Thread by @pickeringenergy

Quick thread on White House address on gas tax holiday. Thanks for pulpit today @PowerLunch and Tyler Mathisen - so much more to say. Key point - "we're doing everything possible" is simply NOT the case. Much more is possible.

More below, #EFT #OOTT

Recap of Biden statements:
1) Proposing Fed gas tax holiday - 18-24c/gal, 2) request states also waive (20-30c/gal),
3) Refine more oil
4) US production will be a record next year
5) OPEC+ adding supply
6) Gas stations need to pass along lower prices
7) Putin's fault = +$2/gal

Jon Gollub CS - Unfortunately, many of these policy prescriptions lower near-term prices but leave longer run inflationary pressures in place.While politically expedient, these efforts encourage additional spending.They also undermine decision making by obfuscating price signals.

Jonathan's comment perfectly captures impacts of a gas tax holiday. Band aid when surgery required. HOWEVER, it will lower pump prices..so there is some relief coming for consumers if this passes. 90 day program - if it passes it will stay in place until gasoline below $4/gal IMO

3) Refine more oil. Cue Trading Places - "turn those machines back on!" from Mortimer Duke. Of the 900kbbls/day shut down in past 2 years, ~1/3 converted for biofuels. The other 600kbbls/day would take 6+ months...hearing NOTHING in rumor mill about restarts....next

4) US production will hit a record next year. Cue Wedding Crashers - Erroneous, erroneous! from Jeremy/Vince Vaughn. US produced 13mmbbls/day at peak. We aint hitting that number in 2022 or 2023. I think we'll get there and beyond..but 2024/2025.

5) OPEC+ adding supply. Paquito (this means "a little bit" for non-Spanish speakers). Yep, the monthly quota additions are 50% higher than they were (~400kbopd to ~650kopd)...but most OPEC+ can't hit allowables. So OPEC+ isn't saving us without (unlikely) major strategy change.

6) Gas stations need to pass along lower prices. Hmmmm. ~145,000 gas stations in the US. ~87,000 of them are one-station owners, less than 8,000 of them owned by refiners. This is called COMPETITION and the market is setting the price, not the "stations" or refiners.

Thank you to the API and National Association of Convenience Stores (yes, there is such a thing) for the above stats. In terms of price moves up/down at pump relative to daily oil prices..it does take a while in both directions. Anecdotally, I've seen prices down 20-30c/gal.

7) It's Putin's fault. Yep, oil prices popped $85 to $115 on Russia/Ukraine. No doubt that conflict bumped price. But tight supply/demand happened BEFOREhand - underinvestment after shale bust and post-covid demand recovery. Seeds of $3.75/gal gas planted long before Russia.

Biden also made an obligatory (my adjective) comment regarding EVs and renewables, etc. I'm a believer in EVs, but they ain't changing the equation in the next 3 years. Sure, you have to start sometime (and never waste a good crisis), but not a near-term answer.

Oh...and while I'm rolling...I loved "we coordinated 240mmbbl SPR release" comment. How's that going? So well we need to eliminate the gas tax for 90 days. Analogy: If I gave you 2.4days of food for the next month, you'd have nothing to worry about for the last 27.6 days, right?

Most tone deaf, incorrect and intentionally political comment of the whole press conference. "We are doing absolutely everything we can". Never get tired of Vince!

The API laid out 10 ways the White House could do more. api.org/news-policy-an… Sure, the API has an axe to grind, but that doesn't mean that some SUPPLY side, incentive-driven policies wouldn't make a difference. They would! Government - try harder!

What a great opportunity to highlight we need an ALL-OF-THE-ABOVE energy policy. Wait..hold on...first you need an energy policy (other than claiming patriotic duty) and then you need that policy to be ALL-OF-THE-ABOVE.

Every time we see another step like a gas tax holiday, we are another step closer to consensus/legislators realizing that baby steps aren't going to cut it. Energy prices will stay painfully high until they 1) cause or get hit by a bad recession or 2) induce a SUPPLY response.