Prof. ST Hsieh
Director, US-China Energy Industry Forum
February 23, 2022
Putin ordered Russian army “entering” eastern Ukraine as peacekeepers. So officially there is NO war in Ukraine yet. It is easy to imagine that Ukrainian people are in panic now, it is hardly their fault. Politicians should bear most of the responsibilities, although it is difficult to assign individuals who should bear the most responsibility or who will be the winner or loser until the war is over. It will take time!
In the US, President Biden is the Commander in Chief, so he deserves all the accolades if his policy is successful! Unfortunately, public opinion is not kind to Biden because “only 40% of Americans approving of his job” and only 36% of people approve of his handling of Russia. It does not mean that Biden will change his courses anytime soon, but it surely threatens Democratic majority after this Mid-term election.
More alarming for Biden is that Republicans are united against his performance, especially in dealing with Putin. By all means, the Ukraine crisis, whether it is war or not, will not be settled anytime soon. But it is not only political leaders are suffering now, the public is also already paying the price.
Biden has warned us few days ago that we will have to shoulder some costs for the Ukraine tragedy. But “we” means the US public will have to pay additional cost for the war. This cost is “additional” because we are already suffering from unprecedent inflations. The Ukraine crisis is primarily caused by European energy security which depends on Russia natural gas and oil. This is not news but escalated lately by the big power confrontations. Biden is vowing to shield Americans from gasoline price spike at the pumps. It is a rather limited task as compared to the energy security challenges in Europe. Unfortunately, Biden’s hands are tied.
- The US is endowed with abundant natural gas and oil that there is no way the US consumer will face any shortage for as long as we go. However, Democratic Party has pursued an aggressive green energy policy for the benefit of decarbonization. As a result, US fossil energy industry has been depressed under Biden administration. Faced with high gasoline prices, Biden’s call to OPEC+ asking for oil production increase is being ridiculed by the US domestic energy industry.
- His sanctions against Putin will reduce the oil and gas supply from Russia to the European market. The global oil and gas prices will get higher as well as high volatilities. Energy consumers all over the world will be negatively impacted, including US consumers.
- The US has a huge Strategic Petroleum Reserve and Biden has approved the release of 50 Bbl in 2021. It was a coordinated release with China, Japan, South Korea, and India. But it failed to make any real impact. It takes time and paperwork: basically, it is too little and too late when the crude reaches the market.
- Reach a nuclear truce with Iran and Iran will instantly supply one million Bbl per day. For Biden, it is a choice very difficult to make. Biden will be blamed for his choice between the two evils: Iran has been painted as an evil empire in par with Russia for years. Let Iran get off the tough sanctions with nuclear weapon potential will trigger middle east crisis because of Israel.
- US politicians have advocated a “ban of US oil export.” Even Biden concurs, there is no guarantee that it will cool the gasoline price at the pump. Further, US oil industry will vehemently against such a government intervention of energy market. It will have long term impacts on US oil industry’s credential around the world for making business deals.
- Just for the purpose of reducing the high gasoline price at the US pumps, Biden could pursue the elimination of the 18 cents per gallon federal tax. But it will increase the federal budget deficits. It will also need congress approval, which is not easy!
- One possibility is for Biden to “beg” Saudi Arab’s de facto ruler, MBS for raising oil productions. In fact, Jake Sullivan had travelled to Saudi already. But Biden and Democratic have burned the bridge with MBS during the Trump administration. Unless Biden personally talks with MBS and invites MBS back to the White House, there is no deal. However, in doing so, Biden will completely lose the support of left wing in the Democratic party. If so, Biden will have no real chance to lead!
Biden’s foreign affairs approval plummets to 40%: Gallup poll
Wed, February 23, 2022, 9:56 AM
President Biden’s foreign affairs approval rating among American adults has plummeted to a new low, a recent Gallup poll shows.
As Biden’s second year in office marches forward, a Gallup poll out this week puts him far below water in the area of foreign policy, with only 40% of Americans approving of his job.
The president’s marks on foreign affairs are a point below his 41% overall approval rating, according to the new poll.
Gallup also found that 62% of Americans disapprove of Biden’s handling of the economy, and only 36% of people approve of his handling of Russia. The poll was conducted from Feb. 1-17, before the most recent Russian escalations in Ukraine.
The decline in foreign policy approval comes amid Russian military moves into Ukraine — moves the White House formally recognized as an “invasion” earlier this week.
Former U.N. Ambassador Nikki Haley on Wednesday accused Biden of “failing” in his response to Russia’s invasion of Ukraine – saying the president is failing to deliver in a “major leadership moment.”
“President Biden promised a ‘swift and severe’ response. He did not deliver,” Haley tweeted, moments after Biden addressed the nation from the White House on Tuesday.
Biden announced new sanctions against Russia and said that troop movements in Eastern Ukraine marked “the beginning of a Russian invasion of Ukraine.” He also announced additional forces to the region but maintained that the U.S. has “no intention” of fighting Russia.
The Ukraine invasion by Russia is already seeing both sides preparing for conflict.
Joe Biden vows to shield Americans from gas price spike. That won’t be easy
New York (CNN Business) President Joe Biden, facing the risk of a destabilizing energy price shock, is promising to blunt the impact of rising energy prices on American families. But that won’t be easy.
The Russia-Ukraine crisis has already helped lift oil and gasoline prices to levels unseen since 2014. Further sanctions on Moscow could drive pump prices closer to $4 a gallon.
Biden is bracing the public for just that, acknowledging on Tuesday that “defending freedom will have costs.”
“I want to limit the pain the American people are feeling at the gas pump. This is critical to me,” Biden said during prepared remarks.
There’s a long history of voters blaming presidents for high gas prices — fair or not. Yet presidents have limited power to drive down energy prices, as Biden himself has learned painfully in recent months.
“Biden’s options mostly come in two categories: Nothing-burgers and mistakes,” said Bob McNally, president of energy consulting firm Rapidan Energy Group. “That’s true of almost all presidents.”
That doesn’t mean Biden won’t try.
‘We cannot afford to lose any barrels’
Markets are on high-alert for signs that Russia’s supplies are threatened, either through US sanctions, damage from a potential war or Moscow deciding to weaponize energy.
Russia is the world’s second-largest oil producer and exporter of crude oil, with 5 million barrels per day getting sent overseas. That’s roughly 12% of the global crude trade, according to the International Energy Agency.
Any disruption to Russia’s oil flows would “easily” drive up crude prices to $120 a barrel, JPMorgan recently warned. Brent, the world benchmark, surged to $99.50 a barrel on Tuesday before backing off.
“Global supply is already tight. We cannot afford to lose any barrels, let alone 5 million barrels,” said Robert Yawger, vice president of energy futures at Mizuho Securities.
Back to the SPR well?
Biden said US officials are “executive a plan in coordination” with both oil producers and consumers to shield the public from price spikes.
That suggests the United States could release more oil from emergency reserves in tandem with other countries doing the same. Just before Thanksgiving, Biden announced the biggest-ever release from the Strategic Petroleum Reserve (SPR). The 50-million-barrel release amounted to just 12 hours of global oil consumption.
Oil prices dropped in the lead-up to that announcement. And then they tumbled when Omicron emerged.
Yet gas prices took just a modest dip — before returning to where they started. And the national average today stands at $3.54 a gallon — 12 cents higher than before SPR rumors emerged last fall.
That experience — and the fact another SPR release is being talked about now — underscores how this isn’t a meaningful solution to the supply-demand imbalance. There are a finite number of barrels in emergency reserves. And each release leaves fewer barrels for the next emergency.
Making nice with Iran
Even before the Russia-Ukraine crisis, supply was failing to keep up with demand.
Biden’s best bet to boost supply, from a purely financial perspective, might be reaching a nuclear deal with Iran.
Iran, once one of OPEC’s leading oil producers, has been sidelined since 2018 when the nuclear agreement with the West collapsed.
“Biden’s only good option is to sign a nuclear deal with Iran. That’s the only lever he has,” said McNally, the energy consultant who previously served as an adviser to former President George W. Bush.
Of course, there are potential national security and diplomatic tradeoffs to making nice with Iran.
But these negotiations with Tehran are not taking place in a vacuum. Analysts estimate that within months a new deal — which both sides have signaled is close — would add approximately 1 million barrels per day in oil supply. And the market could really use those barrels right now.
“I don’t think Biden is going to say he’s going to give the Iranians what they want,” Yawger said. “You can’t help but wonder though if we’re going to loosen up on the terms.”
Ban oil exports
One option that has frequently been discussed is banning US oil exports to insulate American drivers from global volatility.
Although that might feel good, industry experts have warned such a move would likely backfire on US consumers.
That’s because oil is a globally traded commodity. Taking US barrels off the world market would drive up world prices. And prices at the pump take their cues from world prices.
Besides, banning oil exports would only make US allies in Europe and elsewhere more reliant on barrels from Russia.
A phone call to MBS
Saudi Arabia-led OPEC has repeatedly refused to heed US calls to significantly ramp up oil production that was sidelined during the onset of Covid.
The Biden administration’s efforts to persuade OPEC to open the taps have not been helped by the strained relationship between Washington and Saudi Arabia.
Patching up relations with Saudi Crown Prince Mohammed bin Salman, known as MBS, could help. But it’s not clear what it would take to make that happen.
On the campaign trail, Biden previously promised to treat Saudi Arabia as a “pariah.” And that was before US intelligence found that MBS approved the operation to capture or kill journalist Jamal Khashoggi in 2018.
Gas tax holiday
Earlier this month, Democratic Senators Mark Kelly and Maggie Hassan introduced legislation that would seek to eliminate 18 cents per gallon of federal gas taxes until January 1.
While this plan would save consumers money, it’s hardly a solution to the underlying problem. In fact, it would seemingly artificially boost support at a time when supply is low.
Budget watchdogs are already crying foul. The Committee for a Responsible Federal Budget slammed the proposal as a “wrong turn,” warning a gas tax holiday would slash tax revenue by $20 billion.
Biden turns to Big Oil, Saudi Arabia as energy costs soar
Wed, February 23, 2022, 5:24 PM
As President Biden confronts soaring energy costs, he’s looking for help from two entities he’s criticized for years: Big Oil and Saudi Arabia.
Why it matters: The president of the United States is placing part of his political fate into the hands of people who question his long-term intentions and have little incentive to help him, straining his options to contain energy prices. Another challenging option: a nuclear deal with oil-rich Iran.
- The White House is bracing for Russia’s invasion of Ukraine to send gasoline prices soaring, adding more pressure to the current 7.5% inflation rate.
- While Biden isn’t adopting the old Republican “drill, baby, drill” mantra, he’s sending signals to oil companies that he wants their help to prevent prices at the pump from surging.
- He’s also leaning on the Kingdom of Saudi Arabia — which he called a “pariah” during the 2020 presidential campaign — to increase its production.
- “We’re working closely with major energy producers,” Daleep Singh, the deputy national security adviser for international economics, told reporters on Tuesday. “We can work with energy companies to surge their capacity to supply energy to the market, particularly as prices rise.”
The big picture: Throughout the campaign and his presidency, Biden has put the oil and gas industry on notice he expects it to cut carbon emissions.
- On Day One, he issued an executive order to rescind permits for the Keystone pipeline and pledged to rejoin the Paris climate accords.
- He’s targeted the industry with higher taxes and, in November, blamed it for surging prices at the pump, suggesting providers were making “significant profits off higher energy prices.”
- He instructed the Federal Trade Commission to investigate potential illegal activity.
- In December, though, the administration started to shift its rhetoric. Energy Secretary Jennifer Granholm called on U.S. oil producers to get their “rig counts up.”
Today, the oil industry says the administration is sending mixed messages.
- “On the one hand, they are asking us to produce more oil and gas,” said Mike Sommers, president and CEO of the American Petroleum Institute.
- “On the other hand, there are at least five policy areas where they have said the exact opposite, including just this weekend — announcing a new moratorium for on- and off-shore leases.”
In August, Biden officials began to call on Saudi Arabia and other OPEC countries to increase their oil production, which invited criticism from climate activists.
- In September, national security adviser Jake Sullivan traveled to Saudi Arabia to have additional conversations and repeat the request to pump more oil.
- But OPEC+ countries have been ignoring those calls.
- Last week, Brett McGurk, the National Security Council’s Middle East coordinator, and the State Department’s energy envoy, Amos Hochstein, were in Riyadh for further discussion.
- The Saudis haven’t indicated they plan to increase their production.
By the numbers: With war looming, the price of a barrel of oil has risen from $77 per barrel in early January to nearly $100.
- The national average price of gas per gallon is $3.54, up from $2.64 a year ago, according to AAA.
- The United States is still not back to pre-pandemic oil production levels; it pumped about 11.97 million barrels a day last year, down from 12.3 million in 2019.
The bottom line: A potential nuclear agreement with Iran, which has an estimated 85 million barrels stored at sea, may do more to lower the price of oil than any increased productions from the Saudis or U.S. companies.
- “There’s not a drop of spare production capacity outside of OPEC+,” said Robert McNally, president of Rapidan Energy Group. “It’s wishful thinking.”
- “The only real option that the Biden administration has to increase oil supply in the near term is signing an Iran deal and then convincing Saudi Arabia to produce more.”