Thread by @anasalhajji

Thread: What are the Biden Administration’s choices to reduce oil and fuel prices? #OOTT #Oil

1- What has been done?
Asked OPEC members, US oil producers & refiners to increase production. All failed.

OPEC members were not interested. US producers & refiners cannot do so.

2- What are the current choices?
a- Restrict crude oil exports
b- Restrict fuel exports
c- Suspend environmental regulations temporarily
d- Suspend federal fuel tax
e- Remove sanctions on Iran & Venezuela
f- Resurrect relations with Saudi Arabia
g- Withdraw more from the SPR

3- None of the choices above can reduce shortages or lower prices meaningfully before the US mid-term elections. Only a recession would reduce fuel prices and allow for inventories to rise.

Regardless, a recession might flip both houses to republicans. Democrats are stuck!

4- A complete or partial ban on US crude exports will not work: it will not lower gasoline and diesel prices for Americans, while US allies in Europe will be under the mercy of Putin and suffer from even higher oil prices.

US companies will play the game of: "What is crude?"

5- Econ
a- A ban will widen Brent/WTI differentials
b- US refiners will have a feast: refine the cheap oil & export products at international prices. US gasoline & diesel prices will not decline much and might rise instead.
c- It will hurt US oil producers & reduce investment,

6- Politics:
a- The public will be angry at the Administration as fuel prices remain high
b- The oil industry will not trust the democrats again
c- US allies in Europe will suffer from oil shortages and high fuel prices, putting g them at the mercy of Putin. #Russia

7- A ban on gasoline & diesel exports will cause shortages in the US & even higher prices. Refiners will reduce runs while they, along with producers, export the expensive crude. Under such a case, the US will turn into an importer after being an exporter!

8- Banning exports of crude and products (Gasoline & diesel) at once would lower prices in the short run, but would destroy the US oil industry & jeopardize the national security of the US and its allies for years to come. #Oil #OOTT #Biden #Politics

9- Temporary suspension of environmental regulations would enable the refinery to increase runs in the short term by a small amount. This will anger some environmentalists. The Biden Administration knows it will get their support regardless because the alternative is “worse”

10 – Major refiners might be reluctant to use the environmental exemptions for reputational reasons on one hand and for fear of future lawsuits on the other.
They need an exemption from Congress, not from Biden's, to protect them against future lawsuits. #Gasoline #Oil #Biden

11- Suspending federal fuel tax will not reduce gasoline prices as Biden wishes. When supplies are tight, the supply is more inelastic than demand. Most of the burden of the tax is carried by the producers, not consumers. Once the tax is removed, producers get most of it. #Tax

12- Obama: #Gasoline tax holiday is a political gimmick.
- Assume 1,200 miles of driving per month
- MPG: 24
We need 50 gallons per month. Assume all the 18.4 cents of federal gasoline tax goes to consumers, the consumer gets $9.2.
My calc: the consumer gets less than $4. #OOTT

13- Remove Iran & Venezuela sanctions:
Iran is exporting what it can export anyway. Lifting the sanctions will not change supplies but oil prices might decline for a few days.
The same applies to Venezuela except that Venezuela can add about 400 kbd quickly if it gets diluents.

14- The exemptions that the Biden Admin gave to ENI & Repsol to export Venezuelan oil to Europe are not additional supplies. They are shifting supplies from one market to another, causing more disturbances. The same applies to Iran if Biden gives exemptions to export to Europe.

15- Biden's Visit to Saudi Arabia on July 15 & 16 will NOT reduce oil & gasoline prices in the short run.

a- While Saudis are committed to the OPEC+ deal, their oil consumption increases in the summer as demand for cooling increases the demand for electricity. #Oil #Powerburn

16-
b- #SaudiArabia may extend an olive branch to Biden by increasing supplies in the fourth quarter as OPEC+' production agreement ends along with the end of the summer cooling season. The problem is: that oil will not reach markets until after the US mid-term elections.

17- Withdrawing additional amounts of crude from the SPR has proven to work by preventing oil prices from rising toward $150. Releasing more oil from the SPR will not translate to lower gasoline & diesel prices. The problem is in the refineries. Here are some comments on the SPR:

18- Unlike withdrawal from commercial crud inventories, Withdrawal from the SPR is an increase in supplies. Withdrawal from the SPR is bearish. Filling the SPR is bullish. The US will NOT rebuild the SPR to its 2021 levels. When it does, it will be a different crude quality.

19- It is ironic to see people bullish on oil as the US withdraws oil from the SPR and bullish because the US will rebuild the SPR.

The US will NOT resort to the partial rebuild of SPR until oil prices decline. A recession might give them this opportunity. This is not BULLISH!

20- It is ironic to see people bullish on US SPR withdrawal while oil is transferred to other storage facilities in Europe & Asia!

China started rebuilding its SPR from cheap Russian oil during lockdowns. China will use its SPR again if oil prices increase again. #SPR #Oil

21- Conclusion: The Biden Administration is stuck. There are no short-term solutions before the mid-term elections.

It might just give up and focus on solutions that yield results before the 2024 elections. But... 👇

22- The problem is: If Republicans take over both houses this November, they can claim that they solved the energy problems too before the 2024 elections.

Regardless, as I mentioned in various places, we are in for unprecedented energy crisis. #Oil #Natgas #Russia #Ukraine

23- Given what went on in the meeting between the Administration and CEOs of oil companies recently, it is clear that Administration’s officials live in ivory towers. With such sets of beliefs and attitudes, they will intensify the energy crisis. Just watch. #OOTT #COM #Oil