Oil & Gas - Energy - Commodities - Resources (OILBRENT)

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Real Pain At The Pump. The Energy Report
By: Phil Flynn | May 10, 2024

The oldest gas price cliche in the oil industry and media is to say that when gasoline prices go up we feel “pain at the pump” or some derivative of that. The reason why we use the “Pain at the pump” phrase is there’s probably no other commodity in America that reflects the feeling of financial independence and confidence than the cost of a gallon of gasoline. The reason for that is gasoline is a necessity for almost every American whether they’re retired, going to work or maybe a vacation! In fact, even if you don’t drive an internal combustion engine vehicle or any vehicle at all, the cost of gasoline can impact you because it can raise the cost of other goods we all buy.

The Energy Information Administration (EIA)is predicting that U.S. retail gasoline prices across the United States will average near $3.70 per gallon from April through September, which is similar to prices during the same period last year. The fact is the current price of gasoline is weighing on the psyche of Americans at a very high level which is a warning sign perhaps for the over all health of our consumer driven economy. You can look at the cost of gasoline in gasoline demand and that can sometimes give you a better judge of the state of the US consumer than any consumer confidence index that’s been released.

We can clearly see the angst of the gas consumer because even as the current gas price according to AAA has fallen about 3 cents from a week ago to $3.636 cents a gallon, prices are still 10 cents a gallon higher than a year ago and that is taking a toll on demand as consumers are being hit not only with higher gas prices but inflation pressure that is unlike anything many Americans have seen in their lifetime.

The EIA showed that motor gasoline demand averaged 8.6 million barrels a day, down by 4.0% from the same period last year. So the question becomes whether that drop in demand is transitory or is it indicative of a potential consumer led recession. The University of Michigan consumer confidence reading is today but if you look at the last consumer confidence that we got from the Conference Board, it showed that consumer confidence fell for the third straight month and fell to the lowest level in nearly two years.

That is a concern because inflation is just killing the consumer. It also has huge ramifications for politics because the party in charge usually gets blamed for what’s wrong with the economy. And we know what’s wrong with the economy is inflation. And most economists know what causes inflation. Milton Friedman, the American economist from the University of Chicago who received the 1976 Nobel Memorial Prize in Economic Sciences, said it best that the only cause of inflation is government and only government, by changing their spending and money printing ways, can end it.

So again, the gasoline prices are really becoming a problem for Biden. Americans know Biden owns these higher gasoline prices. The average price of gasoline under President Trump was $2.57 a gallon for regular unleaded, and under Biden it’s over a dollar higher today. I heard one Biden apologist say when you look at the price of gasoline and you adjust it for inflation it’s not that bad. I wouldn’t suggest that Biden put that on a bumper sticker.

Americans know that Biden is overseeing one of the biggest bouts of inflation in recent history and as economist Steve Moore points out, Biden’s claim that inflation was 9% when he came into office was wrong. He said the reality is inflation was at a modern era low of 1.4% when Joe Biden took office and while the market did have to spend a lot of money to handle the pandemic shutdown, the real problem with this inflation is that Biden continues to spend money like a drunken sailor. In fact Biden’s only plan to address any problem is to just spend money.

His other plan is to malign the US oil and gas industry. No president has been more anti-American oil and gas in history. No president has ever issued as many executive orders as possible against oil and gas in history. The latest threat from Biden to US oil and gas is being reported by Bloomberg this morning. They reported that, “Climate activists who successfully pushed President Joe Biden to halt new US liquefied natural gas exports are setting their sights on proposed crude oil shipping facilities, after the administration approved a massive petroleum terminal last month. The administration should stop approvals of deepwater oil export facilities and reevaluate its approval process, the Sierra Club wrote on behalf of nearly 20 environmental and community groups in a letter Thursday to the White House and the Department of Transportation.” We know from Biden’s past decisions that he recently has been tending to give into pressure from the environmental fringe as he is desperate to keep their votes. Now here’s a tiscut and a tariff and a red and yellow basket.

Bloomberg reports that Joe Biden is set to unveil China tariffs as soon as next week, targeting key sectors including EVs, batteries and solar equipment. He’s expected to reject the across-the-board tariff hikes sought by Donald Trump. Biden just likes to do everything different from President Trump just because he despises the man. Whether it’s reversing President Trump’s border policy or his energy policies. Biden hands shifted gears and because of that, we’re seeing the results at the gas pump and when it comes to inflation.

So, you can see that oil is set for a weekly gain rate cut expectations have gone up and the geopolitical risk factors to oil have not gone away. We have seen a week where it’s very clear that OPEC is more than likely going to extend their production cuts into the end of the year with the possibility they will run into next year. We are seeing signs that the US energy industry may hit peak oil production because of new regulations put into place by the Biden administration. Reuters reported earlier this week that, “Republican presidential candidate Donald Trump vowed to reverse dozens of the Biden administration’s environmental rules and policies at a meeting with top U.S. oil executives, where he also asked them to raise $1 billion for his presidential campaign, the Washington Post reported on Thursday.

We still believe the weight to be long on breaks and we still think that people should be prepared for significant upside price risk.

Natural gas is really popping up after a bullish report yesterday. It looks like the worst is over for natural gas in the short term and the market looks like it’s breaking out. That is welcome news for many. Natural Gas hit a 14-week high on Monday and now with the bullish report it looks like we’re going to start going back up. Scott Disavino Reuters said that, “forecasts for higher demand over the next two weeks than previously expected as feedgas to liquefied natural gas (LNG) export plants increased with the return of Freeport LNG in Texas.

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