The imminent gasoline volatility

It's been nice seeing gas prices come down over the last few months, even if that price drop was artificial. Experts knew that the price drop wasn't caused by Joe Biden fixing the problem long-term. Experts knew that it was because the Biden administration took millions of barrels of oil out of our Strategic Petroleum Reserve, aka SPR.

Now that the Reserve has been dramatically depleted, the Biden administration can't artificially lower gas prices by withdrawing oil from the SPR. According to Thursday's Flynn Daily Energy Report, " after almost 175 million barrels or so were released from the SPR, US commercial inventories are still about 7% below average and the SPR barrels are at the lowest level since December 1983 at 775,000 million barrels. And while Biden left the door open for more oil releases, the truth is that the SPR has lost its ability to keep prices subdued. Unless the covid wave really causes the world to shut down, the reopening of China puts the crude oil market on track for a major price spike in the near year."

The revenge of the Windfall

Windfall profit taxes are always a bad idea but an even worse idea for oil companies and are counterproductive for a global economy that still runs on oil and gas. Not only does the tax reduce investment in the oil sector, it also raises costs for consumers. It also fails to take into account the boom and bust nature of the oil and gas industry and may force them to go out of business when the tough times inevitably return. That means that the world will face a much more difficult shock the next time demand starts to exceed supply.

Then there's this:

Well, at least Exxon Mobil is fighting back against madness. Reuters reports that, “U.S. oil major Exxon Mobil Corp (XOM.N) is suing the European Union in a bid to force it to scrap the bloc’s new windfall tax on oil groups, arguing Brussels exceeded its legal authority by imposing the levy. Record profits this year by oil companies benefiting from high energy prices have boosted inflation around the world and led to fresh calls to further tax the sector. The windfall profits tax is “counter-productive,” discourages investments, and undermines investor confidence, Exxon spokesperson Casey Norton said on Wednesday. Exxon will factor in the tax as it considers future multibillion-euro investments in Europe’s energy supply and transition, he said according to Reuters.

Capital goes where it's most welcome. Windfall profits taxes tell energy investors that their investments aren't welcome. This indicates that the EU's windfalls profits tax will make matters worse for the EU, not better. This predicts a yo-yo effect on prices at the pump:

Until the Biden administration changes policies on energy, we'll continue seeing price volatility. The thing that stops price volatility is abundant energy. That's something that this administration vehemently opposes.