Prepare Yourselves for $5 per Gallon Gasoline

Footage of actual Biden press conference:

Short run?

Those millions of barrels of imports are mostly for refining into gasoline.

Your economic assumption that domestic sources are a substitute good in gasoline production is weak.

Gas, coal, ethanol, and light crude production has less impact on price at the gas pump than you seem to think. Not to mention that we were net exporting energy the last few years, exporting that increased production or replacing coal with gas much more than substituting oil for gasoline production.

Ramping up gasoline production based on domestic sources isn't so easy.

The spurious theory that all of this is Biden and Democrat policy doesn't explain world oil prices. We've got an oil price shock, but it's not all government policy.

And this is where the cancelled Keystone XL pipeline factors in. Supplies of that heavy oil (normally <25 degree API) in the past have come from Venezuela and Canada. Venezuelan oil production has fallen from 3.1 million BOPD (2005) to around 500,000 today; putting more pressure on Canadian imports. The Keystone XL (which would be nearly completed today if not for Biden cancelling it on his first day as president) would have supplied 850,000 BOPD of heavy Canadian crude oil to refineries in the Midwest US. Instead, this Canadian crude is now put into the Trans Mountain pipeline and moved to the Canadian Pacific Coast where it is loaded onto tankers and shipped to China. 

To make-up for the lack of heavy crude, the US has been importing about 630,000 BOPD from Russia. All this crude oil could have been supplied by the Keystone XL if Biden hadn't cancelled it. Since China now gets the crude the Keystone XL would have provided to the US, it was a good move for the citizens of China. 

The pandemic lockdowns crushed crude oil prices in 2020. WTI prices went negative (-$27.00 per barrel) for a few days in the spring of 2020. US production dropped from 13 million BOPD to under 10 million BOPD. Today US production is approximately 11.5 million BOPD.

www.eia.gov/petroleum/production/

It's struggled to recover for a variety of reasons. The two main ones are the following:

1) Banks, because of ESG pressures, are limiting funding to oil companies. Big oil companies, like Exxon or Chevron, use internal cashflow to drill wells. Smaller independents (which account for about 50% of US production) normally borrow funds for drilling and then pay back the loans with funds from production. It's similar to most folks taking out a mortgage to purchase their home rather than purchasing a house in cash. Under the Biden Administration, the Climate Crusaders have choked-off funding of new oil and gas drilling.

2) The Biden Administration has also effectively used the EPA to limit new drilling. When you produce oil, you also get associated natural gas. Although produced oil can be temporarily stored in tanks until it can be trucked to a pipeline or refinery, natural gas needs to be put into a pipeline. If your well is in a remote location, or the natural gas pipelines where your well is going to be drilled are full, you need to build a new pipeline to takeaway the produced gas before you can produce. Under the Biden Administration the EPA has not granted permits for a single new pipeline project.  This has greatly impacted the drilling of new wells. You basically now have to wait for production to drop in the area you want to drill a new well, so there will be pipeline space for your produced gas. Your only other option is to flare the produced natural gas. This is normally only allowed for 30 to 60 days before you are expected to have a pipeline hook-up.

Biden's attempt to choke-off funding to the US oil industry suffered a blow today when Senator Joe Machin refused to support Joe Biden's Fed nominee, Sarah Raskin.

www.zerohedge.com/economics/manchin-deals-major-blow-biden-opposes-fed-nominee-sarah-raskin

Raskin believes in using the US banking system to block funding to US oil companies and thus lower oil and gas production in the United States.

www.foxbusiness.com/economy/sarah-bloom-raskin-climate-views-confirmation-hearing

"Raskin has previously argued that all financial institutions should re-evaluate their relationships with energy companies and has advocated for a push toward sustainable investments that do not depend on carbon and fossil fuels. If banks and other financial institutions do not take these steps to distance themselves from fossil-fuel companies, Raskin has said, the Fed should penalize them."

In other words, use the US Federal Reserve to penalize banks making loans to US oil and gas companies to such an extent they will no longer make loans to US oil and gas companies.

On Monday Joe Machin said the following:

"I have carefully reviewed Sarah Bloom Raskin's qualifications and previous public statements," wrote Manchin in a Monday statement. "Her previous public statements have failed to satisfactorily address my concerns about the critical importance of financing an all-of-the-above energy policy to meet our nation's critical energy needs," he added.

Thank God for Joe Manchin. He should leave the Democratic Party and join like-minded folks in the Republican Party.

California hit a new average regular gasoline price record today, according to the AAA.

The organization’s gas prices website shows that the average price of the commodity in California came in at $5.88 per gallon on March 24, which is a new all time high, the AAA highlighted.

www.rigzone.com/news/california_hits_new_gasoline_price_record-24-mar-2022-168380-article/

When asked why California’s regular gasoline price is so high, AAA spokesperson Devin Gladden told Rigzone that regular gas is more expensive in California than other states for two main reasons.



“High state gas tax and special formulated gasoline (more expensive for refiners to produce),” Gladden said.



“Also, at this moment, the California market is dealing with a few refinery issues and ongoing industry challenge with shortage of gasoline tanker drivers – all of those factors combined have helped to push California’s pump prices to some of the highest in the nation,” Gladded added.

Soon, maybe even tomorrow, the Biden Administration will announce their plan to release 1 million barrels per day from the Strategic Petroleum Reserve (SPR). I find this to be a travesty of what the SPR was suppose to be used for.

Originally, the SPR was supposed to be filled to 1 billion barrels of oil to be used in an emergency. It only got filled to around 800 million barrels before Congress decided to stop funding it. Over the past few years, it's been used as a "piggy bank" to fund favorite government programs. This has been done under both Democratic and Republican Administrations which was stupid. Yes, Trump did it too. The SPR currently is slightly under 600 million barrels.

I've always believed the entire 800 million barrels should have been saved for a real emergency. IMHO, a real emergency should include physical shortages, gasoline lines, and even rationing. The current situation has none of these. The only national emergency is the November, 2022 mid-term elections where the Democrats might lose big time.

Biden approved the release of 50 million barrels from the SPR last November. These barrels are still being put into the market (3 million barrels last week for example). The SPR is now down to 568 million barrels (as of March 25th). There are about 210 days (7 months) between now and the November mid-term elections, so the SPR could be down to around 350 million barrels by then. Is that worth saving a few Democratic politicians?

Not only are the Saudi's refusing to answer Biden's phone calls, or raise oil production as fast as he has commanded, now Saudi TV is mocking him.





In Saudi Arabia, Saudi TV reflects the viewpoint of the Kingdom. In no way is Saudi TV an independent organization.