Biden's Decision In Afghanistan Will Have Vast Geopolitical Consequences

August 17, 2021 12:30 PM
Crude oil prices are still fighting off Covid-19 fears
OPEC+ sees no need to answer the call by the Biden administration to raise production
Natural gas prices are back on fire, giving bulls the upper hand in this market
Energy Report

Energy Report

The Phil Flynn Energy Report 

Epic Failure

Biden's failure in the fall of Afghanistan is raising anger, distrust, and sadness around the world. The president tried to blame everyone else, but at the end of the day, this was his decision and plan. It was an insult to our military, which spent years of sweat, blood, and toil to stabilize Afghanistan.

He failed to be honest with the American people in his speech yesterday, pointing fingers at the Trump administration, blaming the president of Afghanistan, and blaming the Afghanistan military. He also failed to tell you that military advisors were warning that this was going to happen. The president did say that he was surprised by how quickly Afghanistan fell, but he shouldn't have been. He seemed almost indifferent to the deaths and the human suffering that his decision caused, not only today, but also in the future.

The president mischaracterized the war in Afghanistan in a pathetic attempt to cover for his incompetent decision, one that will have far-reaching geopolitical consequences.

Fox News reports the following:

The New York Times, The Washington Post, and The Wall Street Journal issued a joint statement urging President Biden to ensure the safe exit of their journalists from Afghanistan. 

"For the past twenty years, brave Afghan colleagues have worked tirelessly to help The New York Times, The Washington Post and The Wall Street Journal share news and information from the region with the global public," the joint statement began. "Now, those colleagues and their families are trapped in Kabul, their lives in peril." 

"As employers, we are looking for support for our colleagues and as journalists we're looking for an unequivocal signal that the government will stand behind the free press. In that light, we ask the American government to move urgently and take three concrete steps to protect their safety," the statement continued.

The Wall Street Journal reported:

Former President George W. Bush urged the Biden administration to expedite the evacuation of vulnerable Afghan people, saying "we have the responsibility and the resources to secure safe passage for them now, without bureaucratic delay."

Mr. Bush, under whom the war in Afghanistan began in 2001, issued a statement Monday night that was free of the criticism lawmakers in both parties have directed at the Biden administration for its handling of the U.S. troop withdrawal. Mr. Biden defended his decision in a televised speech Monday afternoon, arguing the objectives had long been met.

"Our hearts are heavy for both the Afghan people who have suffered so much and for the Americans and NATO allies who have sacrificed so much," Mr. Bush wrote in a statement along with his wife, Laura.

Addressing service members and veterans, the statement read in part:

"You took out a brutal enemy and denied Al Qaeda a safe haven while building schools, sending supplies, and providing medical care. You kept America safe from further terror attacks, provided two decades of security and opportunity for millions, and made America proud. We thank you from the bottom of our hearts and will always honor your contributions."

The press, in many cases, spews lies to fit their political agenda. Truth is in short supply these days, so why can't the President of the United States himself mischaracterize the situation in Afghanistan by calling it an endless war, overestimating the risk to the U.S. soldiers? Can you lie about leaving the Afghan people out to dry and putting all of our allies in the Afghanistan War over the last 20 years at risk without the press calling you out? The Wall Street Journal wouldn’t allow it. 

The Journal wrote the following:

The president was dishonest in framing the U.S. mission merely as fighting in another country’s “civil war.” The U.S. didn’t remain in Afghanistan for 20 years to send women to school or to “nation-build.” The core mission was to prevent the country from again becoming a terrorist safe haven. The Taliban’s victory will now attract thousands of young jihadists from around the world, and they will have Americans and the U.S. homeland in their sights.

Mr. Biden said he would maintain a “counterterrorism over-the-horizon capability” to strike camps in Afghanistan, but that will be much harder from the distance of the Persian Gulf. This is a far bigger risk than he lets on, as U.S. intelligence agencies know.

Biden was also dishonest in framing his Afghan decision as a false choice between total withdrawal and sending tens of thousands of troops again. He knows his own advisers, military and civilian, believed they could support the Afghan military with no more than a few thousand troops to supply air power and intelligence.

He also knows the U.S. hasn’t had a single casualty in more than a year in Afghanistan. Even if Biden was set on withdrawal, he could have done it based on conditions that would have given the Taliban more incentive to negotiate with the government. Mr. Biden claimed that Afghan leaders Ashraf Ghani and Abdullah Abdullah had refused his advice to negotiate with the Taliban. That is false. They had been negotiating with the Taliban for months, under enormous pressure from the Trump Administration. The problem is that the Taliban had no incentive to negotiate in good faith knowing the U.S. was leaving and would be able to take its chances on a military victory.

Crude oil prices are still fighting off Covid-19 fears. China had some weak economic data, though reports that China drew on crude oil inventories in July— marking the 4th consecutive month it processed more crude than was available from domestic output and imports— should give the market some underlying support.

Reuters is reporting that “U.S. shale oil output is expected to rise to 8.1 million barrels per day (bpd) in September, the highest since April 2020, according to the Energy Information Administration's monthly drilling productivity report on Monday. The forecast is led by growth in the largest formation, the Permian Basin, where crude output is estimated to rise 49,000 bpd in the month, offsetting falling output expected from the Bakken and other top regions. Production in the Permian is expected to reach 4.8 million bpd in September, the highest since March 2020.”

Yeah, we're seeing the shale come back, but it's a far cry up to where it could’ve been if it weren't for the Biden administration's restrictions on shale. That’s one of the reasons why the Biden administration has been begging OPEC+ to raise oil production. It was a slap to U.S. energy producers and it was a slap to our Canadian allies.

Despite the weak action, we really are in a consolidation period and we're probably headed towards higher prices in the next couple of months. The consolidation period is being caused by concerns about Covid-19 and demand weakness in China, but if China starts to bounce back, we're still going to be under-supplied. 

The market yesterday rallied back off of lows after OPEC said it sees no need to answer the call by the Biden administration to raise production: that means we're not going to see any more oil than was already expected out of the OPEC+ cartel. That should keep the market relatively tight and avoid a major collapse in prices. It also shows that the OPEC+ cartel is going to be very attuned to any demand destruction caused by the rise in Covid-19 cases.

Natural gas prices are back on fire as strong export demand, tropical storm threats, and low U.S. inventories are giving bulls the upper hand in this market. This is probably a very good time to start looking at options for this winter, as we really expect some upside risk. If you need to be hedged on natural gas prices, the time is now; please don’t take the risk if we get a colder-than-normal winter, which BamWX weather is predicting. We then could see some significant price spikes in the price of natural gas.

Don’t miss out on my wildly popular trade levels on all major markets, as well as special subscriber-only updates. Call me at 888-264-5665 or email me at pflynn@pricegroup.com.

About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.