Amid efforts by the Biden administration to put a lid on fuel prices, it was the passage of the Democratic-sponsored $1-trillion infrastructure bill last weekend that became the latest strongly bullish driver for oil.
Oil markets are positive about this deal that would likely considerably increase demand for energy.
"Global demand is exceeding supply right now - the Build Back Better plan could exacerbate that situation - and there's little the Biden Administration can do to reply to meet that demand," said a Price Futures Group analyst as quoted by Reuters.
The reopening of the United States to travelers from abroad also helped boost prices and the outlook for price trends.
"More consumption growth lies in wait once travel begins in earnest and jet fuel demand picks up," wrote JP Morgan commodity analysts in a note cited in a Reuters report. They added that this month demand for oil had practically rebounded to pre-pandemic levels, running at around 100 million bpd.
The infrastructure bill that Congress passed after extended debates includes $110 billion in funding for roads and bridges, most of it to go into construction and repair. It also includes another $66 billion for railroad upgrades and maintenance as well as another $65 billion for the power grid.
These as well as other areas where billions will be spent, suggest an increase in fuel demand despite Democrats' plans to green up the U.S. economy and industry. As President Biden said himself, it can't happen overnight, so for the time being, the government would need to rely on fossil fuels.
Speaking of a reliance on fossil fuels, elevated prices at the pump remain a headache for the administration. Since please and demands to OPEC+ to increase demand did not work, now the White House is considering other options although it remains economic with any details on these options.
"He's certainly looking at what options he has in the limited range of tools a president might have to address the cost of gasoline at the pump, because it is a global market," Energy Secretary Jennifer Granholm said on Monday, as quoted by Reuters. "Hopefully there will be an announcement or so this week,"
"Immediately, the president does not want to see people hurt at the pump, home heating oil, etcetera, which is why he is calling for an increase in supply right now," Secretary Granholm added.
A day earlier, Granholm once again mentioned the release of oil from the strategic petroleum reserve was one of these options. However, analysts have warned that a release of oil from the SPR is unlikely to move prices in any meaningful or sustainable way, essentially confirming another statement by the U.S. energy secretary: that OPEC+ controls prices and they go wherever OPEC+ wants them.
This has served as a welcome opportunity to highlight the energy independence aspect of the Biden administration's energy transition agenda.
"Let us get off of the volatility associated with fossil fuels and associated with others who don't have our country's interests at heart and invest in moving to clean energy, where we will not have this problem. And that's so much of what these two bills are focused on," Secretary Granholm said, as quoted by Politico.
By Charles Kennedy for Oilprice.com
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