The energy transition is dead. Tracked here.
- ESG is dead, too. Tracked here.
Among the energy stories today, the most interesting is this one, the headline: the Biden administration is announcing plans to buy back 60 million bbls of oil to star the "long" process of "building back" the SPR.
Let's find the story.
The United States will take bids this fall to buy back 60 million barrels of crude oil for the U.S. Strategic Petroleum Reserve, the first step in replenishing the stockpile after a record-sized release this spring, the Department of Energy said.
The administration of U.S. President Joe Biden had announced on March 31, 2022, a release of a record 180 million barrels from the stockpile to help tame runaway energy prices, soaring since the Russian invasion of Ukraine. [A time line folks might want to fact check.]
"As we are thoughtful and methodical in the decision to drawdown from our emergency reserve, we must be similarly strategic in replenishing the supply so that it stands ready to deliver on its mission to provide relief when needed most," said U.S. Secretary of Energy Jennifer Granholm in a press release detailing the plan.
The call for bids on the initial 60 million barrels "will take place in the fall of 2022 to secure delivery in future years when prices are anticipated to be significantly lower than they are today," according to the press release.
Charles Kennedy also has the story.
Okay. So, what do we have?
An announcement that around the time of the mid-terms (2022), the US government will call for bids to start the process of "building back" the strategic reserve, with the first "delivery to be made in future years."
So many story lines. Let's begin.
We start with politics. Everything in Washington (DC) is politics so one has to look at this story not through oil-stained spectacles, but through Biden's political lenses.
Biden's approval ratings are so low, everything he does it measured against how "it will play to the base."
Again, the language being used today is "buying oil" -- not swapping oil. Buying oil from Big Oil is probably the last thing the Biden administration wanted to propose.
So, how does this happen? What's going on?
Decisions like this come after a 50-minute PowerPoint briefing that has been vetted for the past six months. The full PowerPoint briefing was 104 slides, including a title slide, and a "thanks to the following" slide.
President Biden's staff was shown all 104 slides but the president, in ten minutes was shown a Reader's Digest version of eight slides.
The last two slides:
The bottom line: energy transition is dead.
If energy transition was going as well as everyone says it is going, there would be no need to re-fill the SPR beyond the swaps to replace the oil released this summer (2022).
But there is no way of sugar coating this for his base. His base will go nuts: buying yet more oil for the SPR! This is incredible. First, an admission that the "energy transition" is not only not going well, but it may be dead and if we don't get back to drilling and producing more oil, "we" (the United States) could be in great difficulty.
There's only a few takeaways.
First, "energy transition," that euphemism for "renewable energy," is dead. If not dead, it's going to take a lot longer than anyone thought.
The tipping point was Warren Buffett at his annual meeting less than a week ago: in one quarter Buffett bought so much CVX stock that an shares in an oil company became one of his top four equity positions.
Warren Buffett's comment that energy transition will take much longer than anticipated was an understatement.
Prior to that was Peter Zeihan clearly stating that "energy transition" is dead.
From my perspective this is quite incredible, for the Biden administration to talk about the need for buying more oil to begin the long process of refilling the SPR. This also tells me that the Biden administration agrees that we are not talking just a few more years of reliance on oil, but decades.
Energy transition was supposed to be accomplished by 2025 or 2030. But gonna happen.
Like everything else in the news cycle, this story will be forgotten by most folks by this weekend but it certainly helps explain why Warren Buffet bought so much CVX in 1Q22 and then early this week revealed that he bought another five million shares of OXY.
Now, for the snarky, political remarks. It is amazing how this administration consistently and continuously keeps making really, really bad decisions when it comes to energy.
By the way, where is all this new oil to "begin re-filling" the SPR supposed to come from? Federal land? Off-shore?
$5.96 a gallon for heating oil today; $3.15 in January.
ReplyDeleteCould be a very, very interesting mid-term election.
Deletewhen i first saw that story, i dismissed it as a parody..
ReplyDeleteLOL. The headline certainly suggested something out of the "Babylon Bee" or "The Onion." The interesting thing for me is that someone -- someone sane in the Biden administration -- is looking at the same data you and I are looking at and is truly concerned about adequate crude oil in the not-too-distant future. I can't articulate my thoughts well enough, but this is beyond the pale -- that the Biden administration would announce this.
DeleteIt's easy to just say this is all politics, releasing oil from the SPR to try to bring the price of oil down, and then to appease others by offering to refill it but I think it's beyond simple politics.
If "energy transition" was going smoothly and fast enough, we wouldn't need much oil in the strategic petroleum reserve. Does Biden see a global military situation in which the US DOD might need a lot of fuel -- especially jet fuel, bunker fuel?
re: By the way, where is all this new oil to "begin re-filling" the SPR supposed to come from? Federal land? Off-shore?
ReplyDeleteRussia. we will save by buying oil from Russia at a discount, of course
Now, that is "parody." LOL. That would be hysterical. That's exactly something a business-minded president would think of doing.
Deletewe got snookered, and so did the markets....this is the week that they planned to start selling a million barrels per day from the SPR, and prices were lower expecting that...so someone "leaks" that they're going to eventually buy back a third of that (which was always part of the plan) and suddenly they get $5 more a barrel for what they're selling now...
ReplyDeleteAt the end of the day, WTI is $5 higher?
Deleteok, it didn't...the Yahoo story i first read tied the leak to a 5% move up, midday i imagine...but checking, i see it was just 45 cents higher at the close...
Deletestill, the theory is certainly plausible...like i said, anything else seems like a parody
All I know it's a fool's errand to try to predict the price of oil, and if any administration tries to manipulate the price of oil, it follows that they are fools. "Parody" seems to fit perfectly.
Delete