- The return of the “Gas Out” movement
- President Biden is asking Congress to pass a three-month gas tax exemption
- a temporary, potentially counterproductive act
- What brought us here in the first place?
- How to trade the energy sector with options
From boycotts to tax exemptions, Americans are trying to find relief from high gasoline prices by any means necessary. But will these efforts be enough? Or, despite their best efforts, are they doomed to feel the pain at the pump?
The return of the “Gas Out” movement
Those of you who are old enough to drive back in 1997 – or 2007 or 2012 – may remember the “gas out” movement. Guess what: it’s back.
if you are new to this field old boycottIt’s going ok:
An email or Facebook status is asking you not to buy gas on a specific day (this time it’s July 3-5). The email says something like, “If your tank is running low, just fill up the day before or the day after.”
They often refer to the “Gas Out” movement of April 1997, in which they claim that “gasoline prices fell 30 cents/gallon overnight” and cite some data showing that after just one day of mass oil company boycotts will suffer ?
That never happened. First, supply and demand don’t work that way. Whether the country fills up on July 2nd, 3rd, 4th or 5th, they end up buying the same amount of gas.
Second, the fossil fuel industry is a formidable adversary — a plethora of trillion-dollar-making companies that employ teams of researchers to keep tabs on all relevant price dynamics. If a movement is broad enough, it won’t dodge them.
If the movement was, “On July 3rd, we’ll sell all our cars and start riding bikes to work,” then this thing could have legs. Otherwise our best tip:
Don’t cancel your 4th of July plans with a 25 year old chain mail shirt.
But if you want to break free from high gas prices, there is something that could Help, at least temporarily…
President Biden is asking Congress to pass a three-month gas tax exemption
This week, after meeting senior White House oil company executives, President Biden formally asked Congress to grant a three-month vacation on the federal gasoline tax — 18 cents less than the price you pay. Can trim up to a gallon. Pump.
This isn’t the Biden administration’s first attempt to cut oil and gas prices. Previously they tried:
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- Public officials are calling out and claiming that they (the fossil fuel industry) are making huge profits as people suffer from inflation.
- Oil executives (again, publicly, not directly) ask to “refine more oil.”
- Call on Saudi Arabia to increase oil production – a plea that was publicly denied.
- Issuance of oil from the US Strategic Reserve.
- Easing of rules for ethanol blending.
So far: Nothing has been able to stop the flood of high prices. this gas tax holiday (Favorable time just before the midterm elections) It could be the first effective action Biden has taken to lower gas prices.
Except… it’s not that easy.
a temporary, potentially counterproductive act
This isn’t the first time a gas tax exemption has been considered (and shot down) in the United States. In 2008, as gas prices rose, the idea of a gas tax exemption began to gain cross-party support. Hillary Clinton and John McCain both backed the measure, which could have temporarily slowed gas price rises.
Who didn’t support the measure: President Biden’s former running mate, Barack Obama. Obama called the gas tax exemption a gimmick, noting that it doesn’t solve the underlying problem — a supply and demand imbalance — and could potentially exacerbate the problem.
In other words, to quote the old economics adage, “The best cure for high prices is high prices.” By lowering those prices, the government would only encourage consumers to continue spending on gas at higher rates, leading to an increase of demand, which already exceeds supply.
In other words, according to Moody’s Analytics chief economist, “You want people to drive less and use less gas. It counteracts that purpose.”
That means that even if Congress passes the proposed gas tax exemption, all of the current administration’s energy policies will only be a band-aid for a much larger problem centered around it.
What brought us here in the first place?
Despite the authorities’ best efforts to combat inflation in the form of “Putin’s price increases” for American citizens, inflation problems existed long before Russia’s invasion of Ukraine. This is something Fed Chair Jerome Powell spoke about Wednesday during his semi-annual testimony before Congress. When asked by Tennessee Senator Bill Haggerty,
“Given the rise in inflation over the past 18 months, would you say the war in Ukraine is the main cause of US inflation?” Powell replied,
“No, inflation used to be very high – at least before the war in Ukraine started.”
Market Rebellion co-founder John Najarian recently broke it down in the form of a tweet with a captioned graphic.
In a tweet on John’s reply, Pete Nazreen described it as excellent, “I have no political leanings, but facts are facts. Just look at the rough diagram…”
In John’s tweet, Graf breaks down the Biden administration’s energy policy, which the president himself described as “tough on big oil.” During a rally two weeks after his inauguration, Biden was also quoted as saying, “We’re getting rid of fossil fuels.”
These policies were likely made with good intentions – hoping to combat climate change and encourage a shift towards renewable energy and away from fossil fuels.
Transportation Secretary Pete Buttigieg said so in November last year when he encouraged Americans to “just buy an electric vehicle” so they “never have to worry about gas prices again.” Of course, there isn’t much overlap between those who can afford the gas prices and those who can afford an EV worth over $50,000.
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How to trade the energy sector with options
It’s not about politics – it’s about the market. It’s about using all the facts we have to make decisions about how to trade and invest in the current environment. And if you ask John Najarian, the structural tailwinds driving the energy sector are still intact in 2022 — which means it’s not time to abandon the energy business.
With his money where his mouth is, John breaks out the massive institutional options trading that has drawn his attention to oil and natural gas stock Cenovus Energy (CVE) – get Cenovus Energy Inc.’s report – one he submitted himself.
bottom lineWhether Americans boycott gas on July 4th or Congress passes a federal tax holiday, the underlying story would not have changed. Government energy policies still tend to be disadvantageous to fossil fuel producers. And even after the conflict in Europe is over, the United States is unlikely to buy Russian energy again any time soon.
This means that old energy companies like (XOM) – Get Exxon Mobil Corporation report, (CV) – Receive reports from Chevron Corporation, (VLO) – Get Valero Energy Corporation reports and Cenovus (CVE) is likely to continue posting record earnings in the face of a perfect inflationary storm — an inflationary storm the Fed has said it has no way of fighting.