United States Oil (USO) campaign to undermine U.S. fuel economy standards

United States Oil (USO) campaign to undermine U.S. fuel economy standards

United States Oil (USO) campaign to undermine U.S. fuel economy standards

The oil industry engaged in a secret public relations campaign to undermine U.S. fuel economy standards, according to a new investigation from the New York Times.

One of the main actors was the largest oil refiner in the country, Marathon Petroleum. Marathon, along with others, ran a “stealth campaign to roll back car emissions standards,” the NYT reported. The campaign argued that the U.S. no longer needs fuel economy standards because it is now such a massive producer of oil.

“With oil scarcity no longer a concern,” Americans should be given a “choice in vehicles that best fit their needs,” a draft letter that was sent to members of Congress said. The Trump administration took up the talking points in its official justification for the proposed watering down of fuel economy standards.

Much of the debate about the corporate average fuel economy standards (CAFE), which were set to rise to over 50 miles per gallon by 2025, focused on the position of the auto industry. But California still has the authority to set its own fuel economy standards, something that the Trump administration is now contesting as it seeks to freeze federal standards at 37 mpg beginning in 2020.

The auto industry has been the dog that caught the car – it initially pressed the Trump administration to weaken the fuel economy standards, but realized that the aggressive rollback would leave the industry with a patchwork of state levels regulations, led by stricter standards in California. Different standards for different states would require automakers to produce different cars for different markets, a reality that would be more problematic than the more stringent nationwide standards.

However, while media coverage focused on this back-and-forth between major automakers, environmentalists and the Trump administration, it appears that oil refiners were waging a stealth PR campaign to convince the public that the standards are no longer needed. Marathon teamed up with the American Legislative Exchange Council (ALEC), according to the NYT investigation, where they pushed facebook ads, and lobbying at the state and federal level. They trumpeted a resolution calling the fuel efficiency standards “a relic of a disproven narrative of resource scarcity.”

The motivation is obvious: more efficient vehicles, including hybrids and increasingly electric vehicles, will cut into gasoline sales from refiners. While automakers have to worry about complying with state level fuel standards, refiners simply want to sell more fuel. Marathon’s CEO Gary Heminger told investors in early December on a conference call that the rollback in fuel economy standards would mean the refining industry would sell an additional 350,000 to 400,000 bpd of gasoline.

By 2030, freezing the auto standards, as proposed, would lead to increased U.S. oil demand by between 221,000 and 644,000 bpd, according to the Rhodium Group.

Some experts argue that the gutting of auto emissions standards would likely result in the largest impact on U.S. greenhouse gas emissions out of any other initiative pursued by the Trump administration, including the rolling back of methane limits, gutting the Clean Power Plan, or opening up vast new acreage for more oil and gas drilling.

Overall, the bias in prices is: Downwards

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 12.65.

The projected upper bound is: 11.99.

The projected lower bound is: 10.25.

The projected closing price is: 11.12.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 4 white candles and 5 black candles for a net of 1 black candles. During the past 50 bars, there have been 17 white candles and 31 black candles for a net of 14 black candles.

An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend (which appears to be the case with UNTD ST OIL FUND). It then signifies that the momentum may be shifting from the bears to the bulls.

If the engulfing bullish pattern occurs during an uptrend, it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.

A piercing line occurred (which indicates that prices moved down on the previous bar, opened even lower, but then closed significantly higher). This implies strength as the momentum appears to be shifting from the bears to the bulls. Note that the higher the close of the white candle (relative to the black candle), the more bullish the Piercing Line pattern.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 42.7418. This is not an overbought or oversold reading. The last signal was a buy 9 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 42.43. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 7 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 58. This is not a topping or bottoming area. The last signal was a buy 9 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 7 period(s) ago.

Rex Takasugi – TD Profile

UNTD ST OIL FUND closed up 0.390 at 11.210. Volume was 104% above average (neutral) and Bollinger Bands were 7% narrower than normal.

Open High Low Close Volume___
10.740 11.270 10.715 11.210 53,082,688

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 10.98 13.05 13.69
Volatility: 48 45 35
Volume: 36,029,656 32,849,432 22,966,696

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

UNTD ST OIL FUND is currently 18.1% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 40 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.

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