The United States is cutting and running from sound energy policies which is going to lead to the United States becoming less competitive and put a financial strain on taxpayers, states Phil Flynn of PRICE Futures Group.

The lack of oil and burdensome regulations with cut refinery runs in the future, open the door to higher energy costs for consumers. This comes at a time when war under Biden’s watch is threatening supply. Not only has the market had to adjust to the Russian-Ukraine war but now because of Iranian support of Hamas and the Houthi rebels, there is a new level of risk. OPEC and Russia are trying to regain control of oil prices as Russia said it would deepen oil export cuts in December by potentially 50,000 barrels a day or more, Reuters reported, citing Russian news agencies.

A blind eye to Iranian oil sanctions allows Iran to reap billions of dollars that funded Hamas ahead of their barbarous terror attack on innocent Israeli civilians. Now the Iranian-funded Houthi rebel attacks in the Red Sea are going to impact the free-flowing transport of oil. Bloomberg News is reporting that British Petroleum is going to pause all tanker transit through the Red Sea. That news led to a huge spike in overseas natural gas prices that surged as much as 7.9% on the story.

Oil prices in the United States saw their normal 3:00 AM central time sell-off, then rebounded and made new highs as the market got a handle on the risk of BP’s actions. Ships won’t use the Suez Canal and that’s going to add thousands of miles to voyages and lead to higher costs and delays for delivery. If you shut down the RED lanes it will delay and add cost to 12% of global seaborne trade. Not just oil and gas but other products as well.

These types of events make people wonder about the long-term ramifications of Biden's policies. Not only is the Biden administration cutting back on offshore leases which is the best way to produce fossil fuels, but in California, new regulations on refining are leaving companies like California’s Chevron to beg the California government to think about the longer-term ramifications of their policies on the people of California. This is a trend from the Biden administration and California’s energy policies that it is all about immediate political gratification with little thought to what their policies will do to the economy and the poor and middle class.

Fox News reports that “The Biden administration on Friday finalized a plan to dramatically curb the number of offshore oil and gas lease sales over the next five years as it continues to aggressively push green energy development.

The Department of the Interior’s (DOI) five-year offshore oil and gas leasing program scheduled just three Gulf of Mexico lease sales through 2029. This is marking the fewest number of sales ever included in such a plan which the agency is mandated to issue periodically. According to the DOI, holding the sales will enable future offshore wind leases under an Inflation Reduction Act (IRA) provision that tethers the two.

Chevron is being forced to send California a message. Chevron has had to cut oil-refinery investments in California in what they say are “adversarial” policies toward fossil fuel. California, in a move to attack oil companies, is imposing a so-called margin penalty in an attempt to steal the company’s profit. This is the type of third-world move that is famous for ruining investments and economies but based on California’s economic track record of late, it is what they do best.

Chevron tried to talk common sense by saying, “Unfortunately, the distortive effects of such a policy would likely run counter to the goal of ensuring that gasoline remains affordable and reliable, in addition to ever cleaner. Rather than solving supply challenges or enabling increased production of clean, affordable gasoline, a margin penalty would contribute to a decades-long trend of decreasing investment and tightening supply. Since the 1980s, dozens of refineries have closed due to an increasingly harsh regulatory environment, which has resulted in increased gasoline price volatility and reduced production. A margin penalty will only exacerbate this troubling trend.”

Chevron pointed out that, “Policies that intentionally handicap the energy industry, such as a potential margin penalty, can have a direct impact on consumers because they may reduce the incentive to invest and thus decrease supply. The state has dampened price spikes in middle distillates by incentivizing renewable diesel, jet fuel, and kerosene, but has not engaged in similar work to increase gasoline supplies – and in the absence of those supply buffers, tight supplies have led to significant price spikes, while regulations make investment here perilous. Projects by in-state refiners would help increase affordable, reliable, safe, and equitable access to fuel, but state policies disincentivize these projects.

Yet it all doesn’t matter. California doesn’t care about the financial strain this is going to put on the people of the state. It only cares about its radical green agenda. California will continue to see the highest gasoline prices in the country and the margins that are going to expand if these policies remain unchanged in the future.

Heating oil futures and gasoline futures are on the rise this morning. WTI oil prices seem to be lagging just a bit but if you look at the crack spreads they are solid. We could be getting ready for a bit of a supply squeeze based on what we’re seeing. Unless the refiners respond, we’re going to see the supplies of diesel and gasoline tighten up. Seasonally of course the products continue to be very strong on a historical basis the last two weeks of December and into the new year. It looks like we’re set up for a pretty nice run.

Natural gas prices are starting to turn the corner as the possibility of a winter storm out east is grabbing the trader’s attention. Fox Weather reports that the “East Coast storm packs threats of flooding, high winds, and severe weather that could disrupt early holiday travel. Near-record coastal flooding swamped Charleston, South Carolina, on Sunday afternoon, prompting several road closures in downtown areas. Heavy rain, gusty winds, flash flooding, and coastal flooding impacted areas across the Northeast and mid-Atlantic on Monday morning. The storm will continue tracking north throughout the day. More than 120,000 customers were without power from New York and New Jersey to New England early Monday morning due to strong, gusty winds knocking down tree limbs and power lines.

Natural gas traders also want to see if the potential for a shift in weather patterns to sharply colder will come true. If they do then we should see a pretty nice bump in natural gas. The charts look like they’re trying to bottom.

Learn more about Phil Flynn by visiting Price Futures Group.