Democrats in oil states are having buyer’s remorse as consuming anger builds against the Biden administration for killing the Keystone pipeline and drilling moratoriums.
The FT reported that, “Four Democratic House members from Texas wrote to the new president declaring: “Now is not the time to jeopardize American jobs, or the critical tax and royalty revenues that federal leases generate for local, state, and federal government that need funds now.” What is especially frustrating for them is the fact that the US government concluded that the Keystone pipeline does not substantially add to greenhouse gases. They should have also concluded that the killing of the pipeline adds more risk to the environment as the oil will be transported in less safe ways. Yet Biden’s climate crusade is not about saving the environment, it is about appearances. Appearing to do something about an issue without really doing anything. That may also be said of the Paris climate accord, an agreement that does little to reduce greenhouse gases but does a good job of killing U.S. jobs while sending U.S. taxpayer money overseas.
U.S. union workers are starting to understand that they have been had by Biden as his promise of “green energy” jobs are right now just a Keystone pipe dream. Zero hedge reports that America’s top union boss slammed the Biden administration. Zero Hedge writes, “America’s top union boss isn’t happy that President Biden canceled the Keystone XL pipeline his first day in the office and doesn’t think promises of ‘retraining’ programs are many consolations for union workers who will find themselves unemployed. “If you destroy 100 jobs in Greene County, Pennsylvania, where I grew up, and you create 100 jobs in California, it doesn’t do those 100 families much good,” said AFL-CIO President Richard Truman in comments which aired Sunday evening on “Axios on HBO.”
Axios notes that there are significant tensions between environmentalists, the Biden administration team addressing climate change, and segments of the labor movement. By canceling the Keystone XL project, approximately 1,000 existing union jobs and 10,000 protected construction jobs are estimated to have been lost. Trumka, who fully supported Biden’s run for president, told Axios’ Jonathan Swan that he thought Biden’s decision to cancel the pipeline project his first day in office, without pairing it with an initiative that would create as many (or more) jobs as would be lost, was a bad move. “If you are looking at a pipeline and you are saying we are going to put it down, now what are you going to do to create the same good-paying jobs in that area?” asked Truman, who “appeared to be uneasy – pausing for a few seconds and ducking the question — when asked whether he was comfortable with Biden’s plan to ban fracking on federal lands,” according to the report. But let us face it. The Biden administration does not care. Their global agenda is more important than thousands of American jobs.
Oil traders get it. They know that the Biden agenda is going to leave the world undersupplied in oil. That is one reason why oil and gasoline prices continue to soar. The other is the global oil drain of supply as demand in India and China has exceeded pre-covid levels. OIL tankers in route to China have hit the highest level in 6 months. Bloomberg reports that global stockpiles in onshore tanks and floating storage are estimated by the International Energy Agency to have shrunk by about 300 million barrels since OPEC and its allies made deep production cuts in May. Reduced supply and the vaccine-driven demand boost have entrenched Brent’s futures price curve in a bullish backwardation structure, which encourages the draining of more oil from tanks.
U.S. energy producers have a harder time raising money and there is talk of more consolidation to survive. Oil shorts that mistakenly believed that the global glut would remain and doubted whether OPEC cuts would matter, now have to reverse their positions. Hedges must be put on and deal with the new tight market reality. I have been warning of this for some time and Reuters agrees. Reuters repots that, “Hedge funds are turning bullish on oil once again, betting the pandemic and investors’ environmental focus has severely damaged companies’ ability to ramp up production. Such limitations on supply would push prices to multi-year highs and keep them there for two years or more, several hedge funds said. The view is a reversal for hedge funds, which shorted the oil sector in the lead-up to global shutdowns, landing energy-focused hedge funds gains of 26.8% in 2020. By their fast-moving strategies, hedge funds are quick to spot new trends.
So, I guess you can this the Biden bull. The Biden administration will put fear into investors in energy and has shown it is willing to sacrifice U.S. union jobs in the process. He is also willing to reduce the positive impact of our energy independence from the energy sector. We are looking for another big draw in crude oil, this week look for a 4-million-barrel draw. For gasoline, I look for a 1-million-barrel build and a 2-million-barrel draw in distillates. Refiners should continue their comeback with a 0.5 increase in run rates.
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