The Declaration Of A National Energy Emergency Sent Oil Prices Tumbling

Energy prices are drifting lower this morning as markets keep an eye out for what’s to come next from the new US presidential administration. ULSD futures are leading the way lower, exchanging hands ~.5% under yesterday’s settlement, while the gasoline and crude oil contracts sink in sympathy, down about .25% in pre-market trading.

The declaration of a national energy emergency sent oil prices tumbling yesterday with WTI dropping nearly $2 per barrel, snapping a bullish run that started in early December. While the declaration provides expedited pathways for permitting of new oil and gas projects, it served more as an announcement of sentiment more so than a to-do list. After all, you can lead a major oil company to a patch, but you can’t make it drill at a loss.

Last week the US Treasury published their guidance on the clean fuel production credits as a part of section 45Z in the tax code. This week Trump paused the implementation of that program via executive order, pending a two-month long review of the Biden’s administration’s Inflation Reduction Act. Yesterday, Senators reintroduced a bipartisan bill to boost support for Sustainable Aviation Fuel called the Farm to Fly Act. If passed, the Act could open a path for SAF producers to double-dip: receive incentives to produce the fuel domestically and to export it to a Europe that is willing to pay to meet it’s 2% SAF target for 2025.

Winter storm Enzo swept through the US Gulf Coast and Southeast regions yesterday, covering the coastal areas in a blanket of snow, which is exacerbating loitering frigid temperatures due to a phenomenon known as the ‘refrigeration effect’. While there have been widespread power outages reported along the path of the storm, the only impact to energy infrastructure/supply chain has been a pause in marine traffic in Gulf Coast ports. As of now there have been no reports of refinery outages in the area.