RE:RE:Washout EventThe SPR is a disaster in the making.
The 1 million barrels being removed from the SPR every day, ends at the end of September.
Biden's strategy was that by October, US oil production would have increased enough to replace that 1 million barrels per day (ie US production would be up by 1 million BOE/day), and continue to increase such that the SPR could be refilled over coming months.
Well they are past the half way mark now, and the US has shown it will not be able to increase its production anything near 1 million barrels/day.
3 months left of SPR reserve daily draws of 1 million boe. Then the spam hits the fan!
What will Biden do then?
Another increase maybe - that would just show how bad things are. It would indicate the World is on borrowed time.
The fact remains that in Canada and US, the governments are hositle to oil and gas, so investment in long term assets is going to be limited.
BUT - and I think this is a big BUT. In much of the World - ie all of OPEC, their governements are pro oil development. But despite being pro oil development, they are still realizing reduced oil production.
You may say, thats because they couldn't afford to invest in drilling when oil prices were low over the last few years. Which is true.
But, this also applies to the wealthy members like Saudi Arabia, UAE and Kuwait. They had money to reinvest, but they are still falling behind their ability to produce at their pre covid rates.
Producing 29 million BOE/day (OPEC's rough output), means a lot of annual work to replace depletion. You have to replace annual depletion before you can think about any growth.
ie oil production isn't just falling in jurisdications subject to increased government regulation. Its falling in places where governments are supportive.
This is important, because at some point, the tide will turn in Canada and the US, and the anti oil government will be replaced by pro oil leadership (looks like 2024 is the earliest for the US).
But that may not make much of a difference.
Remember how Loukas said at the post AGM Q&A, that all the drill rigs available to Canadain oil companies, were booked. ie, in order for OBE to get another drill rig, they would have to take it from someone else. That means Canada is not just limited by regulatory limited, but also by capacity limits. The same may be same in the US.
The energy crisis didn't just end this week!
The western world has a democratic election system in which two parties compete for control.
They have various names, but they all come down to a party of Control vs a party of Freedom
ie, one party party believes the population should be controlled, and the other party believes the population should be free to live as they choose, within certain broad limits.
People prefer freedom over control.
However people chose safety over freedom.
So, if you make people feel fearful, they will chose control over freedom.
The control party knows this, so to get elected they need to create a feeling of fearfulness in their poplulation. That is where the global warming thing comes from. It was remarketed as climate change after the arctic didn't become ice free, and sea levels didn't cover coastal communities.
Creating fear by claiming the world will increase in temperature, and the climate will change (causing drought and floods) because of carbon in the atmosphere, is a strategy the control party uses to promote fear. That fear causes some voters to chose the control party because they claim they will prevent the bad things from happening - ie they represent themselves as offering safety.
They also create fear by being soft on crime, thus allowing crime rates to increase.
In this case however, the strategy the control party is promoting to try to market themselves as the party of safety, is causing harm itself. Higher prices, higher crime etc
They recently had an opportuntity to boost fear by claiming a 1/10 pandemic was a 10/10 pandemic.
That opportunity is fading, so they are now trying to make people afraid of Putin.
They never miss an opportunity to play up the fear associated with mass shootings, or mass illegal boarder crossings.
People are catching on to the harm the control parties are causing.
Voters don't understand that fear is being made up to get their voting support. But they do understand when someone crys wolf.
They do understand that when a 10/10 pandemic turns out to be a 1/10 pandemic, they have been lied to.
They do understand when prices increase and life becomes harder, they have been lied to.
The Western control parties have fortunately made a strategic error by blaming increased costs in the west on Putin's invastion of Ukraine. Its an error, because it implies the solution is to give Ukraine to Putin - something the western control parties are opposing.
The control party in the US is called Democrats. In Canada its called Liberals.
Some voters are catching on that the fearful claims of these parties, were exaggerated or fabricated.
As their fear subsides, their preference for safety over freedom subsides.
Freedom parties may be able to win the next elections as the control parties become associated with less safety, not more.
Only after that happens, will the energy crisis be in a position where it can end.
Those elections are 2-3 years away.
As long as control parties govern the western world, there will be an energy crisis (they are promoting the fear of carbon emissions to maintain votor support)
As long as their is an energy crisis, oil prices will be high.