GasBuddy’s analyst Patrick DeHaan argues that the price at the pump is skyrocketing due to increased demand coupled with the fact that ‘OPEC is not opening the spigot’.
OPEC has always been extremely competitive, but the latest move from the cartel is sneaky and could leave global energy markets thirsty.
While the world is becoming optimistic about an economic recovery to COVID-19 with the distribution of vaccines, the trinkets in the OPEC Plus cartel are being used as a golden opportunity to make the world economy flee while the Biden administration remains silent.
| Ticker | Safety | Last | Alter | Alter% |
|---|---|---|---|---|
| USO | UNITED STATES OIL FUND LP | 43.50 | -0.94 | -2.12% |
US energy independence is on the way
Last week, OPEC and the Russians shocked the market by not increasing oil production at a time when the oil markets are signaling. They need more stock as prices rise.
OFFER OF NEW OIL AND GAS LEAVE ON FEDERAL GROUNDS LEGISLATORS HAVE REQUESTED ANSWERS
The market structure in oil is what is known as ‘decline’, where nearby futures contracts are trading at higher prices than crude in the future, indicating that the oil stock is tight and needs more inventory. At the moment, the decline is so wide that it is almost as if the market is screaming for help.
| Ticker | Safety | Last | Alter | Alter% |
|---|---|---|---|---|
| BNO | UNITED STS BRENT OIL FD LP UNIT ETV | 17.10 | -0.40 | -2.29% |
Therefore, market watchers expected the OPEC Plus to heed the call of the market and increase production and restore as many as 1.5 million barrels from previous cuts to calm rising oil prices and feed the grim oil-hungry world market. They also expected Saudi Arabia, which would unilaterally reduce production by another 1 million barrels of oil a day just two months ago, to start giving it back to the market. Yet it seems that the temptation to push the market line into their pockets is too tempting for OPEC Plus, especially since there is currently no one who can stop them.
Instead of increasing production, the cartel left production unchanged, with a few modest exceptions. Saudi Arabia has extended its savings of 1 million barrels per day. This has led to a huge price increase in prices up to two years, as well as a rise in petrol and diesel prices that has been compromised by the freak winter storm in Texas that is endangering refineries.
TEXAS STORM HANGOVER CAN SPEED PUMP PRICE JUMP
OPEC Plus cried all the way to the bank. These oil ministers feel invincible and feel like they can reduce production whenever they want. OPEC Plus knows that they are once again in control of the global oil market, as the Biden government has withdrawn to be a leader in oil and gas production. OPEC Plus saw an opportunity, took advantage of it and is now the undisputed leader in the world oil market.
Under President Trump, OPEC Plus was not so bold. He realized that when OPEC reduced oil production just to increase oil prices, it was a direct hit for consumers, especially those at the lower end of the wage scale. He realizes that when OPEC Plus reduces production when the market indicates that it is needed, that it is just a wealth transfer of oil-consuming countries in their own pocket. Trump called OPEC on Twitter at least eight times between 2018 and 2019 and OPEC Plus listened to him. Not only did they reverse one of their production cuts, but they also canceled plans to reduce production in the future. It has helped American consumers and American families with their budgets. This enabled them to buy other goods for their children instead of feeding that money into the gas tank.
The administration of Biden, on the other hand, seems to be silent on OPEC Plus. Not only did Saudi Arabia call for their unilateral production savings of 1 million barrels per day, but also oil prices were quiet as 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 per gallon for gasoline, and soon the rest of the country will join them in that dubious honor.
One could say that the Biden government is happy about what OPEC Plus has done that they have done because they need sharply higher prices to achieve their carbon targets. What you will experience at the petrol pump in the coming weeks is just the beginning of the Biden Green New Deal.
This means that according to President Biden’s plan, petrol and all carbon should cost more.
How much more?
A report by energy consultant Wood Mackenzie Ltd. says that if you are going to prevent global temperatures from rising above 1.5 degrees Celsius from pre-industrial levels, carbon prices should rise to $ 160 per tonne of CO2 by 2030, compared to a global end-of-year average of $ 22. is an increase of 600%.
This could give you an indication of the rising oil and petrol prices according to the plan of the Biden administration, which will suffer unnecessarily higher petrol and heating bills in the coming weeks and years.
Producers facing higher costs will be forced to curtail rents or keep wages low due to increased energy costs. This will mean fewer jobs. Manufacturers can also go abroad to avoid some Biden policies.
If the price of oil and gas falls too far out of control, it could also be a risk to the general economy. History is clear that most recessions are preceded by an oil price rise caused by things other than fundamental supply and demand.
READ MORE ABOUT FOX BUSINESS BY CLICK HERE
As OPEC Plus is not controlled and the Biden administration is rooting it, we are going to face major economic challenges. Do not work on the sneak in the OPEC Plus cartel, it will, like children in a tuck shop, take as much money from the US economy as they can, because no one will stop it.
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 and provides individual investors, professional traders and institutions with the best investment and risk management information in global petroleum, petrol and energy markets. The industry and media worldwide have had a huge demand for his precise and timely predictions, and his impressive career spans nearly three decades and draws attention with 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 at [email protected].