Earnings Season, Surging Oil Prices and Dangers Ahead

who controls oil prices

My concerns started with Nike’s (NKE) forecasts heading into the fall. The iconic apparel giant has warned about a massive supply chain crunch in the months ahead. This sentiment was soon echoed by Costco Wholesale (COST), which recently rented its own ships for 2022 to ensure delivery of products. Then McCormick (MKC), a company that buys by the pound and sells by the ounce, suggested they too are facing supply chain crunches. 

Next week, we’re going to kick off earnings season. And while banks and airlines tend to generate the most buzz, I can’t help but urge the most caution in the weeks ahead. Supply chain concerns will dominate earnings calls over the next few months. That’s bad news for the retailers, and good news in the shipping business. But there’s another major worry that now has reared its head. 

Surging Oil Prices

JPMorgan released a report this week suggesting that these surging oil prices could hit $200 in the coming years. The company has repeatedly cited a massive supply and demand imbalance created by the shutdown of production by energy producing nations back in 2020. 

WTI oil has not pushed above $80. Brent crude is testing the $85 level. I remind everyone that OPEC and their partners in Russia have no real loyalty to the United States consumer. When Joe Biden asked those nations to increase production and send crude our way, I laughed. 

These nations fund themselves with crude oil production. So, why would they violate their goals of higher prices and more revenue? The U.S. could increase production, but that would create an-about face move by the Biden Administration. 

Regardless of your feelings about carbon-based energy, the scaling of alternative energy and infrastructure isn’t getting solved anytime soon, it appears. The Senate can’t even agree what color paper to print the infrastructure deal on, let alone allocate trillions of dollars to municipalities in a responsible manner. 

If anything, energy systems are going backward. Coal and natural gas demand are at breakneck levels. Both dirty fuels are sitting at near-record prices. JPMorgan expects that oil prices will follow a similar pattern. It’s hard to disagree with that analysis. How much will this impact the U.S. economy in 2022? 

How much will it affect U.S. midterm elections next year as well? Those are the big questions. For now, we can start to speculate on the large-scale energy producers around the globe that will benefit from rising crude prices. That said, I just wish there was a way to short the politicians.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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