End of the Month... June 2022

Okay, it is the end of June. Time for a recap of data published this month for May by the really smart guys, with comments by a really dumb person (me).

First up is the various inflation gauges...

(Note that I have estimated the Eurostat for the USA, as the official data has not been published.)

Not much relief in the inflation outlook, although demand destruction is becoming evident in certain core areas. Even gasoline and diesel usage seems to be tapering off. Prices maybe not so much... but exports are still outweighing imports.

The personal income and outlays suggest a reason for this. (click to enlarge)

Is it a one month anomaly or the start of a trend? It's possible the old adage of not being able to get blood from a turnip... may be in play.

Now on to GDP. Which slid from -1.5% to 1.6%, and the headlines are about consumer spending decreasing from +3.1% in the 2nd reading and now at +1.8%. It's the consumers fault!! The consumers still remained positive in expenditures and overall GDP fell. Aren't we overlooking that 800lb. Gorilla?

I can remember when the consumers were 60% of the economy; then 65%; then 2/3's; and now 70%. That 70% gets stated as something normal, which it isn't...

That's since early in the 80's, so what might have changed? Let me back out some numbers and see what it might look like in "fun with numbers". (You can guess what I backed out)!

The line edges up in "fun with numbers", but not like the first graph. We can't speak of that, as it is politically sensitive. The bottom line... we did this to ourselves.

I can't really say whether the 2nd Qtr. GDP will be better or worse, but 2nd quarter is over with today, so it is only a matter of waiting for the 1st read at end of July. Frankly, I think it will be positive for 2nd quarter, but the ship is starting to tilt, in my opinion. 

I can distinctly remember discussion of whether or not we were in a recession in spring 2008. I am not sure when the decision was finally made of it starting in December of 2007. It seems it was given that date after the recession "ended" in June of 2009. 

So we won't officially know whether we are in a recession, until it is over, or when the fat lady sings.  

Review of EIA Weekly Report for 6-29-2022

 

The EIA.gov has released the latest weekly report. 

Here are some interesting tidbits... Our exports of Crude and Petroleum Products since March, is 120,789,000  million barrels more than our imports. Gasoline exports during the same period now stands at 16,135,000 million barrels more than our imports. And you wonder why.

There is some semblance of relief at the pump, as current conditions indicate the national average drifting lower another 18¢ to around $4.68. You would think they might be lower, with demand decreasing, but imports still rule the day. If and when Europe settles down, expect these high prices to continue.

As for Natural Gas...

The outlook seems positive for moderation in natural gas pricing in the United States, but the picture is somewhat distorted by Freeport problems. I would still expect the futures price to jump up from $6.95, as Freeport resolves problems toward the end of the year. 

As to why the UK has diverged from the Dutch TTF... I have no idea, nor am I that interested. 

That's it for now!

Still Too Early to Project C.O.L.A Increases... But the Early Bird Gets the Worm. Yuck!

Yes, it is too early, but I cannot help myself. After perusing all the forecasts of inflation, here goes. Of course an explanation is needed as to the rules regarding determining C.O.L.A.

CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) is the gauge used, not the headline CPI, as in CPI-U (Consumer Price index for ALL Urban Consumers). The difference being the salaried and technical folks are in the latter. 

Typically the CPI-W has lagged behind the CPI-U, (hereafter referred to simply CPI). This can be seen in the CPI reading of 292.296 (May-2022), compared to 288.022 for the CPI-W. Both started their indexes at the same time... back in the early 80s.

However, after lagging all that time, the CPI-W is catching up with a vengeance. Why? I don't know, maybe something to do with Covid. (That's intended to be humorous).

Certainly, a lot of things can change between now and then. Even the forecasts are suggesting a peak to inflation in July and then subsiding. It is not unreasonable to view current projections and expect 8.8%~9.1% as the potential range for C.O.L.A. adjustment. Although things appear to be outpacing forecasts to the downside.

• June CPI-W is forecast as 9.3%~9.4%
• July CPI-W is forecast as 9.2%~9.4%
• August CPI-W is forecast as 8.7%~9.0%
• September CPI-W forecast as 8.3%~8.5%.

Whatever the increase might be, it would be important to put that into perspective. Theoretically, the increase which comes in January 2023, puts you back to the purchasing power you had in July, August, and September of 2021. Any lost purchasing power is gone... forever.

The 2nd part of the discussion starts with Medicare Premiums. They jumped a lot this past year, due to the dementia drug and there is a belief that somehow a big drop is forthcoming as the Center for Medicare & Medicaid Services has altered their stance on that drug. 

Fine, but the anticipated hike in 2022 was for a jump from $148.5 to $158, without the dementia drug. The dementia drug's actual cost same in about half of the anticipated, which brings it back to the $158~$160 range. What about the increases in Medicare costs, aside for the dementia drug?

I would not expect any great reductions in Medicare premiums for 2023, although it should not deduct from the C.O.L.A. increase... as it had in years past.

Now to the scams... my wife received a letter from a well known entity, decrying some legislation in Congress that was intended to undermine S.S. Contributions were desperately needed to help stop this legislation.

I checked and found the legislation was proposed back in early 2021 and has sat in committee since, and has apparently been forgotten by all... except the folks desperately looking for revenue sources.

Maybe I am becoming too cynical, but when someone asks for money to somehow benefit me... I immediately become suspicious of them. It has served me well.

Bored on a Saturday Night

There is nothing on television worth watching, and the news is to be avoided. I have completed all my chores for the week and looking for something to do.

So, allow me to jabber about stuff, I know very little about... and prove to you how little I know.

As the EIA seems to be having difficulty with this past week’s reports… I am shooting in the dark, even more so than usual.

The futures market indicates UK natural gas prices will likely double from current, while the Dutch seems to believe in consistency, going into January of 2023. It strikes me odd, as the Dutch and UK futures had remained rather consistent until about a month ago.

I cannot quite understand why, but last fall, the topic of storage was in the news, and I do seem to recall the U.K. had divested itself of most of their NG storage capacity. . It likely was due to long range planning away from fossil fuels.

That's okay, as it is their business. My concern is the prices in the U.S. While prices have doubled and then some, the futures market seems to hold steady where we currently are. Naturally, the doubling of price of Natural Gas on the market does not translate to doubling of price to the end user, but $3.50+ per MBTU will. 

That adds up to about $20 a month more for the average American Household and it is important to remember... only about half of American households use Natural Gas, so about $40 more per month. BUT, most of those households rely disproportionately on Natural Gas in the colder months. 

Likely most Americans have adjusted. Nearly all of us use Electricity and about 40% of that comes from Natural Gas.

The problem will be when the Freeport company is back up to 100%. The problem with the chart above, is it omits the runup to over $9.30 per MBTU just prior to the fire at Freeport. Freeport accounts for about 17% of LNG exports. That fire caused a major disruption for exports, which reduced the draw on our own inventory. 

Freeport states they should be partially up and running in 90 days and at full capacity by end of the year. It is not a stretch to think U.S. natural gas prices will near the $10 per MBTU by then. 

Just double the above numbers and you can see the problem.

On the good news, the gasoline futures have slid 44¢ from their peak on June 6th. Gasoline at the pump always rockets upward, but fall like a feather. That price should continue to fall another 17¢, unless something else happens. If you are wondering about a discrepancy, rest assured the gasoline was on pace to hit $5.20 at the pump and then the bottom suddenly fell out. Something about bad economic news.

There was a bit of concern about some Canadian Model's itinerary, but the Canadian Model appears to have changed her mind. 

That wraps it for me, as this is started to be boring. Oh wait, maybe there is something on the streaming services, that I would be interested in, AND haven't seen a dozen times.😀

It's Politics As Usual, or How to Manipulate Weak Minds

As I am biding my time, awaiting this week's EIA Crude and Products report... I thought I would delve into my current frustrations.

Namely, the failure of the fourth estate… or the press, media et al. I blame them for getting Trump elected in the first place. So eager were they to boost ratings, they went right along with the Trump Phenomena early in the race. I am not just referring to that right wing network. It was “must see TV”.

No doubt they were sure Trump could not win a presidency and therefore… pushed him over other republican candidates.

Unfortunately for all, they managed to subvert the 2016 election, in my opinion. It was not the Russians or anyone else. The fourth estate handed that election to Trump. To distance themselves from any blame, they went on the attack, and it was furious. 

I have no quibble with any of that, but they destroyed what little credibility that remained. By 2020, it was clear that truth, like Elvis… had left the building.

The issue I have, is their great fear of a Trump or Trump-like person (Republican) might win in 2024, they have completely lost any civic responsibility… when it comes to a sitting president.

We should not blame Biden for the current inflation…

So... who do I blame? But wait... inflation is everywhere, so don't blame Biden.

Fair enough to blame their inflation on Putin's invasion of Ukraine, but what about the preceding year in the United States?

I have frequently mentioned this...

Take credit for vaccines, $1,400 checks to everyone and then ignore what might happen to supply chains under this new found wealth. But blame it on Supply Chain, logistics, ports, etc. Just don't blame Biden.

• The supply chain is snarled and causing inflation... don't blame Biden. (What really caused the ports to be congested in the first place)?
• This inflation is transitory... don't blame Biden. 
• It's Putin's invasion of Ukraine that is causing inflation... don't blame Biden. (For the past 3 months, but what about the previous 12 months)?
• It's the greedy oil industry, running up prices... don't blame Biden. (Take the energy component out of the CPI and the inflation rate would still be at a 40 year high.)

So great, I won't blame Biden... but who should I blame?

Even A Broken Clock is Right Twice a Day!!

In this digital age, there will be many that do not understand a reference from way back in the age of analog clocks. But on to the meat of the matter, or where’s the beef?

After months of American citizens complaining about inflation, certain politicians have determined it is a problem and are focused upon the problem. We should also understand the “rest” of the world is also experiencing inflation.

Except there was rarely a peep, until the “rest” of the world caught up with the U.S.A.

Here is a nice graph with annual inflation rates since August 2021. (Click on Picture for larger view).

Eurostat is the source for the EU, France, Germany, as well as the harmonized inflation rate of the U.S. Oddly the U.S. is not in the EU and is tracked, yet U.K. no longer appears anywhere. Someone is taking Brexit very seriously, imo. The U.K. is represented by its own Office of National Statistics, which has both HCIP and CPI. Then Canada data is taken from Statistics Canada. (I estimated the Eurostat numbers for the U.S. at 9.1%, but put 8.8% on this chart/graph to be safe on the low side).

Here is a chart as well...

There does seem to be inflation in these countries, but they are just now joining the inflation party, we have been experiencing for several months. As they say… numbers don’t lie, but politicians do. In this case, our politicians may not be lying, but have put off telling the truth until it could be spun as impacting a lot of countries. 

Clearly, we can see the impact of the natural gas pricing in the EU and UK, as well as the impact of the Ukraine invasion, for all including Canada. The U.S. can certainly join in the chorus blaming Putin, but what about the earlier periods, when both the EU and the UK were experiencing less inflation than the United States?

Why wasn’t inflation an issue then? Did our politicians need to wait for someone else to blame and then proclaim it's not my fault, everyone is having high inflation?

Hey, it will probably work... given the short attention span of most Americans. 

A Timeline of Events and Some Thoughts

How did we get where we are?

In previous postings, I made mention of the repeal of the Crude Export Act in 2015. That set the stage for exporting of crude from the U.S., which was due in part to drill baby drill and lowering of WTI prices within the U.S. As a result, ALL crude oil became priced on the global market demand. At that time, exports were limited to Alaskan Crude and daily exports were in the 500K barrel range.

Also at that time, WTI crude had fallen to $34.74 per barrel and gasoline stood at $2.026 per gallon nationally. This was down from the high of $100+ per barrel in July of 2014, as was gasoline at $3.60+ per gallon. Which was prior to drill baby drill taking hold. Hence the necessity to do something for the drillers.

In February 2020, WTI crude had risen to $51.43 and gasoline to $2.466. Exports of Crude were in the 3.5M barrels daily.

Of course, February 2020 gave us the first glimpse of COVID. With Covid the infamous negative futures price of -$37.63 in April (Monthly average at $17.13). People were paying someone else to take delivery of crude. Gasoline fell to $1.773 by end of April. Crude exports slowed to the 3M barrel daily level.

[All data from EIA.GOV]

The crude prices stayed in the $40 range until December 2020 and gasoline in the $2.20 range. It was about this time that an antsy public was given hope via vaccines. By February 2021, crude was in the $60 range and gasoline had jumped to $2.60+. 

While there had been spot shortages of many goods early on, they had mostly eased by this time, as well. There were lingering shortages of materials to repair equipment, build cars, etc. The economy was still out of balance, in my opinion.

As the shots became widely available and hopes of finally ridding covid seemed on the horizon... consumers became increasingly anxious to get out of lockdowns, etc. 

The economy had largely survived due to stimulus. It was in February that Texas had the big freeze, with impacted refining and saw gasoline jump to $2.80 range. 

Then came the 3rd stimulus, which even Miss Transitory thinks was too much... in retrospect.

It is nearly impossible to avoid what happened next, as the American Consumer went all in on a spending spree. This resulted in port backups, intermodal congestion and Just in Case inventory. Which in turn resulted in this...

Crude also began its climb, as demand increased. By end of 2021, it was nearing $80 and gasoline was in the $3.30 range. We were still exporting around 3M barrels per day. Even with the shuttering of older refineries. Why spend money on something that is being phased out, due to climate change?

Then came Ukraine and the recognition that Europe is dependent upon Russia. Before the invasion, Crude had already climbed to $92 and gasoline to $3.60. 

Interestingly, certain politicians have advocated assisting Europe wean itself from Russian energy. Even an age-old enemy such as Venezuela is now somehow to be considered friendly. An old friend (Saudi Arabia) that became NO longer a friend, is now to be once again... viewed favorably.

We are now exporting 3.5M barrels on average per day since March and some days goes above 4 million. And it's not just crude, but refined products as well. 102,309,000 barrels of crude and petroleum exports ABOVE what has been imported since first of March. Oh and 14,091,000 barrels of gasoline have been exported in that period, ABOVE imports.

Here is how it has flipped since this period in 2019...

I have highlighted the flip areas. Where once we imported more of all products, than we exported AND where we once imported more gasoline than we exported. 

In my opinion, we would still be seeing record prices at the pump, although not in the $5 range (certainly above $4 and still be complaining). So, it would be correct to blame the current prices on Putin, but to run around suddenly buddying up some folks, releasing SPR to the tune of 1M barrels a day, then complain about refineries doing what you asked, is a bit much. I am not defending refineries, just noting the hypocrisy of certain politicians.

What's next... blaming the high prices on climate change? We are just one hurricane in the Gulf from the blame game to shift to that very item. I also found the timing of blaming refineries, just as he or his henchmen got advance news of impending bad economic reports. Those bad economic reports have caused the futures of both crude and gasoline to fall nearly 10% this past week. 

I'm sure the subsequent fall in pump prices will be extolled as proof the refineries were gouging us. And many Americans will believe it, report it, etc. One reporter noted that we consumed 10% more gasoline this past week than the previous week, although the data says -1.0% for the week and -2.9% year over year. Seriously, are we that ignorant, not to see through these lies? Apparently, the answer is yes. 

Which brings me to the IQ of the American people. On certain social media boards, there are still individuals saying we should drill more, etc. without regard to the fact we are exporting. Some people haven't gotten the news or are ignoring it for political gain. 

Of course, the thread that caught my eye, was regarding the falling IQ of Americans. According to one individual, the IQ of Americans was once 110 and has now fallen to 99 and is a clear indication of our stupidity. That no one pointed out the obvious flaw and piled on to that belief... does indicate our stupidity. I doubt anyone caught the irony of the original post, including the original poster.

I consider myself of average intelligence and possibly with age... below. It is kind of scary to think where we are headed.

_{#gasoline #covid #crude-oil #alaska #opinion #exports}

Those Pesky Sensors at Intersections

I realize, you may not understand or what I am referring. If you have had to wait through multiple lights at left turn lanes, that have left turn lights, then you will. 

I am over reacting and wanting to gripe, so bear with me. On most intersections where I live, that have left turn signals as part of the traffic light system... there are sensors embedded in the road. Just behind that big white rectangle, which is the stopping point for traffic. 

I really have no problem with Car A over running that mark, as I can still pull up on that sensor and the next time the traffic signals cycle... I can get clear path to turn. 

That car B, that pulls up short, throws a monkey wrench in the whole system. The traffic lights do not sense anyone in that sensor area and will just skip the left turn green light and allow on coming traffic. 

Time and time again, I have ended up behind someone pulling up short in these cases and the traffic signals are cycling over and over, with no movement in that left turning lane.

Okay... my rant is over. 

A Conundrum On Inflation and Recession.

I'm not the brightest bulb and may be seeing things wrong, but... the Just in Case inventory surplus may be coming to an end.

To clarify... we had all sorts of supply chain issues, which were originally shortages of goods, due to parts, etc. THEN the supply chain issues became a snarled supply chain which caused shortages AND was exacerbated by companies ordering heavy to ensure arrival of supply to meet demand. This is Just In Case inventory control. 

The reduction in inventories allowed companies to pocket some hefty profits and pep up stocks. Everything from reduction of Oil and oil product inventories to freezers, etc. I even noticed my local Walmart pulled in those shipping containers all over their back lot.  

Now companies, such as Walmart and Target are talking about reduced profits, due to excess inventory. Oops! Certain major companies that supply all those retail stores with products (excluding food) are now beginning to cancel components to make their products... from their suppliers.

Understand the mantra is how the consumer's spending habits are changing. Seriously, how many TVs and Freezers, etc. can people buy for stimulus money they were given. 

As these companies slow their ordering to reduce inventory... a potential recession is looming. Meaning their inventory is no where near where it should be. Should be a buyers market at some point... just not yet. Again, this will not really impact food... as we still gotta eat. 

So these companies that had slowly began reducing inventory will now need to speed up. With interest rates sharply climbing, financing the debt to hold excessive inventory climbs as well. Not a good scenario to be in. Think GM in 2008, with their excessive inventory wish mushroomed and sales slumped to where they could not pay vendors.

Which brings me to the other part of this diatribe. How many zombie companies are about to be flushed out of the system?

The consumer, which is solely holding the economy together, will at some point overcome the euphoria of post covid and slow down the spending. My guess is a reduction will begin around fall, with an uptick for the holidays... and then the gloom of January will hit us.

Let's hope those companies have shed their excess inventories by then. Or as I think of it.. the time of steep discounts.

At some point, this may also impact the workforce, as it is not difficult to foresee it finally rebalancing and all those help wanted signs being stored away.

It will be a difficult time, as energy costs may linger and food is certainly not going to go down. I would expect the overall inflation rate to slide.

I probably should stop reading the hysterical headlines and let my brilliant leaders tell me how I should think and feel.

Review of EIA Weekly Report for 6-15-2022

 

The EIA has released this week's report. 

Petroleum product movement from the Gulf Coast to the East Coast remains robust while exports reach record highs

That's what it says and yes, those exports keeps adding up.  102,309,000 barrels of crude and petroleum exports ABOVE what has been imported since first of March. Oh and 14,091,000 barrels of gasoline have been exported in that period, ABOVE imports.

I keep hearing how someone is threatening the refiners to do more. Do what... export? I really can't believe our dear leaders are that dumb, BUT... they think we are and can be easily misled. So in addition to the current heatwave baking the country, we must endure more hot air from D.C. 

Of course, it would be easy to see the futures market for gasoline was heading down sharply by as much as 25¢, then criticize refiners, at which point someone could then turn around and take credit... when gasoline prices drop at the pump. Just wait for it. Of course, it will serve as some kind of proof of skullduggery, the next time prices jump back up. 

Frankly, an angry electorate cannot think rationally and it is easy to trot out the usual bogeymen to deflect blame. 

The problems with Freeport has really rocked the LNG market...

Dutch is up 50% and the UK is nearly double last week. Of course, problems with Nord Stream and also the Norwegian pipeline is wreaking havoc.

That's their problem, which actually might provide some relief to U.S. Consumers as the natural gas slated for LNG export will stay at home... for awhile.

It really cannot hurt... or even over saturate our storage.

I think this is enough for awhile, as I am starting to get tired of the less than positive news. 

Retail Trade Report for May 2022

 

Another less than stellar report, as retail trade fell in May, without adjustments for inflationary prices. 

Here is May's Advance Retail Report from the Census Bureau.

Advance Estimates of U.S. Retail and Food Services

Advance estimates of U.S. retail and food services sales for May 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $672.9 billion, a decrease of 0.3 percent (±0.5 percent)* from the previous month, but 8.1 percent (±0.7 percent) above May 2021. Total sales for the March 2022 through May 2022 period were up 7.7 percent (±0.7 percent) from the same period a year ago. The March 2022 to April 2022 percent change was revised from up 0.9 percent (±0.5 percent) to up 0.7 percent (±0.2 percent).

Retail trade sales were down 0.4 percent (±0.4 percent)* from April 2022, but up 6.9 percent (±0.7 percent) above last year. Gasoline stations were up 43.2 percent (±1.6 percent) from May 2021, while food services and drinking places were up 17.5 percent (±4.0 percent) from last year.

Simply put... we have started to spend less and buy even less. Certainly the aforementioned items by the release come into play, but a few added comments from me. M/M and Y/Y.

• Motor vehicle & parts dealers …….……….. -3.52% -3.73%
• Electronics & appliance stores …………….. -1.33% -4.45%
• Nonstore retailers …………………..….……….. -0.98% +6.98%

It would be imprecise to deduct the 1.1% inflation from April or the 8.6% from May 2021, as the inflation rate varied across the many items. However, I did just that in the graph above. It shouldn't be taken as completely accurate, but does provide an indication of things as they stand. That is my opinion on the matter.

An example would be...

       Grocery stores …………………..………..……….. +1.23% +8.71%

The nearest in the CPI report was food at home, with +1.4% May over April and +11.9% Y/Y. It's almost as if people are purchasing less or at least... cheaper options. The thing about food is only so much budget cutting can take place, until you hit bone. 

An example of that would be the CPI decrease in beef and veal, with an upward spike in chicken and fish. It's not necessarily a healthier diet, as fruits and vegetables have hit a pause. 

The report calls out food services and drinking places on an annual basis, but what about monthly...

        Food services & drinking places ……….. +0.67% +17.47%

The monthly increase looks a bit shaky, once inflation is applied and the annual should be no surprise, as we were in the early stages a fully opening back up from Covid.

The bright spot is gasoline, which is not really a bright spot, in my opinion.

So another report into the dustbin. Which way is everything headed? I will wait for the smart people to tell me.

Producer Price Index for May 2022

 

Once again, it is time to browse through the BLS PPI Report for May. (Historical Page)

The Producer Price Index for final demand increased 0.8 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.4 percent in April and 1.6 percent in March. (See table A.) On an unadjusted basis, final demand prices moved up 10.8 percent for the 12 months ended in May.

In May, nearly two-thirds of the rise in the index for final demand was due to a 1.4-percent advance in prices for final demand goods. The index for final demand services increased 0.4 percent.

Prices for final demand less foods, energy, and trade services moved up 0.5 percent in May after increasing 0.4 percent in April. For the 12 months ended in May, the index for final demand less foods, energy, and trade services rose 6.8 percent.

Simple math... the index rose 10.8% in May and the index less foods, energy and trade services was up 6.8%. So guess what rose substantially faster than 10.8% overall... Yep, foods, energy and trade services. I suspect you already knew that, but remember this is PRODUCER prices, not retail. Can you guess what gets passed on to the consumer? Ouch! 

So it is no wonder that people much smarter I, have quickly revised the CPI forecast upward. There is "some" good news, although it can easily be explained away as a blip. Producer Food Prices did pause in May, which is not to say they fell very much. The easy explanation would be demand for cheaper foods may be in play. The beef and veal index, slipped 9.5%, but chickens rose. 

Still looking for that indication that the rapid upward trajectory of Inflation will pause... and it will happen. But when? However, it would be foolish to expect a reversal in pricing, especially in the food area. Demand destruction might come into play for all other items, but food is a tough one to cut back on. 

There seems to be a bit of turmoil in Natural Gas prices, as Freeport now suggests a much longer timeline for a full restart. That has significantly brought down the NatGas futures on the Henry Hub, but that drop is to levels not seen since April or May. Whoopee! 

On to the next report.

Let's brag about our firearms on Social Media

Guns are back in the headlines, so it is to be expected the discussion is on social media. I am not going to say which way I lean in the debate. I am curious about those bragging about their guns and what they would do IF needed.

First off is the need for someone to own a gun. I get the whole safety thing, but people bragging about their gun holdings and prowess of use, seems to dare a thief to pay a visit... say when you aren't home.

Certainly gun violence is at the forefront AND the discussion is about the ease of purchasing guns, lost is the number of mass shootings where illegal guns and/or ghost guns are used. No one seems able to address that... or maybe they don't want to. About the only thing that strengthening regulations for gun purchases would do... is reduce the number of mass killings with legally purchased hardware. 

Then there is the braggart, claiming they would do this or that, IF someone were to threaten them. I am not sure how that would stack up in a self defense claim. Probably not ending with the braggart being convicted of manslaughter, but the idea of being so scared as to use a weapon in self defense, would come under scrutiny if the social media brags, were to come into evidence.

I don't know how it would all end up, but I find it disturbing, as to how some people seem to think their bragging won't come around to bite them... at the end of the Day.

Would Keystone XL Have Helped?

That seems to be all the rage, now with gasoline prices topping the US $5 mark. It seems that everyone can agree, that it is the fault of one political party or the other. So it would seem that allowing the Keystone XL pipeline to be built... would have increased the volume of crude coming into the United States and thereby reduce the price of gasoline.

Except we are exporting crude and petroleum products at an enormous and historical rate. We have exported 920,255,000 barrels of oil and petroleum products since the beginning of March. Certainly we have imported a lot as well. 827,071,000 barrels of oil and petroleum products in that same period. Oh wait... that export number is nearly 100 million barrels higher than the import number.

What would the crude inventory look like... Note the gray area is the 5 year range, both top and bottom, with the blue line being where we actually are and the red line being those 100 million barrels. Note the 5 year is distorted by the sudden drop in consumer demand, due to covid, which would normally be in the 420 million barrel range. Even the past 5 years is distorted in comparison to 7 years ago. (If you struggle with the small print, just click on the image. 

It gets even better as we have exported 86,667,000 barrels of gasoline over that same period, while importing 74,508,000 barrels of gasoline. Oops!

This is why I am having a problem with the idea surrounding the failure to approve Keystone XL as having an impact on our current gasoline prices. 

To be sure, IF we could go back in time and retroactively approve Keystone XL it should reduce the global impact of crude and thereby the price of gasoline, IF everything else remained the same.

To do that, we would need to ignore the shale boom (drill baby drill) and our own Congress in December, 2015, lifted the oil export ban that had been in place for over 40 years and let's not forget the releases of the Strategic Petroleum Reserve (SPR).

Briefly, the Keystone XL was proposed back in 2008, just as U.S. gasoline prices roared past the $4 per gallon mark. Keystone XL was a proposal by what was then called Trans Canada, based in Calgary. It was the 4th phase of the project, which came under fire. Politics in Canada prevents pipelines of this scale from going to their coasts, thus it is almost captive to the U.S. Market. 

It should be noted that XL was struck down in November, 2015.

Here is the gasoline price chart, with some embedded notes from me. (Pardon the penmanship)

Here is the U.S. Production chart without my adding comments, so refer to above dates and times... (Note that dates may not line up and I probably should have marked each)

So while we can blame Obama (Democrat) for the Keystone cancellation, it should be pointed out the repeal of the crude oil export ban... was Republican led. So here is what transpired, regarding exports from the USA.

Then finally, the last part of the picture... crude oil historical inventory.

At that point in time, the drill baby drill people were under severe financial stress and really needed to unload crude via exports. Keystone XL would have added pressure as well, although the XL stood for export limited, which seems like the exports would be limited, but in American terms, Keystone XL (export limited) would have been branded Keystone XI (export inc.) Keystone was a Canadian venture. Granted it was being exported to the USA, but intent was points further. 

And it was clear the aim was to link up to Cushing Oklahoma and the new pipelines being put in place to the gulf coast AND thereby be further exported to parts unknown. Pipelines that had moved crude from the gulf to the interior were being reversed, as part of this plan. Yes, the refiners in the Gulf had established Foreign Trade Zone status, thereby exempting the Canadian crude from export ban. It was a pass through arrangement being planned.

Keystone XL was slated to add 850,000 barrels per day into the mix. Yes, it would have theoretically lowered global petroleum prices, but so would the release of 1,000,000 barrels a day from the SPR. Coupled together, the likelihood was prices being about the same as current, as the need to phase out Russian Crude would be pulled forward.

Just because XL was struck down, does not mean their crude is not making its way to the gulf and the U.S. refineries along the gulf. Remember all the problems with rail tanker explosions and fires? The result was new tanker requirements and the biggest makers of these new tankers were subsidiaries of Burlington Northern, which was owned by Berkshire Hathaway. A lot of money to be made by building these new rail tankers and hauling this crude. It would have been cheaper by pipeline, but politics is politics.

Striking down XL doesn't appear to have staunched the flow of crude oil from Canada...

Then there is this... 

CALGARY, Alberta, March 24 (Reuters) - Canada has capacity to increase oil and gas exports by up to 300,000 barrels per day (bpd) by the end of 2022 to help improve global energy security following Russia's invasion of Ukraine, Natural Resources Minister Jonathan Wilkinson on Thursday.

It would seem that existing flows were not at capacity, so how would XL have increased the flows?

I can't really see a way around the current price of gasoline at the pump. We may have seen prices lower than 1 year ago and may see prices come down quicker in the fall... but right now, it would likely be the same. 

As usual, there is plenty of blame to pass around and nothing will really be done to alleviate the rise in prices. 

Would Keystone XL have helped? ONLY IF  YOU BELIEVE NONE OF IT WOULD BE EXPORTED OR DISPLACE U.S. CRUDE TO BE EXPORTED. By the way, I have this beachfront property for sale in Death Valley... if you are interested.

If you feel the need to blame politicians, be sure to blame ALL, in my humble opinion. The finger prints of each party are all over the current situation. 

Breakdown of CPI DATA and Real Earnings, May 2022

Last month, I shot my mouth off and predicted the CPI for May would come in between 7.9%~8.2%. That was optimistic, as it came up as 8.58%, rounded to 8.6%.

The BLS report for May... (historical archives)

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.0 percent in May on a seasonally adjusted basis after rising 0.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.6 percent before seasonal adjustment.

The increase was broad-based, with the indexes for shelter, gasoline, and food being the largest contributors. After declining in April, the energy index rose 3.9 percent over the month with the gasoline index rising 4.1 percent and the other major component indexes also increasing. The food index rose 1.2 percent in May as the food at home index increased 1.4 percent.

My own inflation report continues to see the onslaught of higher prices, and I am not happy😠...

Here is a compilation of various inflation reports for May to date. Note my price index jumped to 7.6%. This is not one of those happy increases. Food continues to bite, as those hoarding supplies are beginning to dwindle.

The BLS also released the May Real Earnings Report.

Real average hourly earnings for all employees decreased 0.6 percent from April to May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from an increase of 0.3 percent in average hourly earnings combined with an increase of 1.0 percent in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings decreased 0.7 percent over the month due to the change in real average hourly earnings combined with no change in the average workweek.  

Real average hourly earnings decreased 3.0 percent, seasonally adjusted, from May 2021 to May 2022. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 3.9-percent decrease in real average weekly earnings over this period.

Since February 2020...

Based on real earnings, the workforce is back to February 2020 level. It is hard to imagine any improvement, with current inflation eroding earnings. 

The inflation report was a surprise, as it was above forecasts. However, the forecast was revised upward throughout the month. Obviously the forecasts were not raised fast enough. Don't worry (or maybe worry), the forecasts for June report, due out in July... calls for a range 8.64%~8.91%, at this time. With this past month at 8.58% and it already being near mid June, there is a near 100% chance that June's inflation rate will outpace May. The likely headline in July, will once again harken back to the December 1981 rate of 8.92%. Not much further back, as the November 1981 rate was 9.59%.

The PPI comes out Tuesday and we can see the future of inflation, in my opinion. I will be looking at the various groupings as well. We have the essentials, which fall into the food and shelter category; the things we complain about, but could possibly cut back on; the stuff we would like to have; and the stuff that dreams are made of.

The retail trade report is due out on Wednesday and will indicate something, although not sure of what. Several companies are stating they have an abundance of stuff, that we are no longer purchasing as if the world ends tomorrow. Which seems to indicate something related to the previous paragraph.

Still looking for that glimmer of hope, which might be in the CPI-W. As this is based on 3rd quarter, year over year average, the forecasts are indicating a possible 8.7%~9.0% increase. UNFORTUNATELY, that also indicates some serious inflation yet to come. It should be remembered that C.O.L.A. is based on 3rd quarter average, versus same period of a year earlier. While the CPI-U is the headline, the CPI-W was up 9.3% YoY. Which is odd, as years past had the CPI-U accelerating faster than the CPI-W. 

Hope you have a good weekend!!

Review of EIA Weekly Report for 6-8-2022

 Gasoline, Diesel and Crude Oil stocks are still well below seasonal average.

Much is being made about those inventories climbing since last week, except gasoline. It should be noted that imports remain similar to previous weeks, but exports fell 1.5 ~2.0 million barrels per day, compared to past week's numbers.

Not sure this portends to a capping of crude and petroleum products pricing. Consider the imports of gasoline actually exceeded the exports of gasoline for the first time in a few weeks. Consumption of gasoline is still slightly below last year's pace... yet inventory fell by about 600K barrels.

The AAA has the national average of regular gasoline at $4.955 per gallon. It should break that $5 level over the next few days, according to the futures market.

Here's a look at where we (EU, UK, US) were, where we are, and what the futures market indicates for natural gas. At some point that high price of natural gas will make its way to the consumer, via electrical generation, manufacturing with high NatGas inputs as well as those using natural gas in their homes.

I keep hearing that inflation might be at peak, but that doesn't necessarily mean it is subsiding. 

Oh, aren't I a bundle of optimism!

Update: This afternoon, an explosion at a Freeport LNG has halted the terminal for 3 weeks, according to reports. NatGas prices plunged on Henry Hub, as this will slowdown NatGas exports. EU and UK markets were closed, so should watch direction tomorrow.

The Fine Art of Rubber Necking

Clearly, my user name is not my real name, so I am guilty as sin, for whatever follows. However, in my defense, it is not difficult to uncover my real identity. It is sad that anyone would bother, but some people do lead sad lives.

What I am about to write... is about rubber necking. Traditionally rubbernecking is considered as staring at objects or accidents, etc. However, there is also the art of quickly turning our heads or ignoring things we could and or should do something about. 

For purposes of this diatribe, it is the action or rather non action of someone that sees something wrong or incorrect... then quickly turns their head to ignore. Invariably this person will then post on social media that experience and lament the failings of our society. 

As we ignore the world around us and fail to invest ourselves in that world, the world becomes more uncivilized. If I can repeatedly get away with some uncivilized act, it becomes part of my style and begins to seep into the actions of others. 

As we continue this tradition of ignoring wrongs, ills, misbehavior, etc., we can continue to see incivility increase. But hey... it does give us something to post on social media. I would simply ask the poster to stop lamenting about the decline of our society after observing some indiscretion with out actually commenting at that time and place of occurrence. 

Beware, mentioning this on social media might bring scorn down around you, by people that rubber neck in their actual lives and hide behind their screennames. 

Do you see the problem? 

Are Things That Bad, Or Is It an Election Year?

Famines, war, poverty, inflation... everywhere we turn the news is terrible and we are all going to die, or so it seems.

Is it really that bad, or is it an election year? Over 100 years ago, a guy named Mencken stated...

I remember as a child, being told to finish my meal... as there were children starving in Asia. As a child, I had no idea where Asia was, or even cared. I mean I had trouble distinguishing which Washington had the U.S. Capitol. The little town a few miles away from me, or the state. That whole D.C. thing, simply escaped me. 

Frankly, even today... that whole D.C. thing escapes me. I have learned where it is and have even been there, but is there anyone that can really make sense of that place? It seems rare, that anything happens... which makes sense. 

What was the last thing you can point to?

As for famines, wars, poverty, inflation... has anything meaningful been done to seriously address any of those things?

Which is probably why I focus on things directly and/or indirectly impacting me and trying to plan for that proverbial worst case scenario, while hoping for the best. That's about all, any of us can do, in my humble opinion.