Global crude oil prices surged to a seven-year high as warnings about the coming energy crisis to global elites fell on deaf ears. Now we all have to pay the price, says Phil Flynn of the PRICE Futures Group.

OPEC+ is laughing all the way to the bank. After thumbing their nose at pressure from the Biden administration and other consuming nations to raise output more than the pre-planned 400,00 barrels a day, OPEC instead suggested that the global energy crisis was not of their making. And they are right.

This is an energy crisis created by short-sighted politicians and climate change fanatics who don’t understand the risks of closing down traditional energy production before you have a viable replacement. Global leaders who decided to rely on less reliable sources of energy like wind and solar should not be shocked that they are now short of energy supply.

England has already acknowledged that the lack of wind created a crisis. Labor shortages have also created a shortage of tanker drivers leading to shortages of petrol, as the English call it. Germany and the rest of Europe that closed down oil and gas fields and closed nuclear power plants, are now more dependent on Russia and the good graces of Vladimir Putin for supply.

Zerohedge reports that, “While European politicians have been busy trying to pin the cause of Europe's energy crisis on the Kremlin and Gazprom in hopes of deflecting from their woeful mismanagement of European energy needs, not to mention their torrid push into green energy at the expense of fossil fuels when Europe is clearly not ready for a full transition and won't be for years, if not decades, the truth is that the European gas market crisis has highlighted the market’s unprecedented vulnerability to Russian supply. And, as Goldman writes in a recent note from its European gas analysts, Gazprom’s decision not to book for October the full capacity available at one of the main pipelines that deliver gas to Germany poses an increased tightening risk to NW European gas balances and, hence, (much higher) upside risk to TTF prices this winter.

In the US, natural gas supplies are still very tight but we're in better shape than Europe. Yet the administration is continuing to discourage US production of natural gas. We, too, have a severe risk of price shocks. Take a look at natural gas prices overnight. They're starting to move higher once again as the realization that winter is coming, and our US supply is below the five-year average. Last week the Energy Information Administration reported that the US supply of 3,745 bcf is 15.4% below one year-ago levels and 6.3% below the five-year average. While we should see a triple-digit injection this week, the market is not convinced that supplies in the US are adequate to keep prices under control.

Many people that call me about their shock about these high prices. I keep reminding them they shouldn't be shocked because a vote for Biden was a vote for higher energy prices. In his campaign he made it very, very clear that he wanted to move towards higher energy prices. His embracing the far left’s "Green New Deal” shows he was willing to sacrifice the poor in this country in terms of higher energy prices with the supposed noble goal of trying to save the planet. The Biden administration is willing to attempt to transition off fossil fuels, but it is very unclear whether or not they're going to help US consumers who could see their heating bills doubled or tripled this year. Joe Biden had the power to avoid this coming crisis, but his ideology trumped common sense when it came to the energy transition.

That is not to say that alternative energy sources can’t reasonably be found. It must be done with reason and intelligence and it's going to take some time. In that pursuit, there must be alternatives for people to keep the lights on and stay warm in the winter. Common sense is desperately needed. One of the reasons we're in better shape than Europe is because we didn't make the rash kind of decisions that Europe has made the last eight years.

Tonight, we get the American Petroleum Institute supply report. The expectations are that we should see a modest drawdown in crude supplies of about a million barrels or more. Still, data after hurricanes are erratic and there may be some skew in the numbers as far as product supplies such as gasoline and distillates. There are variations of guesses but I'm assuming we're going to see draws of about 2,000,000 barrels in each category.

We expect also to see the market be well supported on breaks. For months we've been warning about this potential energy crisis and it's here. We've been telling people to get hedged because of this upside risk. It's happening whether it be propane, natural gas, oil, gasoline, diesel. We are in a situation where supplies are going to be tight. They are going to continue to be tight all winter. Weather is going to be a major factor. If we get colder-than-normal temperatures, this market could explode to the upside again. It's better to be safe than sorry. Try to find ways to get hedged for this winter. If old man winter shows up, you're going to be thankful that you did.

Learn more about Phil Flynn by visiting Price Futures Group.