The global oil markets are screaming they need more oil as the US, along with Europe, may look to ban Russian oil for the invasion of Ukraine, says Phil Flynn of the PRICE Futures Group.
Crude Oil (CL=F) prices soared after the Secretary of State said that they are looking at a Russian oil ban but have to figure out where that oil might come from. The only hope to replace that oil in the short term and avoid a global recession is if Biden flies to Saudi Arabia and begs Crown Prince bin Salman for more oil. Sadly, and pathetically, that may happen. Axios reported that Biden’s advisers are discussing a possible visit to Saudi Arabia this spring to help repair relations and convince the Kingdom to pump more oil.
The Biden administration mismanaged relations with Saudi Arabia. Biden’s clumsy foreign policy vowing to make a long-time US ally a pariah state failed to understand the complex strategic delicacies with this relationship in the Middle East and the world, especially when it comes to oil. This is even more important if it is your goal to restrict US oil production. No one likes Saudi Arabia or Crown Prince Bin-Salman, but there were smarter ways to handle this.
Biden officials went to Venezuela this weekend to meet with the government and President Nicolás Maduro. The sanctions on Venezuelan oil forced US refiners to import record amounts of Russian oil. So now, the US may decide to lift sanctions on the Maduro regime to try to keep US refiners going.
Biden’s other hope is an Iranian deal that he staked his foreign policy on, trying to cut a deal with the terror state and now that is falling apart. Reuters is reporting that Russia’s demand for written US guarantees that sanctions on Moscow would not harm Russian cooperation with Iran is “not constructive” for talks between Tehran and global powers to revive a 2015 nuclear deal, a senior Iranian official said on Saturday. The announcement by Russia, which could torpedo months of indirect talks between Tehran and Washington in Vienna, came shortly after Tehran said it had agreed on a roadmap with the UN nuclear watchdog to resolve outstanding issues that could help secure the nuclear pact.
This nightmare scenario was created by Biden’s foolish and short-sighted energy policies that have restricted investment and discouraged US oil production. Even as the signals were clear that the clampdown on US energy was having a detrimental effect on the price of crude oil, as well as geopolitical stability, the administration continued to double down on its disastrous policies, leaving the country and the world in a very dangerous position. All the apologists for the Biden administrations’ policies are making the rounds saying he did such a great job uniting Europe. How did he do that? By allowing a war.
Russia’s cowardly attacks on civilians are a pathetic excuse for any country on the map and it is hard to see how they come back from this. Their economy is going to be in shambles, so they are going to be desperate and very dangerous.
The oil test of long-term resistance near $130.00 is historically significant. If we break above that level, we should test the all-time price for oil at 147.27.
US gasoline prices and products are also soaring, squeezing the US poor and middle class. AAA says that the national average hit $4.065 a gallon. Diesel fuel hit $4.614 a gallon, killing businesses and truckers.
We now have an energy crisis, but Biden may next have to deal with a food crisis. Wheat is limited up again and it is possible that Ukraine will not get a crop planted. The market is pricing in wheat shortages, which could spread to other ag products. Biden could get ahead of this by lifting CRP restrictions, allowing farmers to plant more so the poor do not starve, as they are already facing record-breaking food prices. CRP is a land conservation program administered by the Farm Service Agency (FSA).
In exchange for a yearly rental payment, farmers enrolled in the program. USDA noted landowners enrolled 4.6 million acres in CRP in 2021, including 2.5 million in the largest Grassland CRP signup in history. There are currently 22.1 million acres enrolled in CRP and USDA wants to reach 25.5 million acres—the statutory cap for the Fiscal Year 2022.
Biden needs to move in this situation to avoid starvation. The environment is important, but human lives are even more important. It is also time for a Manhattan project to give support to the US oil and gas industry so they can raise the output of oil and gas and move to avert a financial crisis. It is time for the Biden administration to reverse course and end its war on the US oil and gas industry.
The world is watching.
Learn more about Phil Flynn by visiting Price Futures Group.