Biden’s $ 1 trillion spending package will boost demand for oil

Amid the Biden administration’s efforts to curb fuel prices, it was the passage of the Democrat-sponsored $ 1 trillion infrastructure bill last weekend that became the last strong bullish driver for oil.

The oil markets are in favor of this agreement, which would likely increase demand for energy considerably.

“Global demand is outstripping supply right now – the Build Back Better plan could make this situation worse – and there is little that the Biden administration can do to meet that demand,” said a Price Futures Group analyst. cited by Reuters.

The reopening of the United States to foreign travelers has also helped boost prices and the outlook for price developments.

“Further growth in consumption is on hold once travel begins in earnest and demand for jet fuel picks up,” JP Morgan commodities analysts wrote in a note. cited in a Reuters report. They added that this month, demand for oil had all but rebounded to pre-pandemic levels, hitting around 100 million barrels per day.

the infrastructure bill which Congress passed after lengthy debate includes $ 110 billion in funding for roads and bridges, most of it for construction and repair. It also includes an additional $ 66 billion for railroad modernization and maintenance, as well as an additional $ 65 billion for the power grid.

These, along with other areas where billions will be spent, suggest an increase in demand for fuel despite Democrats’ plans to green the U.S. economy and industry. As President Biden has said himself, this cannot happen overnight, so for now the government should rely on fossil fuels.

Speaking of dependence on fossil fuels, high prices at the pump remain a headache for the administration. Since please and OPEC + requests to increase demand have not worked, the White House is now considering other options although it remains economical with details on those options.

“He is certainly looking at the options he has in the limited range of tools a president might have to deal with the cost of gasoline at the pump, as it is a global market,” the president said on Monday. Energy Secretary Jennifer Granholm, as quoted by Reuters. “I hope there will be an announcement this week”,

“Right now, the president does not want to see people injure themselves at pumps, heating oil, etc., which is why he is calling for an increase in supply now,” added Secretary Granholm.

A day earlier, Granholm had again mentioned that the release of oil from the Strategic Oil Reserve was one of those options. However, analysts have warned that a release of oil from the SPR is unlikely to move prices significantly or sustainably, essentially confirming another statement by the US Secretary of Energy: that OPEC + controls prices and that ‘they go where OPEC + wants them.

It was a welcome opportunity to highlight the energy independence aspect of the Biden administration’s energy transition program.

“Let’s step out of the volatility associated with fossil fuels and associated with others who do not have our country’s best interests at heart and invest in the switch to clean energy, where we won’t have this problem. And that is so much what these two bills are focused on, ”Secretary Granholm said, cited by Politico.

By Charles Kennedy for Oil chauffage

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Felix J. Dixon