Any hopes of a near-term reversal of record gas prices were shattered Friday as oil closed over $105 a barrel, $10 up from what had been a week of steady decline from last week’s peak of $123 a barrel.
The global volatility in the market was visible throughout the day as oil traded between $102 and $106, casting doubt that a reprieve at the pump is coming any time soon.
Multiple states are in talks at the legislative level to ease state gas taxes — including New Mexico — and they’re applying pressure on Congress to do the same for the federal gas tax. While the combined 35 cents a gallon would be a welcomed reprieve for middle-class commuters, it would be a temporary drop in the bucket compared to where we were just last year.
Oil prices are 71% higher nationally than at this time in 2021. Fifty percent of that hike came in the last three months. As officials blame the Russian invasion of Ukraine for the record-breaking prices at the pump, they have increased only 15% since the conflict began a month ago.
The Biden Administration has taken to pleading with dictators in Venezuela and Saudi Arabia to boost production and offset the approximate 10% oil supply that was being supplied by Russia prior to the U.S. banning Russian oil imports last week.
But the Administration has maintained its freeze on new oil leases in the U.S., and its vilification of Big Oil is likely to discourage future investment.
Apologists on the Left like to point out that the Biden Administration’s cancellation of the Keystone XL pipeline wouldn’t have an immediate effect on production, as it likely wouldn’t have been operational until 2023.
Which is true. But that doesn’t mean the cancellation of the pipeline hasn’t affected current prices.
Keystone XL is infrastructure. Oil companies anticipating the 2023 completion of an oil superhighway of this magnitude — estimated at 800,000 barrels of oil per day — would be incentivized to increase (or at least maintain) production knowing that the costs and speed of transportation would be aided by the upcoming completion of the pipeline.
Instead, investors are pulling back on the prospect of future growth, and they’re right to do so — at least from a business standpoint.
If the Biden Administration continues to favor climate change fear-mongering over energy independence with its continuous signaling of the end of fossil fuels in America, the industry would be suicidal to continue drilling, even as demand for oil increases in the short term.
What plays out in the next few months is anyone’s guess, but few signs point to a long-term solution to record-high gas prices in America. 2024 may be the next great hope.
Categories: NM GAS REPORT