04-15-2022, 09:30 AM
(04-15-2022, 08:59 AM)Sled21 Wrote: Because fuel prices are set mostly by oil speculators who invest or not in the oil and gas industry.
Well, this isn't true. At minimum, your verbiage is incorrect. Fuel prices are not mostly set by speculators, they are set by S&D. This is the basic principle of a commodity on the market. When COVID hit, oil demand tanked and caused a situation where oil briefly went upside down. There was quite literally too much supply for the level of demand. Production then slowed down. Now, demand has returned to pre-COVID levels, roughly, but production has not (yet). So, we have high demand, but not yet high supply. This is the single biggest factor in high prices. Then, there is the whole Ukraine situation.
Quote:When Biden said one of the 1st things on his agenda was to do everything he could to kill the fossil fuel industry, oil speculators quit investing.
Overall, I agree that Biden is not friendly towards the FF industry. I've mentioned this before, but I work in the oil industry as an analyst. Now, I don't have the resume that Stewy does, but I work closely with our Risk & Trading teams daily. What you're saying here doesn't make any sense. When a trade desk agrees to a futures contract, they are essentially betting on the price of that commodity. Until recently, the market was in backwardation. This means that current, or whichever spot month the contract is for, oil prices were higher than future oil prices. I can assure you, speculators have absolutely not stopped investing. Futures are traded at a high volume every single day. Every company, from the company I work for to Chevron, BP, Marathon, Exxon etc. all have derivative traders that are pushing thousands of futures contracts to the market every single day. These contracts can bet on whether the price will go up or it will go down.
Quote:It's not just getting the oil out of the ground, you have to have permits to find it, you have to have new permits to produce it, you have to have the infrastructure to move it, and to process it.
Yes, this is correct to the best of my understanding. This is Stewy's area of expertise, I am not familiar with this side of the business.
Quote:He's made producing a gallon of gasoline extremely harder, shutting down exploration and drilling permits, shutting down pipelines, etc., all of which causes the price to go up. The President sets the tone. Trumps tone was Drill Baby Drill and Biden's tone is Kill Fossil Fuels.
Biden has shut down a pipeline. This pipeline has become a sore & misinformed talking point. It's important to remember that his pipeline was never operational, and was never even close to operational. The shutting down of the pipeline has no meaningful effect on prices or supply. Oil production is still slowly recovering and recent data has the U.S. producing 11.3m bbls per day. By EOY 2023, we are expected to hit 12.6m bbls per day, which will be an all-time record if it stays true.
Now, it is my understanding that Biden has made it difficult to obtain new permits and I do believe that his policies are overall not as friendly to FF as Trump's were, but the current price situation is not due to Biden's policies IMO. If we have insanely high dollar oil five years from now, that could be potentially linked to Biden, but not right now. Again, there is a fantastic post by Stewy in another thread that covers much of this information in further detail. That post and thread is here. He has several posts in here that are very educating and interesting to read through. A good quote of his that I believe sums it up is this...
Quote:Bidens only been in office a year. He has been no friend to the industry, but what he's doing will affect prices far further into the future. He's not hampering production, but delaying finding new opportunities.
