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Why Are Energy Prices High? Blame President Biden

An explosion at a liquid natural gas export facility puts an explanation point on inept Biden administration policy.
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Natural Gas futures courtesy of Trading Economics

Natural Gas futures courtesy of Trading Economics

It's Transitory!

If you are looking for something that's transitory, then consider this dip in the price of natural gas.

Investigation Underway at Freeport LNG After Explosion; Damage Unclear

Please consider Investigation Underway at Freeport LNG After Explosion; Damage Unclear

An explosion that rattled the Freeport liquefied natural gas (LNG) export terminal in Texas on Wednesday was brought under control quickly, paving the way for an investigation into what caused the incident. 

The explosion caused a fire that sent black smoke billowing into the air. According to those nearby who posted on Twitter, the explosion could be felt and some people were forced to shelter in place. No evacuations were ordered. The Surfside Police Department said the fire had been contained by about 1 p.m. CT. 

It’s unclear what caused the incident. Browne said an investigation is underway. In addition to local emergency response crews, the U.S. Coast Guard was also on scene. 

The Freeport facility can produce about 2 Bcf/d of LNG from three trains. It’s also the only liquefaction facility in the United States, and one of only two export terminals in the world, that use electric motors instead of natural gas turbines to drive liquefaction compressors, according to the Energy Information Administration.

Henry Hub prices nosedived across the curve after word of the explosion broke. The prompt contract finished the day 60 cents lower at $8.69/MMBtu after hitting an intraday high of $9.66. If anything, the incident may highlight how important the LNG export market has become to domestic prices.

“LNG is accounting for a material percentage of U.S. gas consumption, so if a major U.S. LNG production facility is down for any reason, that should take some pressure off U.S. gas prices,” Poten and Partners’ Jason Feer, told NGI.

The incident also comes at a time when the global gas market is short of LNG as Europe is searching for supplies to displace Russian volumes and Asia remains competitive. 

Supply Chain Disruptions

Global map from Nations Online Project, annotations by Mish

Global map from Nations Online Project, annotations by Mish

On April 4 I commented De-Globalization: New Supply Chains Are Inefficient and Will Drive Up Inflation

Europe does not want to use Russian natural gas so we ship LNG from the US across the Atlantic ocean. Russia is building new pipelines to China. 

Meanwhile, the EU is still dependent on Russia for most of its gas. And despite shipping less natural gas to Europe, the price has exploded so high that Russia is making more money selling less gas.

Why Energy Companies Won’t Produce

The Wall Street Journal has an interesting and accurate take on Why Energy Companies Won’t Produce

President Biden has urged oil and natural-gas companies to ramp up production, and you’d think, given the current high prices, that it would be in their interest to do so. But the industry has been slow to respond, with some justification. Companies expect that as soon as the current turmoil subsides, the Biden administration will shift back to hostile rhetoric, anti-energy legislative proposals, and oppositional regulatory policies.

Last September, 20 House Democrats introduced the Fossil Free Finance Act, which would require the Federal Reserve Bank to take steps to stop banks from investing in fossil-fuel production. The bill’s goal was “no financing of new or expanded fossil fuel projects after 2022,” the Naderite group Public Citizen noted approvingly.

Then there’s the harping about excessive profits, which led Sen. Elizabeth Warren to propose a new tax. “The oil companies need to understand that the benefits of price gouging will be sharply undercut by a tax that’s not across the board, but instead is a tax on how their profits increase during this short-term crisis,” she declaimed. 

There was a time when most people understood that if you want less of something, tax it, and if you want more, subsidize it. Even though Democrats’ more radical legislation is unlikely to pass, the message to participants in the highly regulated financial markets is clear: We want to see less, not more, capital flowing to domestic oil and gas production.

Biden's Bank Regulatory Nominee Espouses Helicopter Money and Praises the Old USSR

In addition to the totally absurd Fossil Free Finance Act, please recall Saule Saule Omarova, president Biden's nominee for Comptroller of the Currency, 

Omarova went down in flames, but not before stating "We want oil, coal and gas industries to go bankrupt if we want to tackle climate change." 

She also praised helicopter drop money and letting the Fed set key prices.

Omarova is a genuine Marxist nutcase. 

For discussion, please see Biden's Bank Regulatory Nominee Espouses Helicopter Money and Praises the Old USSR

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Now Biden and Warren are whining the industry is not producing enough oil and gas when this is precisely what they were begging for.

Where's AOC hiding? She's stunningly quiet these days.

What Should Biden and the EU Do?

  1. End sanctions and import restrictions on Russia and Iran
  2. Stop the regulatory madness
  3. Promote nuclear energy as a solution

Ending sanctions would immediately lower the price of oil and natural gas. 

Points two and three are longer-term steps to wean off fossil fuels. 

What to Expect

  1. More useless finger pointing at Putin
  2. More regulatory nonsense
  3. Higher gasoline and natural gas prices 
  4. Calls for more tax hikes
  5. Calls for more free money to ease inflation
  6. Summer blackouts especially in California

Blackouts Coming 

I confidently predict a huge number of blackouts this summer and escalating energy costs.

Elizabeth Warren and President Biden will respond to the blackouts with demands for higher taxes and price gouging legislation.

Also note Ukraine Safe Passage Grain Talks Fail, Expect Still Higher Food Prices Globally

Finally, please note Biden Mandates More Ethanol in Gasoline, Expect Many Negative Repercussions

President Biden is incompetent. 

This post originated at MishTalk.Com.

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