After doing everything possible for 10 months to discourage oil and gas production, Biden Asks Oil Industry for Help to Tame Gas Prices.
The latest outreach to the oil industry is an awkward shift for the Biden administration, which has pledged to move the country away from fossil fuels and has drawn criticism from the industry and Republicans for pausing lease sales of federal land for oil and gas development.
But President Joe Biden faces mounting political pressure to curb rising prices that have lifted the average per gallon price of gasoline to $3.28, more than $1 above the year-ago level, as crude oil prices hit 7-year highs this week above $80 a barrel. That pain at the pump comes as the U.S. consumer price index jumped 5.4 percent in September, matching a 13-year high and driven partly by troubled supply chains — creating another political headache for Biden heading into the 2022 election season.
The industry is smarting over the administration’s call for OPEC to increase oil production, saying it sounded hypocritical given its stance on the auctions for new parcels of public land to drill.
“Years ago they drilled like crazy and made no money,” said Andrew Lipow, head of Houston-based oil market consulting firm Lipow Oil Associates. “This time around they need to show returns to inventors and they’re increasing their dividends” instead of sending more rigs to the oil fields.
Biden Suddenly Loves Frackers
The Wall Street Journal comments Biden Suddenly Loves Frackers
Stranger things have happened, but we can’t recall one. For nine months President Biden has been pursuing policies to squeeze oil-and-gas producers to limit production and eventually go out of business. Having begged OPEC in vain to boost oil production, Mr. Biden is now having to suffer the humiliation of beseeching an American industry he vilifies as destroying the planet to save the day.
At a presidential debate last year, Mr. Biden said he would “transition away from the oil industry.” His first day in office, Mr. Biden revoked the permit for the Keystone XL pipeline, which was supposed to carry oil from Canada and the Bakken Shale to refineries on the Gulf Coast. A week later he issued an order placing a moratorium on new oil-and-gas leases on federal lands and waters.
Progressives in Congress, meantime, want to use the Democratic reconciliation bill to punish the industry by doing away with expensing for intangible drilling costs, the oil depletion allowance and more. The bill’s Clean Electricity Performance Program is expressly designed to punish fossil fuels, including natural gas. Mr. Biden and his party have sent signals that are loud and clear, in accord with the larger cultural message that fossil fuels are the new tobacco and the world doesn’t need them.
$200 Oil?
Bloomberg reports Someone Is Betting That Oil Will Soar to a Record $200 a Barrel.
Brent $200 calls for December 2022, options contracts that would profit a buyer from a rally toward that level, traded 1,300 times on Wednesday. While the contracts don’t expire until October next year, they could profit from any sharp spike in prices this winter or next summer.
In a market where a single cargo of crude would currently fetch about $160 million, the $130,000 wager on oil reaching an all-time high is tiny. However, it reflects the fact that a growing number of options traders are betting that an energy crunch this winter may see prices rip higher.
It’s not just $200 calls that have been trading in recent days. Holdings in Brent $100 calls through to the end of next year have climbed by 20,000 contracts this month.
Crazy Bets?
The Bloomberg report was on September 30. But the action continues. On October 17 Fox News reported ‘Crazy’ bets on $200 oil invade the options market
Fox reported “Call options at $95 or $180 a barrel have been popular over the past week.”
Is a bet on $200 oil crazy? Yes, in my opinion.
Betting on this to happen in 2021 is more than a bit pushing things. Longer term, I believe a recession would hit first, killing demand.
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Mish
I don’t think it will go up to $200, but it’s going up.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2021 is 0.5 percent on October 19, down from 1.2 percent on October 15.
Perhaps you should work hard on electing freedom candidates.
https://www.youtube.com/watch?v=yxgybgEKHHI