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US energy security under attack, ethanol industry listed as a causality

By Staff | May 7, 2020

I am a little surprised that there has not been more concern expressed over the ramification of everything going on relative to our national security, both general and energy security. In another update on the USS Theodore Rooseveltthe investigation now leads them to believe that the ship did not pick up Covid-19 during their port call in Vietnam but from the flight crew. Over 600 sailors tested positive for Covid-19 and another revelation is that 60% of those sailors testing positive did not have symptoms a much higher percentage non-systematic cases than expected. This was an experiment of sorts to show what level of positives are out there. A positive without symptoms is just as contagious as a positive with symptoms. We have not tested the general public enough to gain such a perspective. There are anecdotal reports of people without symptoms presenting at a meeting and infecting a significant number of attendees. In the state of Iowa, you had to have symptoms to be approved for a test and that did not tell us a darn thing about the level of Covid-19 in the population as a high percentage of it is symptom-free. The U.S. military is trying to control the risk of Covid-19. Acting Secretary of Defense mark Espy said, “It has revealed a new dynamic of this virus that it can be carried by normal, healthy people who have no idea that they are carrying it.” It also shows that younger people can be virulent carriers of the virus. The USS TR is not the only aircraft carrier whose crew is defeated by the virus. 700 of 1767 sailors aboard the French carrier Charles de Gaulle have tested positive. If these navies can get Covid-19-clean crews at sea they are not going to touch shore for a while. The investigation of what lead to the removal of Brett Crozier as Captain of the USS TR has shed a more positive light on his actions that has prompted consideration of his re-instatement. Mark Esper said that he was open to it.

As to our energy securitypre Covid-19, the U.S. had become a net oil exporter. We were also exporting significant amounts of ethanol. President George W. Bush was a TX oilman. Asked why he helped create the RFS he responded, “national security.” Biofuel was one of the components of our national energy security. There are no F-16s or patriot missile batteries defending US ethanol plants. They are far removed from the hurricanes that have ravished US oil refineries in the gulf from time to time. This country has spent enormous sums protecting our access to mid-east oil. DJT (Donald J. Trump) has touted about removing troops from the mid-east but his most recent action was to send more U.S. troops and patriot missile batteries to help protect Saudi refineries. He has been very much involved personally with both Vladimir Putin and the Saudi King and Crown Prince. He even helped the Saudi Prince, MBS, cover up Washington Post reporter Jamal Khashoggi’s murder. He is in their club. The Saudis and Russians do not get along. Russia supports many of Saudi enemies in the region. They have always gotten above their differences when it came to oil. Russia was aligned with OPEC. Actually, Russia was taking advantage of OPEC but never complied with the agreements to cut production that they signed. Those agreements had no impact on Russian oil production at all. Everyone was taking advantage of the Saudis who could afford and also had the ability to manage its level of production. Every time that the Saudis curtailed production the U.S. shale oil industry, the new exciting boy on the block, took market share from them. So, MBS decided to go another direction. Covid-19 was in the process of ravaging global oil demand. What better time to flood the world crude oil market with more oil?

So, instead of cutting back, Prince MBS turned on their oil spigot and flooded the world with more oil crashing the oil market. The deal reached a week or so ago was just illusory. Its execution is delayed and it is doubtful that it will ever be consummated. It was a blip in the trade war. Not all of the boost in Saudi oil exports was directed at Russia. Pre-trade war Saudi oil exports to the U.S. averaged 200-400 kbd. In the first two weeks of this month they have averaged 1.46 mbd to the US. It will be the crude oil market that shuts off oil production. Negative pricing which came as a shock will do that. The ethanol industry is already half shuttered. Demand destruction will be followed by bankruptcies. Some of those will be in the U.S. shale oil industry and some in the ethanol industry. What the Saudis have done is essentially attack U.S. oil producers and U.S. energy security. DJT doesn’t seem to be too shook up over that. He is more concerned about who is running the “Voice of America” and defunding the WHO as scapegoats for his own ineptitude.

They have done a Pearl Harbor on our energy independence and to rub salt in the wound our troops are still protecting Saudi oil refineries. This is not America First. DJT has acknowledged the damage being done to our domestic oil industry (not biofuel) and members of both Houses of Congress have protested to the Saudi ambassador and sent letters of protest to the Kingdom threatening repercussions, yet they all have kept the response low key. Why? Maybe they support what the Saudis are doing to the Russians. Putin cannot afford this and has his own Covid-19 problems to deal with. What I do know is that this has ruined the ethanol industry margins are so far into the red they cannot even see breakeven from heremuch has to be corrected on both supply and demand to even consider re-opening shuttered plantsand there is a good chance it will ruin the corn market. If you think that it is ruined now you underestimate how ruined that the corn market could get.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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