While the Biden administration’s landmark infrastructure bill has been touted as anti-fossil fuels by the media as well as politicians such as Coal Country’s Joe Manchin, oil has ironically surged in the wake of the long-awaited adoption of the bill. “This US infrastructure bill screams up for oil,” Louise Dickson, senior oil markets analyst at Rystad written in a recent note.
The adoption of the US $ 1 trillion infrastructure spending program is likely to stimulate a nationwide economic recovery, in turn increasing the demand for oil. Additionally, Biden’s infrastructure package has always had a huge boost in demand for oil, built into arrangements like funding road construction, which requires a lot of petroleum-based asphalt. Even before the bill was torn apart and simplified to appease Republicans, the infrastructure bill was much more oil and gas friendly that most of the headlines would have you believe.
In fact, many environmental groups have long been vocal skeptics of the Biden administration’s infrastructure bill for bowing down to the fossil fuel industry and allowing the most progressive provisions to mitigate global warming to be gutted in order to make the bill attractive for a bipartite Congress. Arrangements such as carbon offsetting funding, widely seen as a classic greenwashing tactic, have been described by skeptics as “on the oil industry‘s wish list” and seen as “a gift to the oil companies. By climate groups.
Biden walks a very fine line between advancing a climate-friendly agenda and preventing the oil and gas sector from collapsing and dragging the US economy with it. “Even as Biden pushes clean energy, he seeks more oil production“Proclaimed a New York Times article last week. Indeed, as oil and gasoline prices have risen around the world as global supply chains have struggled to meet energy demand, growing anxiety over inflation has grown. is poorly reflected on the Biden administration.
Retail gasoline prices rose about 50% to pre-pandemic levels, leaving Biden with some options to regulate inflation. Cuts in oil exports risk angering key allies, OPEC + has refused to budge on production limits despite White House pleas, and the president is extremely reluctant to dip into emergency reserves.
All of this gave benchmarks and oil futures a boost. The boost follows a significant loss last week on the heels of a OPEC + meeting which resulted in the refusal of the powerful cartel to stimulate oil production. This clear signal that OPEC + was not going to change its approach to oil markets has fueled some fears that US producers are finally turning on the taps – fears that have so far proven to be unfounded.
While oil has received a short-term boost from the Biden administration, the future of fossil fuels is still uncertain. All of this is taking place against the backdrop of the COP26 climate conference, which brought together the world’s most powerful leaders to take climate change mitigation and adaptation strategies seriously. This summer, the United Nations sounded the alarm, denouncing a “red code for humanity” as the Intergovernmental Panel on Climate Change released its landmark 6th evaluation report. The document unequivocally affirmed that human activity had already irreversibly altered the climate and that the window to limit further damage was closing quickly.
While it is utterly unrealistic for the world to wean itself off fossil fuels overnight, the desire – especially within developed countries – is clearly there to reduce dependency. Indeed, the global transition to green energy has begun, and investing a lot of money in enabling infrastructure is a key part of that imperative – even if it gives oil a temporary boost.
By Haley Zaremba for Oil Octobers
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