Oil Supply Shock, Soaring Prices Coming in Next Few Months
Last month OPEC’s oil production fell short by 3.58 million barrels per day (bpd), which is 3.5% of global oil demand. The U.S. continues to sell oil out of the Strategic Petroleum Reserve, nearing the end of what can be sold off. And Russia’s oil exports could fall by some 2.4 million bpd after the EU embargo enters into effect in December. Add to that mix the observation by Saudi Aramco’s CEO, who said last week that years of underinvestment in oil drilling infrastructure have damaged the balance between supply and demand in the oil market, and what do you get? According to OilPrice.com’s Irina Slav, “a [oil] supply shortfall on a global level is imminent.” In other words, an oil supply shock and skyrocketing prices for oil are on the way.
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We’ll say it right up front: We told you so. From the beginning, when U.S. Senator Joe Manchin announced he had sold out the country and would vote in favor of the horrible (misnamed) Inflation Reduction Act in return for a promise from Chuck Schumer and Nancy Pelosi to pass a “permitting reform” bill that guarantees to finish the stalled (95% complete) Mountain Valley Pipeline, we told you it was a bad deal (see 
The price of natural gas here in the U.S. has roughly quadrupled in price over the past two years. If you are a landowner or rights owner, you’ve certainly noticed a nice increase in royalty revenue. As we have reported about publicly traded drillers in the Marcellus/Utica, profits and free cash flow over the past couple of quarters have gone through the roof–because of the high price of natgas. The question is, why have prices for natural gas gone so high? And relatedly, will they stay high?
In a clear sign the Democrat Party is desperate with a national election (national referendum on Biden) just 44 days away, our beneficent Dictator in Chief, Joe Biden, has demanded that companies running gas stations, “Bring down the prices you’re charging at the pump to reflect the cost you pay for the product. Do it now. Do it now. Not a month from now — do it now.” He sounded like a raging lunatic when he said it. High prices at the pump are the result of Biden’s own socialist, very misguided policies. Yet he attempts to scapegoat and blame it on the thousands of individual companies that vend gasoline in a free-and-open market.
Americans, indeed just about every human on the planet alive today, have been so thoroughly brainwashed that burning fossil fuels is causing catastrophic global warming and is “bad” or “evil,” that when someone comes along to say, “Wait a minute, what if more carbon dioxide is a good thing,” that person is considered a crackpot. Let us ask that question. What if more carbon dioxide (CO2) in the atmosphere is actually helping Mom Earth, not hurting Mom Earth? Is it possible?
A small group of landowners in southwestern Virginia who have lost all of their previous attempts to block Mountain Valley Pipeline (MVP) from crossing their property have made one last-ditch effort to fundamentally change the laws of the entire country to prevent this one pipeline. The landowners, obviously using Big Green money, have appealed their losing case to the U.S. Supreme Court, asking the high court to hear their case against FERC’s (the Federal Energy Regulatory Commission) right to delegate its eminent domain power to a private pipeline company–in this case to MVP.
Virginia Natural Gas (VNG) is one of four natural gas distribution companies owned by Southern Company. VNG provides natural gas service to more than 300,000 residential, commercial and industrial customers in southeast Virginia. Since 2012, VNG has replaced nearly 500 miles of the aging pipeline, resulting in a 27% reduction in methane emissions. VNG is a little over halfway through spending $360 million on infrastructure upgrades.
Last Friday, the New York Power Authority (NYPA) released a report of the results of mixing so-called “green” hydrogen with natural gas and using the fuel to generate electricity with reduced emissions from a retrofitted General Electric combustion turbine. The experiment was conducted at NYPA’s Brentwood Power Station on Long Island. NYPA experimented with fuel blends from 5% to 44% hydrogen. The study found CO2 mass emission rates were reduced by approximately 14% by mixing in a 35% blend of hydrogen.
We are equal parts excited and repulsed by hydrogen as an energy source. We’re excited because, seemingly overnight, everybody and his brother (and sister) are jazzed about converting to hydrogen energy. Mountains of money are being poured into hydrogen research and infrastructure. The federal government is spending $8 billion (out of $1.2 trillion) to establish regional hydrogen hubs. Even companies in the Marcellus/Utica are jazzed because hydrogen production offers a huge new customer for M-U molecules. On the other hand, we’re repulsed because hydrogen is a “poor” fuel that faces “major obstacles” to its widespread adoption. We’re concerned about chasing after the wind–sinking a LOT of money into something that ultimately won’t pan out. Let’s have a hard and honest look at some of the downsides to hydrogen energy.
A few years ago, a trader could buy an LNG cargo for $15-$20 million. Today? It’s an order of magnitude higher. A single “spot” LNG cargo now fetches $175-$200 million! Given the money involved, only a handful of international energy majors and top global trading houses are currently in the game of buying and selling such cargoes. And it appears it will stay that way–in the hands of the big players–at least until 2026. That’s the analysis according to Reuters.
Secretary of Energy Jennifer Granholm attended a gathering of leftist nutballs (she was in good company) in Pittsburgh on Friday at the so-called Global Clean Energy Action Forum to announce the Dept. of Energy (DOE) has finally gotten off its rear-end and has officially opened the application process for states and regions and even private entities to lobby her in an attempt to attract a regional hydrogen hub. The Biden infrastructure bill, signed into law last November, was originally said to be funding $8 billion for “four” regional hydrogen hubs, with each hub getting roughly $2 billion (see 
As we mention in today’s lead article, the Dept. of Energy (DOE) has launched the official application process for states (and coalitions and even private companies) to petition the DOE for a share in a $7 billion jackpot to build a hydrogen hub (see DOE Hydrogen Hub Funding Goes from $2B to Less Than $1B Each). On Friday, the day the DOE made its big public announcement in Pittsburgh, the partisans at Team Pennsylvania Foundation (TeamPA), co-chaired by PA Gov. Tom Wolf, announced the publication of a new report, “Successful Deployment of Carbon Management and Hydrogen Economies in the Commonwealth of Pennsylvania” (full copy below). The report has some interesting things to say about how PA can attract one of the hydrogen hub projects.
Republicans in the Pennsylvania Senate have, since April 2021, refused to appoint new members to the five-member Public Utility Commission in response to Democrat Gov. Tom Wolf’s unilateral push to force the state to join the Regional Greenhouse Gas Initiative (RGGI) carbon tax scheme (see