November 1, 2021
Come Christmas, I wouldn’t be surprised to see gas around $5 per gallon and oil at 20 times that – $100 per barrel. Everyone will feel it, and in some parts of the country, they already are.
This should surprise nobody.
Once the economy got up and running again, we knew people would be itching to travel, buy stuff, do things, and as a result, it would cause more energy to be consumed. It was almost inevitable.
Still, the current spike in oil prices isn’t just a rebound from an economically disastrous 2020. It’s also the result of policy.
Upon election, President Biden signed executive orders limiting future oil supply availability. He also shut down the Keystone Pipeline, a project that would have massively increased the amount of oil coming into the U.S.
To combat climate change, the administration ordered a freeze on new drilling permits and leases for federal land. Also, this summer all oil leases in Alaska’s Arctic National Wildlife Refuge were suspended.
These actions tighten the oil supply, just as the economic ramp up demands its use.
Meanwhile, the “green energy” push must have oil investors questioning their choices. Why attempt to extract oil domestically when our own government has made its stance clear on energy production? Despite the current government position, a cleaner energy future can include the oil industry.
Another driver of higher gas and oil prices is the Federal Reserve. It’s continued insistence on printing money (now more than $6 trillion) causes energy prices to rise, along with everything else. That ultimately depresses the value of the U.S. dollar.
While the Fed says it’s going to trim its balance sheet, rates remain low, dollars stay depressed, container ships wait offshore, and the price of everything keeps going up…just in time for Christmas.