Postcards: Another "Crude" Reason to Drink

When you follow the U.S. energy policy in the 2020s, it's best to use Uber if you need to travel to a nearby watering hole. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: Another "Crude" Reason to Drink]( When you follow the U.S. energy policy in the 2020s, it's best to use Uber if you need to travel to a nearby watering hole. [Garrett {NAME}]( May 9   [READ IN APP](   Market Update: It’s been a few days since our signals turned fully green, and the rally continues. We’re sitting at a point now where volatility is back under 13, liquidity is strong, and commodities are rising. Over at Republic Risk, our No. 1 pick of the year - Ardmore Shipping (ASC) has eclipsed a 40% return for the year. If you want to see the rest of the portfolio - and get access to our Midstream report THIS WEEKEND. [Upgrade to paid]( --------------------------------------------------------------- Dear Fellow Expat: Years ago, I outlined a short book teaching finance, investing, and economics. It consisted of short allegories about squirrels, raccoons, and other trash pandas. We’d discuss capitalism, stock market trading, dividend reinvestment, and many other things we explore here in the Florida Republic. I called it… “Who’s Got My Nuts: Fun and Finance With Animals that Scour Your Garbage.” Whenever a big story emerges around energy or economic security, I reflect on this idea. For example, what would squirrels do to ensure they had enough acorns each winter to avoid running out during a massive snowstorm? Would they have… a Strategic Nut Reserve? Similar to the United States having a Strategic Petroleum Reserve. Ah yes… up in those grand arboreal realms, where squirrels jump from branch to branch. Imagine a cadre of squirrels assembling their own Strategic Acorn Reserve. Here they are, with an air of grave solemnity that would make any Capitol Hill bureaucrat nod in approval, meticulously counting and categorizing each nut. How would they fill said reserve? By purchasing nuts? By expanding nut production? Would they have acorn indexes and their reserves mapped out with the precision of a tax auditor? Or, like America, would they create a Byzantine nut production system that requires hefty government oversight, radical politicization, nonstop CAPEX inflation, and a lack of stable currency to ensure long-term nut security? And would the squirrels put one of their own in charge who neither understands how many nuts they eat in winter nor where the nuts come from? (Cough… Secretary Granholm… cough) This morning, the United States once again proved its ignorance of the state of the U.S. energy system. After several years of mismanagement in the Strategic Petroleum Reserve - White House energy advisers did something even more confounding. It promised more of the same. [Upgrade to paid]( What Is Happening? We’ve heard about greed at the pump for the last three years. We’re told that oil companies are making record profits and gas stations are gouging customers. Remember, the U.S. government makes 18.4 cents per gallon in taxes, while the average gas station makes about 7 cents in margin. It’s over 50 cents in California. During COVID-19, the U.S. energy sector nearly imploded. WTI prices went negative, and certain politicians cheered their potential demise. When the previous administration suggested we refill the U.S. Strategic Petroleum Reserve for $25 per barrel, opponents called it a bailout for the U.S. oil sector. What a bargain that would have been in hindsight? In 2022, the U.S. sold 180 million barrels of oil from its Strategic Petroleum Reserve after Russia invaded Ukraine. It was the largest drawdown, decreasing the emergency supply to 18 days. We currently have about 367 million barrels, down from a record 727 million in 2009. Now, the reserve exists to address massive disruptions in the global oil markets. And with Russia (one of the three largest producers in the world) bringing havoc to the global system, we put that crude to use - even selling it abroad to foreign nations while boosting our GDP in the process. Now, it’s time to rebuild that supply… The White House put out bids when crude was under $70 last year. Then, they raised the cap to $79 per barrel. As of January, they’d bought back 32.3 million barrels of crude (a $2.5 billion contribution to GDP) But now… the White House is willing to pay more. Much more than that “bailout” level from 2020. In recent days, the White House bought 2.8 million barrels (using taxpayer money and goosing GDP through government spending) at… $81 per barrel. It was a $225 million purchase padding revenues for Atlantic Trading & Marketing, Macquarie Commodities, and Sunoco Partners Marketing & Terminals. But don’t cozy up to those oil barrels yet. Lobbyist turned adviser Amos Hochstein has said that the U.S. might use the SPR this summer if necessary. Maybe we’ll sell some to get our export numbers up to pad GDP… Or maybe we’ll try to keep crude prices down if OPEC+ decides to keep production cuts in place come June. Selling WTI crude to South Korea and India… offers a boost to GDP. The good news is that the DOE earned about $95 for 2022 emergency SPR sales... higher than what they’re buying it back for at an average of about $76.47. The bad news is that the government behaves more like an energy hedge fund than a security apparatus… They’ve already spent the profits. We’re likely paying 5% on top of every barrel they buy, finance, and refinance. Plus, they’ve already spent the previous profits… There’s no guarantee that oil prices will move higher when capital is drying up for production and the monetization of U.S. debt is surging. We’re a long way from 2009… Maybe it’s time to let the squirrels horde the oil for us. We can pay them in peanuts. Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()