Oil prices may rise until January 2025 due to US energy policy

According to the latest data from the Federal Bureau of Labor Statistics, gasoline prices in the United States in October increased by 6.1% compared to September, and since the beginning of this year, fuel has risen in price by almost 50%. The administration is aware of the rising energy costs facing US consumers, but has yet to show its willingness to take constructive action to address the issue.

Moreover, there is no indication that the White House can be expected to take effective steps to lower prices during the remaining three years of Biden’s tenure.

It is important for traders to understand that the actions of the current administration, judging by its track record, are likely to be more likely to drive prices up, at least until January 2025. This does not mean that oil and other energy prices will necessarily rise, as there are other influences as well.

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And yet, this means that one important factor will continue to push prices higher.

Even before the 2020 elections and the inauguration, it could be assumed that a Democratic victory and an administration led by Biden would mean upward pressure on oil prices. Almost immediately after its inauguration in January 2021, the Biden administration announced initiatives that would suggest it was seeking to cut U.S. oil and gas production.

The decisions taken at the time, including the cancellation of the Keystone XL pipeline and a moratorium on permits for federal land and offshore drilling sites, sent a signal to the American oil and gas industry that producers were taking seriously. This is evidenced by the results of the Dallas Federal Reserve Bank polls starting in March 2021.

However, the current situation with production is possibly even worse than predicted, and its further deterioration is possible. WTI, the US benchmark, is at its highest levels since 2014, but drilling activity is not increasing as rapidly as many, including the Energy Information Administration (EIA) expected. According to the latest weekly EIA survey, US oil production remained stable at 11.5 million barrels per day, up just 1 million barrels from last year and 1.6 million barrels below dock production levels.

Meanwhile, global oil demand has actually recovered to pre-dock levels of around 100 million barrels per day. It is this imbalance, coupled with inflation and market speculation, that is behind the highest gasoline prices for American consumers in years.

The administration does not understand the work of the industry

No one knows for sure what will happen to the energy policy of the Biden administration, but it does not seem to bode well for domestic production and transportation of hydrocarbons.

With the revocation of construction permits for the Keystone XL pipeline, many now fear that the Biden administration may support Michigan Gov. Gretchen Whitmer’s attempt to end operations on Enbridge Line 5, a key pipeline that supplies oil, gasoline and other important energy products from Canada to the United States and vice versa. : US Secretary of Energy Jennifer Granholm also served as Governor of Michigan in the past; more on her below.)

The Biden administration announced its intention to discuss this topic with the Canadian authorities, but the White House did not give any real guarantees that it would support the continued operation of the pipeline. If Enbridge Line 5 shuts down, many US energy products will become more expensive.

In addition, Biden also banned mining on the territory of the Arctic National Reserve, although none of the companies seemed to be ready to drill there anyway. The new Green Deal, or at least some aspects of it, is a constant threat to the American oil and gas industry, as it is supported by many allies of the Biden administration. As recently as last week, the White House announced new rules governing methane emissions and overseeing oil and gas companies. Details have not yet been disclosed, so the companies do not know how much the innovations will cost them.

Recently, the country’s oil and gas industry could be alarmed by the rhetoric of the administration and officials close to it. Energy Secretary Granholm (formerly Governor of Michigan, as noted above) embarrassed herself and the agency by laughing when asked what she was going to do about rising gas prices in the United States. The question was posed by Granholm, an authoritative host of the Sunday morning television show.

In addition, the minister showed gaps in knowledge about the global oil industry by confusing crude oil with a refined product, gasoline. Granholm said that “OPEC is a cartel that controls over 50% of the gasoline supply.” US oil and gas companies, therefore, have no reason to expect senior officials in Washington to understand how the oil industry works and how global market forces operate.

The Biden administration continues to send negative signals to US oil producers. So, for example, Saule Omarova was nominated for the post of head of the Office for the Control of Monetary Circulation. A video was recently uncovered in which Omarova said small US producers of coal, oil and gas “are likely to go bankrupt soon.” “At the very least, their bankruptcy would be desirable from a climate change perspective,” she said. Meanwhile, President Biden and members of his administration are calling on OPEC to increase oil production while actively curbing US production.

American manufacturers interpret this as a sign that the administration does not understand at all and does not want to understand their business. The White House wants many of the industry’s players to collapse and for American consumers to buy energy from foreign suppliers, apparently with the exception of Canada, the US’s neighbor and the main source of imported oil. American manufacturers remain fearful of disruptions and suspension of operations due to the actions of the White House.

The Biden administration, perhaps, can only change the course of the threat of an “uprising” of voters (consumers) with too strong growth in prices for gasoline and electricity. Otherwise, the oil industry has more than enough reason to believe that the current administration is a barrier to production.