High Fuel Costs Are A Cautionary Tale Against Extreme Climate Policies

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Gas prices in the US hit fresh record highs last week, just ahead of the busy summer travel season. High fuel costs have an impact on every part of the economy, from travelers planning their summer road trips to families shipping goods to companies.

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However, it is not all doom and gloom. Due to stratospheric oil and gas prices, energy stocks have been a bright spot in an otherwise poor market this year. By the end of May, the S&P Oil & Gas Exploration and Production Index gained an incredible 60% compared to the S&P 500, which fell nearly 13%.

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Several oil companies, including Shell and Exxon Mobil, reported record profits in the first quarter, and by the end of this year, they are projected to post record annual profits. According to estimates made by Rystad Energy, publicly traded exploration and production companies are on track to produce an unheard of $834 billion in free cash flow (FCF) in 2022. This would represent an increase of about 70% over the previous year.

No one likes high gas prices, and I absolutely doubt anyone expects them to last indefinitely. On the other hand, think of it as an opportunity. Many investors may have missed the rally so far this year, but if Rystad’s projections hold true, there could be more gains in the coming months.

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Governments’ green energy initiatives have helped boost fossil fuel profits

So how did fuel costs get so high? We can point to pandemic-era disruptions, some of which are underway around the world. Then there is the Russo-Ukraine war, which has shaken the geopolitics of the energy market.

These are short-term interruptions. The biggest contributor to higher energy prices now and then is the forced efforts of governments to transition from fossil fuels to renewables before the technology is ready to meet global demand.

This is excerpted from a new report by the Fraser Institute, a Vancouver-based think tank. in paper, title “Can Canada Survive Europe’s Energy Crisis?”, Analysts in the group led by Robert Murphy say Canada—and, by extension, the US—should view Europe’s rising energy prices as a cautionary tale against extreme climate policies. Such policies have “contributed to Europe’s energy crisis,” the authors write, adding that “Canadian policymakers should reverse course and avoid [same] mistakes.”

It’s doubtful a turnaround will happen with Justin Trudeau, of course. Despite oil being a superpower, Record exports of $13.6 billion Among oil, natural gas, coal and refined petroleum, Canada has one of the world’s highest gasoline prices in March. During the week ending May 30, Canadian drivers received an average of Rs. $6.50 per gallon of gas. That’s above the world average and about $1.70 a gallon more than what American drivers paid on average during the same week.

And prices are only likely to continue to rise over time. In May, all G7 countries agreed Stop funding foreign fossil fuel development Starting sometime later this year. as reported by Guardian, The agreement could move about $33 billion each year from fossil fuels to renewable energy.

US Still Number One Oil Producer

Meanwhile, the US remains the world’s number one oil superpower, surpassing Russia in 2018. This is despite the fact that production has not yet fully recovered to pre-pandemic levels.

Production is strongest in the Permian Basin, located in parts of West Texas and New Mexico. The oil field is so prolific, in fact, that Rystad believes that 2022 output alone will exceed output from every oil-producing country except Russia and Saudi Arabia.

In form of Houston Chronicle Reports, the Permian had explosive growth a decade ago due to the shale boom and ingenuity of American producers. Since then the region has been an economic superpower. Rystad now expects production to reach 5.6 million barrels per day this year and 6.5 million barrels per day next year, nearly half of total US production.

According to the American Automobile Association (AAA), this may be part of the reason that Texas has some of the cheapest gas in the country, even at a record high of $4.34 per gallon. No wonder many companies have Moved to Lone Star State in recent months.

Curious to know the top five oil producing countries? watch our video Click Here!

Credit: www.forbes.com /

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