Off And Running

Crude Oil (CL=F) prices are off and running as talk of Hong Kong lifting Covid restrictions and more oil companies trying to put the screws to Vladimir Putin are in the headlines, says Phil Flynn of the PRICE Futures Group.

Hopes for peace talks are floundering as Bloomberg reported that Ukraine rejected a Russian demand that its forces lay down their arms Monday and leave the besieged southern port of Mariupol, which has been under intense Russian bombardment.

The AP reports that, “Baker Hughes, a major US oil services company, added its name Saturday to the growing list of US companies that are pulling back from Russia in response to Moscow’s war against Ukraine.” They join oil companies ExxonMobil, Shell, and BP, suspending Russia operations. Reuters Reported that, “The European Union should step up sanctions on Russia to target its lucrative energy sector, the foreign ministers of Lithuania and Ireland said on Monday, at the start of a week of intense diplomacy aimed at agreeing to more steps against Moscow. The European Union and its Western allies have already imposed a plethora of sanctions against Russia over its invasion of Ukraine, including freezing its central bank’s assets. The movements in oil have been driven with volume that has dried up a bit because of higher margin requirements and people fearful of the volatility this week. We should see an increase in crude oil supplies but only because of releases from the strategic petroleum reserve and we expect to see big drawdowns in product in both gasoline and diesel.

In California, gas prices should go over $6.00 a gallon as Reuters reports that union workers were removed from a Chevron Corp oil refinery near San Francisco hours ahead of a deadline to begin the first labor strike at the gasoline producing plant in more than 40 years. More than 500 United Steelworkers members were bussed out of the plant Sunday evening and replaced by non-union staff. No new contract talks are planned, said USW Local Five First Vice President B.K. White in an interview. “We are far apart” in reaching an agreement, said the USW’s White. “It’s hard to negotiate when one side sees flesh and bone and other side sees the bottom line,” he added. The USW local has asked for a 5% pay increase above what was agreed to last month by its peers because of the higher cost of living in the San Francisco Bay Area. It also wants the company to add staffing to reduce the 60-70 hours that union members must sometimes work, White said.

Obviously, this is a situation that reflects overall inflation and labor shortages as well. Yet while the global energy crisis takes hold, those that brought it to us ‘the green energy lobby”, are now blaming oil companies. Bloomberg reports that democrats in Congress are taking aim at big oil as they seek to deflect blame for eye-popping gasoline prices that could sink their prospects in the midterm elections. Both the Senate and the House are calling executives from the nation’s largest oil and gas companies to testify, saying the industry isn’t passing the benefits of record profits on to consumers at the pump.

“I remain concerned that the oil industry is not doing enough to protect American consumers from rising gas prices,” Representative Raul Grijalva, chair of the House Natural Resources Committee, wrote to company executives in a letter sent Friday.
The committee is requesting testimony from executives from EOG Resources, Inc., Devon Energy Corp., and Occidental Petroleum Corp. for a planned April fifth hearing to “examine the fossil fuel industry’s failure to help stabilize American gasoline prices.” The Senate Commerce Committee is planning a hearing, “The Corrosive Effect of Elevated Petroleum Prices on American Commerce and Consumers,” that will focus on pump prices, according to a letter seen by Bloomberg News and sent by Senator Maria Cantwell, the committee’s chair. Among the witnesses being sought is Exxon Mobil Corp. Chief Executive Officer Darren Woods, according to the letter.

The House Energy and Commerce Committee is also seeking the testimony of executives from BP Plc, Chevron Corp., Devon Energy., Exxon, Pioneer Natural Resources Co., and Shell Plc for a hearing planned April sixth on their company’s business practices and the industry’s impact on consumers. “The industry appears to be taking advantage of the crisis for its own benefit,” Representative Frank Pallone, a New Jersey Democrat who chairs the committee, wrote in letters this week asking executives from the companies to testify.

Learn more about Phil Flynn by visiting Price Futures Group.