past the zero mark that few imagined would ever be crossed. Negative oil is the equivalent of getting paid by your local Starbucks to take coffee off its hands.’
Since then, governments and private companies, so covered with greenwash that they look like giant vegetables, have worked tirelessly to lower supplies of the dreadful fossil fuel.
There are subsidies for electric cars, windmills, and solar panels…and penalties for producing oil.
England just announced that new houses will have to be equipped with a charging station for electric vehicles. Internal combustion engines are to be banned from new autos by 2030.
The European Union says it will put speed governors on autos so they won’t go so fast, kill so many people, or use so much oil.
Oil industry takes the hint
Also in Europe, thanks to US meddling, the gas pipeline from Russia to Germany ran into more trouble this week.
US Secretary of State Antony Blinken announced new restrictions on Russian gas sales to Europe, suggesting that there was something underhanded about it. The pipeline is completed. But it is still not in service.
Meanwhile, Treasury Secretary Janet Yellen says the ‘transition’ to a green economy will cost as much as US$150 trillion over the next three decades.
Naturally, oil companies have taken the hint. They’re not about to invest a lot of money drilling new holes when the feds are trying so hard to put them out of business.
Biden’s pick for Comptroller of the Currency, Saule Omarova, made it clear where this is headed. The New York Post reports:
‘President Biden’s controversial, Soviet-born pick to lead a key branch of the Treasury Department admitted in a newly unearthed video that she “wants” traditional fuel industries “to go bankrupt”.’
And here’s Oilprice.com:
‘Reinvestment rates among US shale oil producers hit an all-time low in the third quarter of 2021, resulting in a record free cash flow for the quarter, and are projected to fall even lower by year-end according to a Rystad Energy analysis. The analysis focused on a peer group of 21 public US shale oil producers, excluding majors, that together account for 40% of the expected 2021 output.
‘The peer group’s combined reinvestment rate in the third quarter of 2021 was 46%, down from 53% over the same period in 2020 and way lower than the historical average of above 130%.’
And the disinvestment is not just in shale oil. Total, BP, Chevron, Exxon, and Shell — the biggest producers in the world — have been reducing investment for almost 10 years.
What would you expect to happen?
Faced with so many discouraging words, the oil industry has backed off…output has gone down…and the price of oil has gone back up…Brent crude is now $81 a barrel.
And since oil is critical to modern economies…and crucial to the standard of living of most voters…and since the Biden team is getting worried about winning the next election…
…suddenly, there’s an emergency. Here’s the headline story from Oilprice.com, ‘Biden Announces 50 Million Barrels SPR Release To Lower Oil Prices’:
‘US President Joe Biden announced on Tuesday that the Department of Energy would release 50 million barrels of oil from the Strategic Petroleum Reserve (SPR) in a bid to lower high gasoline prices in a coordinated effort with other major oil-consuming nations.
‘The U.S. Department of Energy will make available releases of 50 million barrels from the SPR, of which 32 million barrels will be in the form of an exchange over the next several months, releasing oil that must be returned to the Strategic Petroleum Reserve in the years ahead. Another 18 million barrels will be an acceleration into the next several months of a sale of oil that Congress had previously authorized, the White House said on Tuesday.’
Oh my. Oil supplies getting tight? Prices going up? Future availability in doubt?
What’s the very worst thing you could do? Drain the strategic reserve!
Consequences of the Fed’s actions
There are knowns, unknowns, and things which we haven’t a damn clue about. Here at the Diary, we are reasonably sure that given a choice of two alternatives, the feds will always choose the worst one.
But the consequences vary.
Biden’s ‘Build Back Better’ boondoggle will make us poorer. And we’re reasonably sure that it won’t make life more agreeable for most people.
As for their energy policies, the fire the feds are playing with will almost certainly burn somebody’s fingers. Fossil fuels don’t just allow us to watch Netflix. They make it possible to feed 7 billion people.
Our guess is that the emergency has scarcely begun.
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