March 2, 2022
A year ago, oil was trading in the mid $50s. The national average on gas was $2.59/gallon.
Throughout the past year, we've talked about the glidepath to $100 oil (driven by anti-oil policies). And here we are.
Oil closed above $100 yesterday, and traded over $112 today.
With the Biden administration's pursuit of a "clean energy revolution," we've knowingly ceded control of the oil market to OPEC. And OPEC has every incentive to drive prices higher. As I said last year (and penned in a Forbes piece, here), Get Ready For $6 Gas.
Add to this, we now have the additional catalyst of a potential shock to an already undersupplied market. If sanctions were placed on Russian energy exports, there's no telling how high the crude oil market might spike.
With that, we've talked about the prospects of Biden going the route of price controls. It may be coming.
Remember, last night's State of the Union was all about "costs." He said the word "costs" as many times as he mentioned Putin last night.
He's already alleged price gouging from the domestic oil and gas industry and (similarly) called for an "investigation" into U.S. producers (for the audacity of making wider profit margins on higher prices, which is now controlled by OPEC).
Last month, Biden said he would be "coordinating" with major energy consumers and producers, and will be "prepared to deploy all the tools and authority at his disposal to provide relief at the gas pump."
These "tools" may come in the form of some sort of subsidy, at some point, but a subsidy would sustain the demand dynamic for oil. Apply that to a world that is undersupplied and underinvested in new supply, and the price of oil will continue to rise.