Oil markets soared an unprecedented $8.50/bbl this morning, with more gains continuing to stack up leading into the afternoon. Unprecedented news from Venezuela is driving prices to 2019 highs and beyond. After closing above $60/bbl for the first time this year, prices are already swelling close to $70, and gaining every minute.
Fuel prices are the same story. Diesel prices have picked up 40 cents since Venezuela’s news came out. Gasoline prices are up 35 cents. Fuel prices are gaining another cent every few minutes.
In a shocking new development in Venezuela, the country appears to have shut down all of its oil production in an effort to prevent opposition leader Guiado from taking control of lucrative oil fields. Maduro addressed the nation, remarking “Sorry everyone, Venezuela is closed.” The country has seen oil production plummet over the past few months, but the drop to zero is unprecedented for oil markets. Many view the move as a political statement in response to American sanctions on the country. China and India, both major importers of Venezuelan crude, have declared martial law within their countries until new sources of supply can be identified.
President Trump, not to be outdone by Venezuela, took to Twitter: “Zero Venezuela oil was my idea not Maduro’s! Fake news completely distorting this, I blame China. Sad.” He also tweeted that the US was mobilizing forces to invade the country and “any bordering countries” – the first US declaration of war announced via Twitter.
International leaders have assembled to discuss how to react to the situation. OPEC Secretary General Barkindo has called an emergency meeting for the oil producing nations. Still, the path forward is unclear. Saudi Arabia’s Energy Minister Al-Falih told reporters “Sounds like a personal problem” as his country gears up for further cuts, virtually guaranteeing that oil prices swell to $100 in the coming week.
Of course, American producers are hitting high gear to fill in the void, with rig counts expected to swell 20% in a week. This increase in drilling activity will weigh heavily on diesel, and energy analyst predict diesel prices could rise to $3/gal or more by the end of the day given the uptick in demand. Prominent oil economic Phil Verleger, who has been predicting $200/bbl crude oil since 2018, told reporters, “I told you so.”
To conserve fuel, Congress is imposing mandatory alternative driving days within the US based on alphabetical order. Drivers in Alabama through Missouri will be able to drive on even days, while Montana through Wyoming may drive on odd days. Given the emergency nature of the declaration, any cars found on the road in Alabama through Missouri will be immediately commandeered and sold at auction to raise money for the war efforts in Venezuela. Workday commuters will need to hunker down in their office until driving is allowed tomorrow.