The Energy Report: For Pete's Sake

Oil prices are facing a dilemma, as they can't seem to decide whether to fear a recession or the Fed's attempts to create one due to last week's strong jobs numbers. This dilemma is even greater for United States Secretary of Transportation Pete Buttigieg, who promised that families who buy electric vehicles (EVs) would "never have to worry about gas prices again." However, there is now evidence that it is becoming more expensive to charge an EV than it is to fill it with gas.

According to Kelly Bluebook, if you drive 1,058 miles per month (the average American drives 12,700 miles annually), an EV will use approximately 353 kWh, which would cost around $56 per month based on the October 2022 average U.S. household rate of 16 cents per kWh. On the other hand, the average price of gas, as of this writing, is $3.42 per gallon, so filling up a 12-gallon tank would cost about $41.

However, as more EVs are added to the grid, the cost of electricity will likely rise, requiring the addition of batteries to handle the increased load. This means that EVs will not save money over gasoline in the long term, and even before the government bans natural gas stoves.

Oil prices are being affected by macro forces and refinery maintenance, with concerns about demand in Saudi Arabia. Still, there are signs of hope as the country has decided to raise the prices of their crude oil in Asia, a sign that China's reopening is going well.

A sell-off near key support should hold, and as weekly crude builds slow down the market, refineries will regain momentum, and supplies will tighten, potentially leading to major inventory draws in the coming months.

Meanwhile, Freeport may have the potential to save the natural gas market. According to EBW Analytics, the NYMEX front-month contract dropped to as low as $2.341/MMBtu on Friday, down 50 cents from the previous week, due to the shedding of 52 gHDDs and 80 Bcf of demand from the February forecast.

However, a third consecutive larger-than-expected EIA draw, growing indications of Freeport's return, and major technical support offers hope for a possible reversal higher. If February continues to drop gHDDs, however, it may be difficult for natural gas to bottom.

Note: A tragedy has occurred in Turkey and northern Syria, where two massive earthquakes have disrupted oil exports and caused over 1400 deaths. Let us take a moment to say a prayer for those affected. Additionally, oil exports from Iraq Kurdistan have been suspended via Turkey.

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Written By: Phil Flynn