A FEW RAMBLINGS AND OPINIONS REGARDING INFLATION, ENERGY, ETC.

The PCE numbers for January finally arrived yesterday, so the January numbers...

Nothing to extreme. I recognize much of February reportage has been completed, so the laggard is the PCE, which will see next release around April 9th.

Obviously the CPI for February was 2.4%, and we can all expect that to jump for March. Energy prices alone, will drive inflation up by nearly a full percent, for the month of March. I would expect the overall y/y to be in the 3.2%+ range for March.

It should be noted that California prices will distort the national average. California is unique, due to nearly no access to the SPR (no pipeline, Jones Act), in direct competition with east Asia over Alaskan crude. Additionally, 30% of their crude imports ... comes through the Straits of Hormuz. California imports 60% overall. 

Simple math indicates 18% of their refinery inputs are in serious danger of being impacted. It would not be unreasonable to see the pump prices in California breaching the June, 2022 highs. Gasoline- $6.438; Diesel- $7.011.

Natural gas prices are not substantially higher and should not increase due to the situation in the Persian Gulf. The reason being simple... The U.S. facilities for processing NatGas to LNG are already at full operation. 

It is possible that various nation's SPR release might stem to spikes temporarily, but the capacity of withdrawal is one of the questions, as well as shipping availability. Ships can't magically appear overnight... at any given port.

Frankly, I see no easy solution. 

Globally, Asian countries are very vulnerable, with the exception of China.

Curiously, Iran has stated that crude priced in Chinese Yuan would be allowed passage. China might gleefully go along with that, but considering the impact on the yuan/dollar exchange rate, as well as holdings in dollars held by China... maybe not. 

Energy Inventory Update, and Some Geo-Political Thoughts

I guess it is no surprise that pump prices are rapidly rising... now standing at 11.5% above year ago levels.

How high could it go? That gets very complicated and depends on...

Past crude oil disruptions

Nothing really compares to the current situation. The 1973 Arab Embargo, targeted the U.S. and a few other countries, which were mostly unaffected. Notably, the U.S. experienced shortages and significant price hikes. The 1980 Iranian revolution impacted the global prices, but not the Straits of Hormuz. Again this impacted the U.S. with spot shortages and sharp price rises. 

That latter crisis did result in our current spot pricing structure, which ensures inventory across the different regions of the country.

The duration of closure of the Straits of Hormuz.

This is the determinant of future crude prices, natural gas prices, etc. As these are global commodities, the U.S. is not immune, as a net exporter of crude and LNG.

The 2nd part of the puzzle is shipping costs, which are usually included in those futures pricing. There are a lot of tankers, fully loaded and sitting stationary in that Gulf. Additionally, tankers are starting to pile up at the entrance into the Gulf. All those tankers are basically removing shipping capacity from the equation. 

We can all remember the high prices at the pump in 2008, which was caused by a much weaker dollar AND limited transport capability, due to our extreme dependence on imports at that time. 

Some basic math. 

Currently about 20 million barrels of crude passes through the Straits of Hormuz, each every day. Of that, less than 1 million barrels is shipped to the U.S. 3 million barrels are from Iran and generally goes to China. That leaves 16 million barrels for the rest.

The bulk of U.S. Imports are from Canada, which is largely captive by their government policies and is therefore highly dependant on the U.S. importing their product.

Certainly U.S. exports can rise, but a dramatic uptick in shipping would be hard to achieve, imo. U.S. Pump prices will most certainly rise, dependant upon duration of Straits of Hormuz closure, but there should be no shortages at the pump for at least 3 months. That might not be the case in other countries. 

Other overlooked factors

Deducting the 3mbpd exported by Iran to China, there remains 17mbpd of crude not passing through the Straits of Hormuz. That is approximately $1.3B per day of lost revenue to the exporters in that area.

With no ships entering the Straits of Hormuz, countries that are heavily dependent on food imports will experience possible sharp rises in prices, as well as potential shortages.

Summary

As someone that drives very little, an extreme jump in pump prices can be absorbed. As natural gas is a factor in electricity prices, I would expect an uncomfortable jump in that. With diesel prices jumping faster than gasoline and reliance on transportation of products... it will increase things I use on a regular basis.

For me... inflation is the story, NOT shortages, unless it would be shortage of money.

Latest Energy Consumption Data and A Few Ponderings About "Other" stuff!

Pump prices remain relatively steady, with consumption jumping on the weekly basis, but nearly flat... year over year.

Now for the opinion stuff...

It is fascinating to watch the British News over Epstein, Mandelson, Andrew, etc. It was a shock when Andrew was taken into custody. Of course, it was noted on several occasions that the British Police are investigating this sex trafficking thing more thoroughly than in the US.

The possible charges against Andrew, are over government secrets, which came to light after the files release. While he may be assessed by multiple British police agencies over possible movement of underage girls, he has not been charged.

Simply put... Andrew got a lot of publicity over sharing of secret government financial records with Epstein, which violates UK laws and dates back to 2011.

As for Epstein, he served 13 months from June 2008 ~ July 2009... on work release. Which meant he only spent his evenings in a cell. 

As for Andrew, he was a trade envoy from 2001~ 2011. He resigned that position due to some issues with expenses and possible association with unsavory characters.

It is hard to believe the Crown was not aware of Andrew's illegal business dealings. Yet all remained quiet.

An oddity in UK law has the Monarchy immune to open records requests, for 99 years after death.

Taking that last sentence and reviewing the timeline of the past 15 years, the slow drip drip of accusations against Andrew, stripping of his titles and duties and then the timing of his removal from the Royal Lodge, just 2 weeks prior to this latest uproar... reeks of a conspiracy. 

It is not so unbelievable that the Royal Lodge was scrubbed clean and any questionable material, digital and otherwise, is now safely ensconced in some walled off partition, held by the monarchy. To remain there until 99 years after Andrew's demise.

Thus the only evidence is in the U.S. files which were simply reproductions from digital files. 

With the UK media now describing the King as being forthcoming and willing to work with the authorities as somehow being above reproach. The cycle is nearly complete. 

Of course, this is all just a conspiracy on my part... and could never possibly be true.

A Bit of Update on the Energy Market, and a Few Political Opinions.

 The winter weather is the likely culprit for the drop in overall consumption. Only time will tell.

The overall inventories are still in good shape.

Now on to politics and MY OPINION.

GREENLAND...

I think we all understand the earth is not flat, but when discussing Greenland, somehow the average mind forgets that fact, and focus on the flat map. Get a globe to understand. With the potential opening of trade routes in the Arctic, who is to control those routes?

Those trade routes would cut the distance between the Asia Pacific Countries in half and more depending on Suez or Panama route. That has HUGE implications on volume of goods, container ships, cargo rates, etc. I would remind everyone of the Houthis's disruption of trade moving through the Suez Canal and the battle with China over the control of the Panama Canal. 

This is huge and could become a big geo-political nightmare in the coming decades. 

STARMER...

The UK Prime Minister has messed up. If you are not familiar, then step aside. The excuse being run up the flag pole... is the Mandelson appointment was made to placate or negotiate with you know who, in the White House. How weak has the U.K. become... to protrate themselves to a leader of another country. How can Starmer now attempt to play the moral outrage card, after all that.

This is quite laughable, although extremely serious if you are a  Brit, which I am not. However, I do feel sorry for them.

A FEW CHARTS WITH SOME POLITICS - January 07, 2026

The crude inventories are in good shape for this time of year...

It should be noted that the total inventory of Petroleum and Petroleum products are at the highest since April, 2022.

Consumption is near year ago levels, with pricing slightly down. 

Am I the only one noticing that Venezuela crude and Urals crude is similar?

Am I the only one noticing how the same people saying Trump does nothing but lie, lie, lie, are in a rush to treat his every utterance as the Gospel? I guess irrational behavior would create such opposing views. 

I periodically watch a certain UK news station. It was a constant bombardment of the U.S. seizing an oil tanker in the North Atlantic... until is was announced the UK had participated. The is was all rah-rah for the UK military. 

Then is was all about whether the UK was now undertaking a more active role. Yet, it came out the UK vessel was not crewed by Royal Navy, but rather by merchant marines. So who will become more active.

Of course, internation law is bandied about, but there has been literally dozens, if not hundreds of violations of "international law" over the previous decades. 

If there is no one to enforce the law... is there really a law??

It's Been Awhile

Finally some more reports coming out from the government services, with PPI and Retail Sales. Granted it is still a month behind, as October data should be out. 

Inflation did edge up in September on the CPI and PPI. Real Earnings were recently released as well. The latter slipped down a bit, with the exception on weekly earnings for production and non-supervisory.

Retails sales edged up before inflation adjustments, which let it slip a bit.

Looking inside the numbers, it would appear "Brick and Mortar" department stores continue to slide, as well as those companies that sell brick and mortar...building supplies etc. It would also appear the hobbies are taking a hit as well... sporting goods, etc.

Week Ending Report-August 16th, 2025

A few reports of interest (to me), from this past week.

CPI

Real earnings

Petroleum

Producer Price Index

Retail Sales

The inflation report was rather benign and met expectations. The oddity was in the CPI-W, which directly relates to C.O.L.A. It was a mild 2.5% y/y. The previous projection was a 2.6%~2.7% cola, which now moves a bit down to 2.5%~2.7%.

The Real Earnings moved up and is +1.2% above one year ago. As this is inflation adjusted, the earnings are +3.7% above one year ago.

The petroleum report shows an increase in both crude and distillate supplies. Gasoline supply edged a shade lower.

Produce Price Index was rather ugly, with a substantial jump across the board. Just as last month's PPI foreshadowed a benign July CPI... August will be a wake up call, imo. On top of that, the forecast for PPI is even higher... going forward.

I am not exactly happy, as my current CPI is 3.0% and possibly climbing, with COLA far behind.

The current status of the report card...

Advance Retail Sales

Not a bad report on the surface.

OPINION time:

In a previous post I questioned the accuracy of some government reports. The retail sales would be one example. The issue being with revisions. Below is a snapshot of cumulative revisions of advance sales going back about 2 1/2 years. Revisions are not unheard of, but the pattern is suggestive of something being off. 

The pattern HAD been the previous couple of months being revised downward, which inevitably shows a brighter current report. This had been almost a monthly occurrence, of the past couple of years. Now it should be noted that historically, April has been an across the board revision of everything.

Going forward, it will be interesting to observe if the revision pattern continues, although the monthly pattern has broken towards upward revisions for previous month's data, which would suppress the joy of a current report. It does seem suspicious, imho.

While the overall picture seems okay, with the exception of the PPI... a glimmer of hope seems to be in the PPI being a month blip, as following forecasts indicate flat to negative.