Get Ready For $6 Gas

NOVEMBER 18TH, RIYADH, SAUDI ARABIA: At the conclusion of the Third OPEC Summit on November 18, 2007, in Riyadh, Saudi Arabia, Saudi King Abdullah (L) speaks with Saudi Arabia’s Oil Minister Ali… [+] al-Naimi (R) and an unidentified Saudi delegate (C). Iranian President Mahmoud Ahmadinejad has indicated that he will hold talks with Arab countries regarding enriching uranium in a neutral country outside of the Middle East, such as Switzerland. (Photo courtesy of Getty Images/ Salah Malkawi)
courtesy of Getty Images
We discussed the potential for a surge in oil prices leading up to Memorial Day a month ago. We’ve had enough. In a little more than a month, oil prices have climbed by as much as 20%. Now we’re approaching the Fourth of July weekend. Remember, the administration has promoted this date/holiday as a “turning the page” on the viral commemoration. Travel will become more popular. This is despite the fact that the national average gas price is $3.10, up 42% from a year ago. And as we get closer to the weekend, that number is likely to climb. As the supply/demand mismatch in oil is uncovered, rumors of gas shortages at stations are already circulating.
As we’ve seen, the Biden administration is stifling domestic oil production. As a result, OPEC is once again in a position to control global oil prices. And you can bet they want prices to go up, not down. As a result, OPEC (together with Russia) will meet on Thursday to discuss possible output increases in the coming months.
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In June, they gradually increased productivity. Oil prices increased, not decreased.
And don’t expect them to make a big move on Thursday, citing Covid’s “unpredictable antagonist and violent mutations” as a threat/excuse, as the OPEC Secretary-General put it. OPEC+’s “nothing material” decision should continue to support the oil market (i.e. higher prices).
The focus in the oil market has been all about future demand—meaning decreased demand, driven by the fantasy of rapid change to ubiquitous electric vehicles and wind farms, as we’ve addressed in my daily notes. As a result, they underestimated oil consumption, and as a result, they miscalculated the economic impact that limiting supply will have (from the climate activist movement).
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Some are finally waking up to this fact, as estimates for $100-plus oil have emerged in recent weeks from a few major institutional oil trading firms and investment banks. Prepare for $6 gas, as I already stated.
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