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And just like they did for her predecessors, the markets hung on every single word.
Except in this case, nobody (and I mean nobody) expected any major fireworks. What they were looking for instead was a confirmation that it would be "business as usual."
Judging by the nearly 200-point jump in the Dow Jones Industrial Average that followed, I'm guessing that nobody walked away disappointed.
In her prepared comments, Yellen provided no surprises as it relates to the Fed's exit plan for its quantitative easing "tapering" plans. The immediate impact of which has been a lengthening of the yield curve.
That means, barring anything unforeseen, there will be continuity rather than change. Nonetheless, it does raise some major points that will have a direct bearing in the energy sector.
Here's what it all means for investors…
What Janet Yellen Won't Tolerate
First up, as yields continue to rise, pressure is emerging on the price side of the bond-trading picture. Essentially this translates into an inverted debt market, with some medium-term inflationary consequences.
Now, inflation is the one consequence that the Fed will simply not tolerate.
Therefore, as I have noted before, there will need to be some attention directed toward the price side of the equation. For the new Fed chief, that may mean some tinkering with the tapering mechanism.
The balance between price and yield will be critical here.
And as we begin to move into the next round of a major expansion in unconventional oil and gas production in the United States, the ability to float debt to pay for significant new infrastructure development and refurbishment will be decisive.
In this arena, interest rates will be key since the debt markets are going to play a major role in financing that expansion.
Second, we'll once again be focused on the unemployment figures. Like her predecessors, Ben Bernanke and Alan Greenspan, Yellen will view the employment level as the thumbnail indicator of where the economy is going, just as inflation will be regarded as the principal bogeyman.
Yet it is true, of course, that the longer these stats are the primary concern of monetary policy, the less likely we are to actually zero in on the most compelling factors contributing to the economic expansion.
That is because employment is almost always the lastof the primary indicators to rise once an economic recovery is underway. On the other hand, it is also usually shorthand for a range of political issues more related to elections rather than genuine prosperity.
In addition, these unemployment figures actually tell us less about what is really going on. As more workers drop out of the market, and as those removed from the unemployment compensation lists continue to increase, the real unemployment rate becomes less a function of the stats and more a result of partisan political perceptions.
What's more, the primary impact these figures have on energy forecasts remains one of the thinnest connections ever devised. Even still, we continue to see knee-jerk reactions to employment figures due to their perceived impact on energy demand.
Now admittedly, a major economic recession would have a chilling effect on the need for energy, and that would kick in across the board. But we are nowhere close to another recession.
And in actuality, as I have pointed out on several occasions, it is not even U.S. demand levels that determine energy pricing.
Prices are set in other areas of the globe, in developing rather than mature industrialized countries.
Where the Demand Can Really Be Found
In these "up-and-coming" economies, the demand expectations are rising again – and it's for the full range of both conventional and renewable/alternative sources. Once again, the reality of the situation is buried beneath the hype of talking heads on TV.
Take the Chinese figures, for example…
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.