Updates
March 18, 2022: more suggestions that IEA (i.e., Saudi Arabia) is also quite worried. IEA specifically says it hopes OPEC+ which includes Russia can ease the market strain. The Brits are saying a complete ban on Russian oil will devastate their economy, and probably the entire global economy.
March 18, 2022: surfing through the news and op-eds, there really does seem to be a panic developing in Washington (DC) with regard to the price of oil. I'm looking through oil-stained glasses, so I am quite biased, but it really does appear to be a lot of anxiety out there among the incumbents.
Later, 9:57 p.m. CT: I got started late on blogging tonight due to family commitments (it's spring break this weeek). But when I started the original post below, I swear on a stack of Bibles, that WTI was $103.30. You can confirm that by looking at the previous post.
Now, about an hour later, getting ready to close shop, and watch some Perry Mason, I checked WTI one more time. WTI is now $105.80. It's gone up $2.50 in the last couple of hours.
No wonder folks in Washington (DC) seem to be in a panic.
Jay Powell may wish he had not raised the "fed rate." I guess the way Ms Psaki sees it is that with Jay Powell raising rates, it was time for the CEO of XOM to call the "oil sector of America" and tell "everyone" to raise the price of crude oil.
Original Post
Myth of spare capacity: everybody's talking about it now. Link here.
Panic:
When has life been "fair" or "sensible"? LOL.
It takes a little while for "things" to happen. But this is the timeline. A few weeks ago gasoline prices at the pump started to go up. The elites in Washington (DC) didn't really notice it: it didn't affect them or they simply weren't paying attention, or maybe a bit of both. New Yorkers certainly didn't notice it; they don't drive cars; they take the subway. Joe Biden used to commute from his home in Delaware to Washington (DC) on the train. The White House press secretary was completely tone deaf on this issue.
It took their constituents a few days to realize that "hey, this is not transitory," and, oh by the way, "these gasoline prices really are high." So, they started writing letters to their congress men / women, and to their US senators. A few letters at first, and then those letters started growing into a big pile. Finally, the congressional / Senate staff get around to compiling those letters and providing their bosses the update. Now, two weeks later, the incumbents are starting to get it, and they're starting to panic.
That explains the links above, why we're finally hearing from the elites in Washington (DC). Their constituents are "mad as hell and aren't going to take it any more." They're ready to ask Canadian truckers how to stage a convoy but they can't afford the gas.
Today, the US Secretary of Energy practically said, "drill, baby, drill." For the incumbents, panic is truly starting to set in.
When crude oil dropped from $120 to $90 literally overnight a week ago, a lot of folks thought things would be fine. Some of us didn't understand how crude oil could drop so quickly when there were no changes in the fundamentals, but the Washington (DC) folks thought, "hey, maybe things will settle down."
But today, crude oil is back up to $105 and this time it looks like it has as much to do with fundamentals (supply / demand issues) as with the geo-political environment (the Ukraine-Russia war isn't going to end any time soon).
Anyway, there you have it.
Sure, bad things might happen. I don't like it (the high prices). Bad things like:
- windfall profits tax;
- nationalizing the US oil companies;
- executive orders for price controls, either crude oil or gasoline;
- ban crude oil and/or LNG exports.
So, bad things might happen. As someone once said, things are never so bad they can't get worse. And it was President Obama, not me, that recognized that Joe Biden has that particular skill set to make bad situations worse. I didn't say that, that was paraphrasing President Obama.
Anyway, time to move on.
But the tea leaves certainly suggest the incumbents are starting to panic.
Driving season doesn't start for another month or so. Plenty of time to put in some more renewable energy.
By the way, what's going on with Berkshire Hathaway, hitting 52-week highs three days in a row and today wasn't even subtle? Up almost $9 at the close. That just blows me away.