Biden's Big Bitumen Blunder
will a strategic release add to it?
The Biden administration has been plagued with gaffes and slip-ups. The latest is their double talk when it comes to affordable gas in the US. Early on in the current administration’s tenure, they moved quickly to curtail development in the US. They moved to shutdown the development of the Keystone XL Pipeline. The administration also halted oil and gas leases on federal land. These actions severely restricted the US oil supply. Since demand did not change, prices have moved higher. Now Biden has been accusing OPEC of not pumping enough oil. He’s called on them twice to increase production. Predictability, OPEC has not budged from their path. They have laid out their own track and plan to stick to it. They are also greatly benefiting from higher oil prices. They hold all the cards in this game. The Biden administration had an opportunity to negotiate with the Saudi’s about weapons sales but failed to take advantage.
Now the administration has walked into another session of two faced double-talk. Out one side we have concern that oil prices are too high. MSNBC had Energy Secretary Jennifer Granholm on to discuss what the administration might do. She stated that Biden is “certainly looking at what options he has in the limited range of tools a president might have to address the cost of gasoline at the pump, because it is a global market.” She also said that there will be “an announcement”, possibly this week, to address the soaring price of fuel. A release of the country’s strategic petroleum reserve could very well be in the cards.
It will turn out to be a cruel joke. If a release were to happen, oil prices could see immediate relief but this relief will be temporary. Since none of the underlying dynamics of the market will have changed. As soon as the strategic petroleum reserve flows stop, oil will begin to rebound.
Out of the other side of this administration’s mouth comes the announcement of another pipeline being on the cutting block. The Line 5 pipeline that connects Superior, Wisconsin with Sarnia, Ontario is now in the sights of the administration. Leftist activists claim that a spill from this pipeline could do untold amount of damage to the Great Lakes. However, Canada is not on board with this pipeline being shutdown. They’ve sued to keep it operational. This could be a lengthy court battle.
In anticipation of an announcement concerning the strategic petroleum reserve, I am moving up my stops on my oil holdings.
The Producer Price Index was released today and it continues its trek higher.
Even the so-called “core” PPI is blasting off. This is the Producer Price Index without food or energy. With the index this high, it is putting businesses in a tight spot. They will have to raise prices or risk having lower margins to stay in business. Businesses aren’t in business to lose money. No one wants to sell goods for less than what they bought them for. You can’t keep employees or the lights on by having negative margins.
The picture looks worse when you add back in the food and energy costs.
I believe tomorrow we will see another high print for the Consumer Price Index. I think this is why we’ve seen so many Fed members giving speeches in the past two days. They are attempting to get in front of the story of hot inflation prints to calm the markets. Talk can only get you so far, in time action will be necessary. Do you think the Fed has what it takes to stop inflation in its tracks?
On the inflation front, it's interesting to me that every time bad numbers come in, the market reaction is to sell gold/silver positions, due to this crazy expectation that bad inflation numbers mean the Fed will act and that the action will make a difference. I am curious at what point that won't be the case anymore, but it's allowing us to get some buying opportunities during this rally.