I saw an article two days ago asking if the price of oil could go any higher. I had to read the article for only one reason: I couldn’t believe anyone was even asking if oil would keep rising, and I knew it had to be someone so wedded to chart dynamics that he couldn’t see the obvious fundamentals. So, I read it just to see if I was right. Sure enough, the “analyst” pointed out how oil had risen parabolically and how it looked like it was showing signs of a top.
I was surprised that it wasn’t clear to this fellow just by looking around at how the oil market has fundamentally changed that prices have barely begun to show the impacts of oil sanctions. Wait until the tank farms start getting low so that we start seeing actual shortages and are no longer just predicting shortages. Some of us who lived through the seventies, remember those standard two-block lines from the gas stations month after month. That is clearly where we are headed.
Second, everyone knew before his article was written that Biden was looking intently at the possibility of sanctioning 100% of Russian oil imports into the US. On the very day of the article’s publication, Biden announced he had moved from thinking about sanctioning all Russian oil in the US to doing it. That added a whole additional layer of absolute sanctions that the market had not priced in but that could have been anticipated as fairly likely since Biden had said repeatedly he was working toward that possibility. So, that article didn’t age well because prices bolted up in leaps the size of which we’ve never seen the second the article was published and Biden’s announcement came out.
And this is the first point of my article about oil. People believe what they want to believe ALL THE TIME, some of them with fantastic zeal, as I’ll show below.
It seemed clear to me that, unless Biden simultaneously announced he was reopening the US broadly to oil and gas drilling and pumping to compensate for such a major move in sanctions, oil prices had A LOT further to rise. And now we sit in a situation where we know other nations are seriously considering the same 100% embargo and trying to find a way to make that happen. In fact, Boris Johnson made such an announcement for the UK immediately after Biden.
Obviously, absolute sanctions on Russian oil are much harder for some nations than others because Russian oil and gas was their closest supply, so those nations became dependent on it because it was cheaper. You had to get good discounts to ship from elsewhere, and elsewhere might not always want to offer such discounts. Nevertheless, it remains likely some of these European nations still plan to increase sanctions more and maybe even entirely. They are just working out ways to do so without inflicting more pain on themselves as leaders and their own citizens than they do on Russia.
These additional moves that are likely coming make it is absurd to even entertain the pure fantasy that oil prices could be topping out just because they went parabolic, especially when the true shortages — the kind that hang signs on pumps saying “out of gas” have not materialized yet. Wishful thinking makes us say, “This can’t get much worse.” It will! And I’m not speaking against the sanctions, but I’m talking about the reality we have to face because, as I’ve softened claimed, I take my reality straight up even on actions like the sanctions that I’ve already said I believe are necessary.
There are, however, ways of doing this that are not as monumentally self-destructive as what we have just witnessed, so that is what I am also writing about here.
The religious anointing of oil
We are living through a tightening of the oil market beyond anything we’ve ever experienced. That inflation-driven recession I’ve been talking about, which already included an energy crisis in Europe that was seeping over to the US in prices is now suddenly coupled with an all-out oil embargo that humbles the old OPEC embargo we had in the seventies. So, all ingredients for the seventies recession I have said we were entering are now abundantly present.
However, this global embargo is happening right at a time when we were also already about to see the collapse of the Everything Bubble because the Fed and other central banks were entering a time of their fastest, greatest moves from easing to tightening ever seen. Now we have to factor in how all of these sanctions — not just oil but the Everything Sanctions — combine to make the economic collapse I have been predicting even worse. I’ll be exploring that in my next Patron Post and other articles to come, but I want to deal with the changes in the oil market here as a standalone subject because this is something really clearcut where the US could do a lot to ease the world’s (and our own) pain from these oil sanctions.
All of the above, at a time of greater oil consumption globally than ever before, should clearly indicate crude has a lot more parabolic price action to come. We now see people writing about $150-per-barrel oil and even $200-per-barrel oil, and I don’t think those bets take us a high as this is like to go if Putin’s War drains on. That’s because the price pain is going to be intensified by President Biden’s flat-out refusal to make any move at opening up more US supply, which could have softened the blow because our potential supply is massive, and a fair amount of it is ready to move in fairly short order.
When Biden made his announcement, he needed to show he had the guts to defy his party’s progressives, even if just on a temporary basis (in order to get their buy-in), in order to turn the US oil-producing valves wide open. His repeated refusal to make even the slightest effort in that direction when asked by the conservative side of the mainstream media (Fox & Co.) if he would open up US production betrays a level of fanaticism that has taken on religious intensity in the Democratic Party as I will show.
Let me explain why. We’ve already read about Biden speaking with evil ruler Nicolás Maduro in Venezuela and other evil mullahs and ayatollahs of other nations long hostile to the US , including, of all things Iran, to get them to produce more oil. Yes, Biden wants MORE OIL production. He’s begging for it! Yet, he says that opening up more US oil production wouldn’t make any difference, using that claim to justify why he won’t even think about it. How is it that getting Venezuela to sell oil to the US (when we were the ones who sanctioned it and shut it off) and getting Iran to sell more oil (when we were the ones who sanctioned it and shut it off) suddenly makes more sense to Biden and his party than getting ourselves to produce and sell more oil??? Did these very Russian-allied nations suddenly stop being the evil nations we have long said they were?
Biden has already asked the Arab nations to PUMP MORE OIL, and they have already turned him down so many times that we saw this week the extraordinary action of their not even being willing to talk to the US president on the phone because the conversation is just getting that tiresome to them! That is an extraordinarily humbling level of abasement by the new begger-in-chief.
The president would crawl on his knees to beg for more oil production from countries that will humiliate him for begging out of the United State’s own sanctions against those same nations, but he won’t open up more production in the US! How insane is that? What it beggars is belief! Think about it, especially if you’re a Democrat. Biden is begging for MORE OIL to be produced, but holding out on principle against the US being the one to produce it!
Sometimes the insanity is literally head-crushing.
We’re asking the world to pump MORE OIL in OTHER PLACES than Russia in order to turn Russia’s shipping (and hence its pumping and profits) off, but one of those places CANNOT BE the US. Please tell me how the earth is going to care whether the additional oil that Biden wants to see pumped comes out of the ground in the US versus out of the ground in Venezuela or Iran!
If Biden were willing to see it pumped in the US, the US would actually benefit greatly from these massively higher crude oil prices while helping our allies who desperately need oil and without helping our adversaries like Iran and Venezuela, but the US president would rather beg those nations to take all the benefits from us. My head hurts just thinking about that!
Just to be clear, we’re not talking about pumping any more oil in the world or burning any more oil. We’re not talking about building more gas-guzzler cars or running more dirty-coal electrical plants. We’re just talking about changing where the oil we are already burning gets pumped from in order to take the sales away from Russia to curb its invasion of a sovereign nation, and the world would love us if we put that money into our own coffers because it would save them money coming out of theirs.
Almost all the developed economies in this world have established their own sanctions against Russian oil, even to the point of hurting themselves considerably because they so intensely believe Russia’s decades of imperial ambitions and its inhumane actions against Ukraine and its current defiance of international law by playing endlessly with globally accepted boundaries must be stopped. I’m just saying that is how those nations feel. I am not in this article arguing for or against those sanctions at the moment. I’m pointing out that is the belief of this nations to prove those nations would in no way blame the US if it were the one that started pumping the oil. This would NOT be a time when they said, “You just did this over the oil” as is so often said in wartimes like this because THEY are the ones laying down their own sanctions with a vengeance at great cost to themselves, whether the US does the same or not.
So, let me ask, why, other than due to liberal religious fanaticism about oil, would we choose not to be the nation that helps out the rest of the world with these huge costs and, at the same time, be the nation that reaps the low-hanging fruit that every Western nation out there wishes we would???
Is there something about Venezuelan oil or Iranian oil or even Arab oil that burns more cleanly than US oil? Of course not. Our oil is as good as theirs. We’re planning to buy the oil anyway and burn it anyway right here in the US by increasing their production. It would actually use less oil if we produced our own than if we burn more oil to transport it halfway around the world! It is beyond insane to turn, in oil-desperate dependence, to those other nations and throw the windfall of these high profits to them as well when we can vastly increase our pumping here, even if just for a few years, until this crisis is over.
Extraordinary times merit extraordinary measures. Even Elon Musk, whose Tesla electric car company stands to profit in a major way from these jacked-up oil prices, gets that. He speaks against his own self interest when he says “PUMP MORE OIL IN THE US.” He says that because it is in the national best interest and in Ukraine’s best interest and in the world’s best interest. So, he is willing to speak against his own interest because it is THE RIGHT THING TO DO!
Biden tries to see if he can outlie Putin
Yet, every time he was asked by the press about this, Biden refused to give greater US production any consideration at all, even to the point of making it sound like US oil production is higher than ever. It’s not.
What Fox News claimed at the same time is also misrepresentative. They said US oil production is down under Biden from where it was under Trump — specifically down 1.5 million-barrels a day from where it was in December 2019 — as if was down due to Biden. Liars on both sides.
You see, while that is true, it is also a case of lying with the truth, which I talk about a lot. Yes, it is down from where it was in December 2019, and it clearly improved a lot during Trump’s years; but the chart makes it obvious that the huge lockdowns that also happened during Trump’s years in office created a massive fall in US oil production because it created a massive drop in US oil demand. It also makes it obvious that we have, in fact, been recovering from that since Biden took office, and the rise back up has happened almost as steeply under Biden as the initial rise that took us to PEAK oil production by February of 2020, immediately before the COVIDcrisis. So, the conservative media often distorts facts as much as the liberal media.
For a broader historic picture, you can see we are how higher in production than anytime prior to that peak just before the COVIDcrisis:
The last peak was during the 1970’s energy crisis. US oil production went into long decline after that, but it started to rise quickly from the start of the OBAMA years due to fracking, then took a dip and then started to rise again for about half a year before Trump entered office and continued to rise after that. That’s the true full story (fuel story). The Obama years actually saw the steepest rise in history. Trump’s were a little less steep but steep all the same and took us back on up the path to beat the last peak. Biden’s are little less steep still, but still climbing as demand picks up.
Nevertheless, Biden did try to make it sound as if US production was about as high as it can go when it did get quite a bit higher in the past. He even spread disinformation just to sustain his position by saying there are already 9,000 permits approved that are not being used. That statement is pure propaganda.
CNN, showing its bias like a Biden mouthpiece, falsely reported that our present sanction situation is a lose, lose, lose situation that Biden has to face. No it isn’t! The commentators on CNN right after Biden’s big announcement of total oil sanctions against Russia made NO mention at all of the the opportunity here to produce and sell oil into a market that will be at record price highs by the time production begins. They repeated Joe Biden’s and Jen Psaki’s disinformation that there are 9,000 permits/leases issued for drilling that aren’t even being used.
I’ll let the chief executive of the American Petroleum Institute explain why I call all of that disinformation, by which I mean using bits of truth to spread false impressions. Yes, the 9,000 permits exist, but…
“There’s a fundamental misunderstanding of the administration as to how the process actually works,” Sommers said in an interview on the sidelines of the conference, Bloomberg reports. “Just because you have a lease doesn’t mean there’s actually oil and gas in that lease, and there has to be a lot of development that occurs between the leasing and then ultimately permitting for that acreage to be productive,” he said. “I think that they’re purposefully misusing the facts here to advantage their position.”
Sommers was nicer than I’m willing to be. I’m sure Biden fully understands how the process actually works. Biden’s statements are simply disingenuous. Sure there are permits or leases out there that are not being tapped. There always are because in many cases they are for exploratory wells where there may not be enough oil to go further, or they are in areas where no infrastructure exists for moving that oil out if it is drilled and pumped, and companies have to evaluate the cost of laying in that massive infrastructure. Companies buy the leases to get a lock on the land for when it makes sense to do all of that.
However, roads have to be built or pipe has to be laid, and in some cases the Biden administration won’t approve all of that as a way of stopping leases that were granted during the Trump years from moving forward! There are construction permits that have to happen to make those leases productive. Legal battles to be fought that the Biden administration might bring in its own fervor to make good on Biden’s campaign promise to suppress US oil exploration and drilling. There are bank loans needed from banks that have been globally enticed not to finance oil production in order to fight global warming. There is a LOT Biden could do to change that, even if just on a temporary basis to get us through extraordinary times, BUT HE WON’T.
I’d call this “Freedom Fuel” and pay the high price if it stopped Putin’s ENDLESS imperial advances (Georgia, Chechnya, Crimea, the Donbass, now the whole enchilada), except that a good part of the price will be due to Biden’s refusal to do anything about the price even though he’s the one who decided to do the sanctions.
This could be a boom time for the US oil market and the many who work in it and provide services to it. It could be the lift the US needs in order to get through these sanctions with minimal impact from the oil sanctions if Biden wasn’t a religious fanatic on this issue. If he would open US drilling and pumping like never before, the US would instantly replace Russia as the world’s largest oil exporter at a going rate of, at least, $150 per barrel by the time production is up and running. At those prices, Big Oil has all the incentive necessary to move quickly if allowed to do so.
And this is the painful part: it wouldn’t make a bit of difference in terms of pollution or global warming because we’re not talking about burning more oil but just about replacing Russia as the market source of oil and gas that is already being produced and burned. There is no net impact here because we are turning Russia off! It’s a total no-brainer, not a no-winner as CNN’s expert claimed.
Instead, the Biden administration, “progressive Democrats,” and their CNN mouthpieces are doing their best to make sure the US does not ramp up oil production and replace Russia as the largest global supplier. Fox has covered the issue extensively, and I have flipped back and forth between CNN and Fox and not once seen anyone on CNN point out how much the US could increase production.
Instead, CNN talks about how Jumpin’ Joe is doing all he can to ease the burden on US citizens by asking Venezuela and Iran to be the ones who reap the low-hanging fruit here and pick up the fastest, highest profits ever made in oil because Biden & Co. would rather see the EU buy its oil from anywhere other than here.
Now, just one final point to show that this is pure fanaticism at work: Venezuela is one of the dirtiest oil-producing countries on earth. It does not have an agency that comes anywhere close to the EPA at monitoring the production of Big Oil. It doesn’t have regulations that come anywhere close to those in the US. Venezuela is such a dirty, polluted oil producer, slopping oil all over the scorched earth, that one almost has to wonder if Big Oil is the group pushing Biden to push Venezuela into greater production because they could go in there on contracts and make even more money by having almost no regulations.
I don’t actually believe that is the case, BUT I’m just saying that is how dirty the oil production in Venezuela is. Or we could produce it here where we have some of the tightest oversight on pollution of anyplace on earth. So what Biden & Co. are really pushing for, based on their religious zeal directed against American oil, is the dirtiest, most polluting oil production on the face of the earth because, yeah, that is what the good earth needs!