More Mixed Messages on the Energy Front
There is much that can be reported on the volatile price of oil and the related politics of the last seven days. In last week’s article a Texas oil producer suggested a ‘perfect’ phone call be made to the Saudi’s and the Russians to abate the flood of cheap oil. This week begins with portions of a letter written by the president of Reliance Well Services in Erie, Dan Doyle, titled “An Oilman’s Plea to President Trump”. The full text of the letter can be found on www. myprogressnews.com “Dear President Trump, I voted for you and I’m voting for you again. I like what you’re doing with our country. Because of our solid relationship, I feel I can be impertinent, and suggest that you take a few moments out of your extremely tight schedule and entirely remake the oil world at your earliest possible convenience. Please keep applying all your efforts to the Coronavirus. Don’t stop any of your momentum there. The oil and gas industry can wait… But once you are ready for us, we will be unconditionally ready for you…” “The demand side destruction now taking place is huge. There’s no stopping it, and with it will come the unraveling of one of the centerpieces of your platform, an energy-independent America. Many in your administration will ask you to appeal to the reasonable side of the Saudi’s. They will tell you to make a deal, give something away, turn your head. Please don’t. Rather, I would suggest, you give some consideration to the possibility that there is no reasonable side to the Saudi’s — not as it pertains to our interests. There’s no talking to the Russians either. Instead, why don’t you reinvent American’s energy policy and its relationship with all of the oil-exporting countries? As a fellow free-market advocate, what I’m suggesting may sound treasonous. Fix the price of oil, maybe by basin, or one price for all. All imported oil would be subject to tariffs. This includes all the sulphur-rich, low-quality oil the Saudi’s send into their state-owned refinery in Port Arthur, Texas, along with all the other heavy crudes shipped into our ports. Putting a simple spin on it, no bailout money would be required for the US oil and gas sector, plus you’d have those tariff dollars. My treasonous thinking has you allocating some of it to wind and solar development. Oil and gas alone cannot meet all of our needs. So, include renewables. Odd things may happen to your presidency when embracing all forms of energy. You may find some of the green energy crowd coming along with you. With such an all-encompassing approach, heavy on natural gas, you just might win over enough of them to win over the House. If the Coronavirus has taught us anything, it’s that supply chains essential to life in America should not be outsourced. Move energy and pharmaceuticals and all other essentials back home. We’re safer that way. You’ll be creating homegrown jobs and we won’t have to placate anyone…” (Excerpts were printed with Mr. Doyle’s permission.) Our sources indicate the letter got at least to Congressman Mike Kelly’s office. Last week President Trump tweeted he had discussed prices with the Saudi’s Crown Prince, and said he spoke with Putin on March 30. Thursday he said had brokered a deal between Russia and the Saudi to cut output. (The ‘perfect’ call?) Trump went on to say that Saudi Arabia and Russia “both went crazy” with their production after the supply deal failed. Saudi Arabia and Russia signaled on April 2 they were ready to cooperate to stabilize the oil market after calls with U.S. President Donald Trump to discuss the slump in prices, triggered by the end of an OPEC’s deal to curb output and a collapse in demand due to COVID-19. Low oil prices are threatening to put U.S. shale oil producers out of business as they cannot compete with cheaper Saudi and Russian oil. “I never thought I’d be saying that maybe we have to have an oil (price) increase, because we do,” Trump said. According to Reuters, Russia and Saudi Arabia have blamed each other for the price collapse. Riyadh wanted to deepen the oil cuts because of the fallout from coronavirus but Moscow refused to join new reductions, only extend the existing OPEC agreement. In response, Saudi Arabia tried to sell cheap oil to refiners that buy Russian crude. Saudi supply hit a record above 12 MMbbl/d on April 1. April fool’s anyone.