Some thought on May 7th, 2026... about energy, etc.

It's been awhile since posting, although I never really stopped tracking. 

Current U.S. inventories, compared to last week and 1 year ago.

Not terribly tight and I really don't see a significant drop off in U.S. consumer purchasing at the pump. Distillate exports reached an all time high during this reporting period. Additionally, the distillate inventory has dropped to levels not seen since 5/23/2003.

Pump prices compared to days gone by, factoring in inflation...

That $4.114 in July, 2008 is comparable to $6.176 in today's dollars. Also, the $5.016 of June, 2022 is comparable to $5.590 in today's dollars.

The market does seem to be settling down a bit, but I suspect that is more fear of getting caught over bought, due to some very clear demand destruction in Asia. Much was made if that 470M Barrels being released from various strategic petroleum reserves, but that is a drop in the bucket to the near 1B barrels that have been lost to the strait of hormuz blockade, etc.

Even if the blockade suddenly stopped tomorrow and the full complement of crude starts tomorrow... another 500M barrels will be removed from the global inventories, due to transit times of delivey. If you are keeping track... that is 1B barrels above the SPR release.

That demand destruction is taking place, is undeniable. Even with significant demand destruction of 5M barrels per day... it would take 6 months for a full recovery, imho.

What I find interesting, is the lack of discussion of the current state of natural gas supplies. Qatar suffered a severe setback in its LNG liquefaction facilities. It will take some time to resolve that situation and while there are new Liquefaction facilities coming on line later this year... the current state of the European Union's Natural Gas storage if behind last year, with draws still above last year. 

Purchases of Natural Gas for storage is woefully behind last year. Perhaps they see a milder winter coming up over the next 12 months. I guess what I am hinting at... Natural Gas prices in Europe are set to dramatically escalate in the coming months, OR... they may decide to swallow some pride and get some of that pipeline natural gas from somewhere.

A Few Thoughts and Opinions on Ukraine

It's the 3rd anniversary of Russia's invasion of Ukraine. IF YOU IGNORE Crimea, 11 years ago to this very day. If memory serves me correctly, in the west, there was gnashing of teeth, squirming and statements of dismay. That was about the end of it.

It should be noted that some guy named Yanukovych was ousted on 2-22-2014, as president of Ukraine. He was pro-Russian and was ousted (coup) during something called the Maiden Revolution. He fled the country. The term "coup" is in dispute, although he was a democratically elected president... forced from office. Of course, the term "democratically elected" is also in dispute as to his election.

There is also, the potential for western dithering in such matters. 

Hence the seizure of Crimea and something else... a bitter dispute arose in an area called Donbas. The pro Russian folks in that area, rose up to combat Ukraine. This situation was fully supported by Russia.

With the current anniversary... a lot of news media attention. This has also brought up Zelensky's latest offer. Somehow the entirety of the offer has been sliced up and presented as "Zelensky's says he will resign, if it means peace". Quite a noble offer, except he also said Ukraine is to be admitted to NATO.

Clearly he has no plans to resign, nor allow elections... where he would likely lose. As for the NATO portion of his statement, it would require unanimous consent from the other NATO members. Russia would likely keep fighting, as Ukraine being in NATO is a big NO NO.

While it would be easy to expect the USA to block Ukraine's ascension into NATO, there are other countries that would have objections, such as Turkey.

One possible solution, is that the USA withdraws from NATO by January, 2029, with a phase down of USA troops in Europe during this period. 

There might even be a European peace keeping force in Ukraine, which would constitute the current borders of control. (cease fire in place)

This would appear to be a victory for Russia, with the USA leaving NATO, the real winner would be the USA, as Europe would be forced to dramatically pick up the pace of defense spending, etc. Which would allow Europe to keep Russia in check and the USA to focus on the Far East. 

For the record. When Russia slipped 30+ years ago, there was all sorts of talks about a peace dividend. I thought a withdrawal from NATO would have been appropriate. The only peace dividend seems to have been for Europe, of which they have squandered.

Am I Over Thinking?

 

Just when I think I have figured something out... it goes "poof"!

A bit over a week ago, the price of natural gas in Europe and U.K. went skyward, Mostly because Gazprom was shutting down Nord Stream 1 for repairs and might not reopen. 

On the 26th of August, Norway's Gassco, stated they will reduce capacity for planned and unplanned maintenance at 13 fields and processing plants throughout September.

This past week saw prices drop 30%. Reasons given...

1. It was thought Nord Stream 1 would reopen on schedule.
2. Germany was a month ahead of meeting its storage capacity targets.
3. It was suggested that certain large industrial users of natural gas could not afford the high price and were shutting down.
4. It was further suggested, these companies were selling some of that much cheaper natural gas "forward contracted" a couple of years back... for a healthy profit margin going forward. 

Then late Friday, Gazprom said no on reopening on schedule, just like everyone originally thought. 

So #1 was wrong, #2 is probably right. How can #2 continue on pace to achieve all its targets, if Nord Stream 1 remains shuttered and Norway starts their planned and unplanned maintenance? Unless there is much to #3 and #4.

Let's face it... if you were a company that heavily uses natural gas; you would want to plan several years ahead and lock in prices. Say it is mid 2019 and you lock in a 10€ per MWh and you have that currently locked into your business model, but your business model suggests a dramatic slowdown in your sales... you could look back at that 10€ per MWh and see the market is currently paying 20 times that rate. 

Call me quite cynical, but when such a company screams they cannot afford such high natural gas prices and then shut down, I wonder what the real motivation might be. 

This becomes especially true, when considering some of these countries are multi-national conglomerates.

Am I over thinking?

Review of EIA Weekly Report for August 10th 2022

The EIA released the latest weekly report, and I am still not seeing demand destruction. Yes, from this time last year, but it is hard to make a call on demand destruction, when the days supply of gasoline falls from 26.2 last week, to 24.9 for this week's report. 

Yes, Gasoline Inventories fell nearly 5.0M BBLS from last week's report. Might the imports/exports of gasoline have something to do with that. We did export 3.2M BBLS more than import... last week. I am not sure where all those numbers citing demand destruction are coming from. 

The market for gasoline has shot up 11¢, as of this writing. Not the only one... NOT seeing demand destruction. 

Yes, I could be looking at all this wrong, but it would take some proof, that I haven't seen

On to the Natural Gas stuff...

I have about give up on trying to understand the European (including U.K.) situation. I still track it and read about it, but figure there is enough to worry about on this side of the Atlantic. Although... whether or not we in the U.S. are in a recession or about to be, it is becoming very clear that the other side of the Atlantic will almost definitely be. Does it aggravate our situation?

While the U.S. natural gas prices are back on the rise, I would expect a bit of a jump going forward, depending on whether the Freeport facility gets up to full run. It has stated early October start-up. Plus, Calcasieu Pass has been granted approval for blocks 5 and 6, whatever that means.

Meanwhile, here's hoping for a mild winter...

We are staying ahead of the curve, so that is good. 

Review of EIA Weekly Report for August 3rd 2022

I am still looking for the demand destruction in gasoline... and just not seeing it. There was likely a pull back in June and early July, but demand seems to be on a plateau. Crude Inventory is up +4.4M BBLs, distillates down -2.4M BBLs and gasoline up slightly at 163K barrels.

The U.S. exported 3.8M BBLs more Crude and Petroleum products, than imported, with the tally from March 1st at 151.1M BBLs. Gasoline exports outweighed imports by 1.6M BBLs last week and that tally now stands at 19.9M BBLs since March 1st.

At this point in time, the futures market suggests pump prices will continue to fall and should go below the $4 mark, by mid August and then maybe another 15¢ or so by end of month. A word of caution as we are heading into peak hurricane season. Let's keep our fingers crossed. 

The natural gas futures aren't signaling any big changes...

I have somewhat delved into U.K. futures and the current price is suggestive of a 49% rise in bill to £2,972 annual. I have been reading about another potential rise for 1st of the year and it would tack on another £600 annual, based on the December futures price. I don't think I have any publicly appropriate adjectives for any of those rises. 

Nearer to home, the big question is our natural gas.

A year ago, we were at the top of the 5 year maximum and now we are near the minimum. Not sure how to feel about that. I do not directly use natural gas, but I do use electric generated by natural gas, products that were made in factories that use natural gas, etc. 

I'll just have to monitor my utility bills, my grocery bills, other purchases, etc. I think there is a word for when things go up in price... is it transitory? No wait it is inflation! Crap, I thought I left that in the rear view mirror... some 40 years ago. 

Review of EIA Weekly Report for 7-27-2022

Another glorious week has passed and the Energy Information Administration has released their weekly report. Crude inventories are down 4.5M bbls from last week and gasoline is down 3.3M bbls. 

Gasoline consumption continues to fall, although the fall in pump prices may slow to a stop. We exported a walloping 1.183M bbls more than we imported. Crude and petroleum products also rose on the export side, compared to imports... by 18M bbls. Since March we have exported more than imported of gasoline... 18.2M bbls; crude and petroleum products...147M bbls. 

I am still not sure that demand destruction is taking place. The strong dollar did make U.S. gasoline for export a bit more pricey, but apparently the need has overcome the price, as exports reversed course. It may have been simply timing of ships, etc. In any case, the U.S. futures market for gasoline is on the rise and is approaching where the national average currently sits. (That's factoring in the typical margin between futures and pump.) Also, the dollar has weakened a bit the past few days, as well.

On to the natural gas stuff...

In previous posts, I had mentioned U.K. and EU, but today... should focus more on things closer to home. I don't use Natural Gas, although probably some or most of my electricity comes from Natural gas powered power plants. Also, I probably use materials, foods, etc. that may have varying amounts of natural gas power, as part of the production and/or processing.

Which is a round about way of saying... I don't have a clue. I would suggest the price of natural gas may be in the neighborhood of 35% of a natural gas bill. Obviously, large users probably get a bit of discount on the remaining 65%. The average residential customer could expect a $7 rise in their bill for every dollar the overall price rises. 

So there is likely a price hike coming your way... and you might not like it, nor the size of it. If and when that liquefaction facility comes fully back on line... the N/G price might well top $10. I guess I am saying that less than $4@MBTU bills of last winter should not be thrown away. You might need to burn them this winter to stay warm.

Review of EIA Weekly Report for 7-20-2022

Last week I posited the notion of demand destruction. Not quite so sure about it happening after this week's numbers. While down -2.19% from year ago levels, quite a jump (7.1%) from last week's number. Information is from the EIA Weekly Report

I would suggest the jury is still out on demand destruction. The gasoline inventory did jump by 3.5MB, while crude fell -455KB and distillates down -1.3MB. Spot market for gasoline is suggesting another 35¢ per gallon fall... from current average of $4.467. 

Exports of Crude and Petroleum Products outpaced imports to the tune of 4.6MB to reach a disparity since March of 129,266,000 barrels. Gasoline slid to 17,087,000 barrels as it may be that we are finally returning to a more normal seasonal flows. Typically imported gasoline outpaces exported from late December until mid summer, and then reverts to exports being more than imports.

The past few years, with understanding covid messed up 2020...

The stronger dollar is also playing a role in bringing down WTI Crude prices. By way of comparison, if the dollar was at same level as end of July 2021, the price would be $119.14, rather than the current $102.28. 

Another example would the impact on U.K. pricing of Brent...

This helps explain some of the fall in U.S. pump prices, versus U.K., which is not seeing much of a decline. This might seem beneficial to the U.S. consumer, but a word of caution... the dollar has been know to fall quite significantly at times. 

2008 would be a reminder, when we in the U.S. were talking about our high gasoline prices and trying to compare the high prices in the U.K. and the EU, by using the exchange rate at that time. The dollar was at its weakest since the early 70s... by quite a bit.

As an exercise, the U.K is currently at £1.88 per liter, at £88.90 per barrel of crude. We are at $102.28 and pump price average is $4.467. IF the dollar was at April 2008 levels, the numbers for the U.K. would stay the same in THEIR currency. However, the WTI crude would be at $154 and pump prices would be near $5.50 national. We in the U.S. would attempt to make ourselves feel better, by using that weak dollar to convert the £1.88 per liter, the Brits are actually paying and come up with something like $10 per gallon. 

In any case, the dollar rises and then it falls. Don't expect anything permanent and don't strut with glee over a strong dollar. Just understand that rise and fall does impact any global commodity.

On to the Natural Gas futures, and yes in dollars, as it makes it easier for me to understand. 

Even with the conversion, I cannot make sense of what appears to be a train wreck in the works. Granted the UK gets about 40% of its Natural Gas for the North Sea, and that pricing is probably mixed with the spot market, prior to end user... But those future would seem to suggest a much higher price on the "mixed" result to consumer. 

I got enough to worry about here, although our Natural Gas stocks are rebounding, but anything near a midpoint of 5 year average. While crude, gasoline, etc. were distorted by covid, not so much for Natural Gas.

I guess the bottom line is whether we are starting to see demand destruction in the crude/gasoline side of the equation and then if that destruction is due to a slower economic outlook or simply high prices? 

Review of EIA Weekly Report for 7-13-2022

 

Is demand destruction taking place in the gasoline market? The weekly EIA report does seem to suggest it. A whopping jump in gasoline inventory from last week (+5.8MB), although not at last year's level. The consumption numbers would lead me to believe that someone may have stubbed their toe, when doing the math. Highly unlikely, so consumption dropped off considerably.

Crude inventories jumped 3.3MB and distillates up 2.7MB. Across those 3 we get 11.8MB of products. 

Oh wait, I forgot the imports/exports. We had been exporting roughly 1MB per day more than importing of all products. This week indicated we imported slightly more than exports. Since March, we have exported 124,597,000 barrels of Crude and Petroleum products, than we have imported. 

Gasoline, on the other hand... continues to exported more than imported. 17,500,000 barrels more since March.

It still puzzles me, as this report is for week ending July the 8th, which included the July 4th holiday. Apparently, most people stayed home at shot off fireworks. It seemed that way in my neighborhood and lasts for days on end. Seriously, July the 12th and still lighting them up. 

In any case, the gasoline pump prices are on the decline, although not falling as fast as they rose. Still can see gasoline falling to $4.10 regular for the national average. Probably won't get there this month, but in August... possibly. Of course, it could all change very quickly. 

I should mention the importance of the strong dollar. In an alternate universe, where the dollar was stable compared to last year, the price of WTI crude would be in the $115 range and not the current $96. Hooray for the strong dollar... until it begins to weaken, which it will. It's just when.

On to the Natural Gas futures...

I have no idea where Europe and the U.K. stands on their natural gas supplies, but the pricing indicates a lot of pain going forward. I can only think of the USA status and hope for the best.

It seems a long time ago, but once there was a saying... if the U.S. sneezes, the rest of the world catches cold. Times have changed and I suspect... if Europe sneezes, the rest of the world will catch a cold. Maybe not that extreme, but if Germany is E.U.'s engine and their exports have fallen dramatically, even with a weak Euro... then something is terribly amiss, in my humble opinion. 

Review of EIA Weekly Report for 7-07-2022

 The EIA.GOV released their weekly report.

Here are some interesting tidbits... Our exports of Crude and Petroleum Products since March, stands at 124,758,000  million barrels more than our imports, which up near 5 million barrels from last week's report. Gasoline exports during the same period now stands at 16,625,000 million barrels more than our imports and up about 400K from last week. 

There is some semblance of relief at the pump, as current conditions indicate the national average drifting lower another 50¢ to around $4.25. 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. But hooray, we can cheer for $4.25 at the pump, like it is some sort of consumer victory.

As certain politicians are already cheering the SPR release as working. It kept the crude prices somewhat at bay, but really did nothing for gasoline prices in the USA. You simply cannot export gasoline like we have the past 4 months and expect anything different.

Now on to natural gas (data from yesterday's close)...

I cannot help but notice the problems with futures, concerning U.K. and Europe in general. I recognize that U.K and Europe are outside my area of concern, but we talk about recession in the USA and what we are doing or not doing (about it), when we might consider a recession in U.K. and Europe, despite what they are doing or not doing. 

I wouldn't count out a NG shortage this winter in Europe. It would serve you know who quite well, as it would divide NATO. You know who might get blamed for a cutoff, but the root blame would fall elsewhere and by elsewhere... you know where!

On the bright side, the gasoline prices in the U.S. should continue to fall, as no hurricanes or "other" storms appear on the horizon. Even U.S. natural gas has somewhat stabilized, due to Freeport shutdown. 

Amazingly, government regulators have stepped in to embark on strenuous safety oversight... which will likely delay Freeport's timetable for restart and full operation of LNG exports. Remember... it is all about safety and has nothing to do with replenishing U.S. natural gas storage for the coming winter. 

Time to rest up for next week, which has a bunch of reports about June. Not sure what to expect.

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!

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?

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. 

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.

Review of EIA Weekly Report for 6-2-2022

Yes, gasoline prices continue to rise, as inventories are below seasonal 5 year averages... as are distillates and crude.

Refineries are working at normal or above, with gasoline and distillate consumption down and crude consumption up. Yet the prices for gasoline and diesel are going up... oh yes exports.

There is really no global slowdown in demand, although U.S. usage indicates some demand destruction. Those that import a lot of energy are trying to build up inventories, unless you know what were to happen. On the other hand, the U.S. can absorb some of that excess demand, depending on how much the consumer can handle in price increases. Yes, I do believe $5 national average on gasoline is just around the corner... as in just days.

Beginning in March, the U.S. began exporting more than importing and the exports have been large enough to state the U.S. is a net exporter since Mid October of 2021. Wrap your head around that fact.

Now for LNG... We are exporting at capacity and adding processing capacity. This is impacting Natural Gas prices in the U.S., as well as prices in Europe.

As can be seen, the UK v Dutch pricing has diverged, due to UK capacity for processing LNG back to gas. UK appears to be capping off inventories and shipping excess to mainland Europe.

In the U.S., we can expect natural gas prices to rise, as further processing capacity for LNG is brought on line. None of this bodes well for U.S. inflation, but everything else is going up, so why not. 

As for good news, the anticipated soon to be named T.S. Alex, appears to be barely a T.S. and will impact southern Florida. Maybe not good news for southern Florida, but stays away from the very sensitive gulf coast refineries. I hope that lasts, as it would be a game changer, in my opinion... and not a good one.

I really do wish there was some good news for the consumer. Just remember, this is all transitory [sarc].

Let's Talk Energy, or Lack Thereof!

 

It seems everyone is fixated on the high price of gasoline. I have no idea what was expected, when everyone was shouting "hell yeah", stopping imports of Ruskie oil is a small price to pay. 

As I have stated earlier... this seems to fit the definition of "virtue signaling". A lot of chatter, without really meaning it.

As Europe tries to wean themselves off Russian Crude... someone get to make it up. Since the start of the Ukraine invasion, our exports of Crude and Petroleum products has exceeded our imports by an average of 1 million barrels per day. The U.S. based inventories across the spectrum is still below levels seen over the past 5 years in late May.

Do not expect the above to slow any time soon and be mindful of the upside potential in prices. As I had mentioned previously... we are soon entering Hurricane and Tropical Storm season for the Atlantic. With over 50% of our refining capacity along the Gulf Coast... anything more than a slight breeze could really inflate prices at the pump. 

Now for Natural Gas... the prices of natural gas have not hit an all time high in the U.S. but there is clearly upward pressure here, while LNG exports are affecting and easing the prices of natural gas in Europe. Fortunately for us, there is limited infrastructure for processing LNG for export, LNG container ships and offloading facilities in Europe. But there are big bucks to be made, so expect the limitations to fade in the next few years.

In any case, the Natural Gas market will weigh heavily on the inflation readings going forward. It does impact a wide variety of industries. 

Funny, Strange, ODD, and Disinformation!

Where France's Macron buys his suits is front page news on one of the many international news websites I peruse. 

Germany's Chancellor has done another about face, which has left the columnists spinning, trying to keep up.

Europe is cooperating on gas, which suggests some sort of united front, but really ends up with several countries in Europe not cooperating and even one stating they will veto. I got to look up "cooperating", in the dictionary. Hungary claims there are 10 countries using the Rubles for Energy scheme.

Previously, Germany got the blame for obstinance regarding sanctions, but any meaningful sanctions have seen the EU bloc in disarray. Conveniently, the Germans are now pushing back by laying blame on "other" members of the EU. No doubt they will eventually coalesce their blame shifting and lay all this at the feet of Americans. Some things never change. 

Pelosi has been to Ukraine and is seen posing with Zelensky. Is it one of those selfies Zelensky was so critical of?

India is on pace to have a record wheat crop. Oh wait, India is undergoing a massive heat wave which may dramatically limit the wheat crop. 

Musk buys twitter and Homeland Security announces, "Disinformation Governance Board". DGB... not to be confused with KGB, which was a completely different committee. What qualifies as disinformation, misinformation, etc.? Who decides when a lie is no longer a lie, or when the truth is no longer the truth?

Speaking of disinformation... CNN is boldly proclaiming "3 Signs that Prices Could Soon Come Down." Prices coming down would be a sign of "deflation". The rate of inflation might come down, but prices... not so much. But it is CNN, so excuse the confusion or is this what the KGB DGB will soon remedy? Not intentionally leaving out FOX, MSNBC, et al, but it is way too much.

I keep reading where China's economy may be stalling, but until China says it is... it isn't. I fully expect them to say they are meeting targets. <wink> <wink>

A lot of concern about U.S. farmers cutting back on fertilizer and the potential for much lower crop yields as a result. The big farmers bought their fertilizers and inputs and had it all delivered by December 31st. Granted the big farmers does not equate to all farmers, but the weather is still the biggest factor. That weather has not been very cooperative at the start of this planting season.

This nugget from a Deutsche Welle opinion piece, regarding North Korea...

Pyongyang claims the most advanced weapon in its armory can carry multiple warheads and has a range of more than 15,000 kilometers (9,300 miles), putting the entire continental US within striking distance.  

Note that the continental US is singled out. That distance puts all of Asia, Europe, Oceania, the North American Continent, most of Antarctica, most of Africa, and South America above the equator. It would not be difficult to understand the continental U.S. would be the main objective, but the wording seems to indicate only the U.S., while ignoring fallout, etc. 

Run out of things to ponder, so time to wrap this up. 

MY MUDDLED THOUGHTS AND ATTEMPTS TO MAKE SENSE OF IT ALL

Normally I write about Inflation and "business" outlook, etc. Recent events have muddled my thoughts and it is hard to make sense of what might happen... so here goes, while acknowledging recent events potential impact.

Inflation 

The BLS CPI report is slated for release on March 10th. THIS REPORT IS FOR FEBRUARY, so would have limited impact from the invasion. The range is 7.6% ~ 7.9%, with the upper end more likely. Pre Invasion expectations for March CPI, being released in April... to be even higher. 

It is those expectations that are going to be heavily impacted by the Ukraine Invasion.

Food

The potential disruption of basic food commodities, have driven multiple items to either all time highs or nearing those all time highs. Wheat, Corn, Barley, Canola, Rice, etc. etc. 

Grains are going up, so what about meats? There is a mixed message compared to a couple of months back, with the likelihood of staying flat. However, while chicken prices are moderating, there are worries about bird flu, etc. 

The CPI has food as about 14% of the average household expense. It should come as no surprise that the above average income households spend less that 14% and below average income households, will spend more that 14%. 

It is about 50/50 of that 14% going to food away from home and food at home. I have no data as to how that breaks out for above and below average income households, so will refrain from positing a guess. I would think the food index will rise month to month and add onto the inflation pressures. 

Energy

While energy makes up only about 8% of the CPI index compared to food's 14%, guess which will get all the media attention! That most of the current significant rises are in the past few days, the March 10th report is considering just the month of February.

I have no doubt the national average for gasoline will reach all time highs and possibly reach $4.5 @ gallon. The previous was in July, 2008 at either $4.11 or $4.17, depending on data source. This level, with everything else staying flat, would push March inflation to 8.5% y/y. For reference, this is in the range of  Jan48 ~ Aug48 preceding a recession; Feb51 ~ Jun 51 Korean War; Dec73 ~ Aug75 Oil embargo resulting in recession and Oct78 ~ Dec81, which straddled two recessions and the Iran Revolution.

I guess I am saying that nothing gets Americans more antsy... than the price of gasoline. Not even...

Ukraine

Certainly I am concerned about the innocent lives being taken and the disruptions to others. It is not lost on me that not a lot will be done, other than taking in refugees, etc. I recall reading where it has become popular in Ukrainian circles to wonder how many more buildings are left in the west, to be lit up with Ukrainian colors. Apparently, they realize this is about the extent of their support. Is that what is called "virtue signaling?"

Here in the USA on social media, it seems the discussion is about all the things we should've, could've or would've done to prevent this. I am not sure how this could have been avoided, short of keeping the U.S.S.R. intact. A right that wasn't ours to make. 

Sure, we might have rejected those former members of the Warsaw Pact from joining NATO, but why? And why did they ask to join NATO? I don't recall NATO countries sending in tanks and overrunning those countries and forcing them to join NATO.

Sadly, we can now see the answer to these questions. Horrifying as it might seem, Russia will eventually pound Ukraine into submission. Then some rebel enclave (Russian) in Moldavia will need to have Russian "peacekeepers", so who will be next?

A couple of other questions might be... Is Putin really that strong? Or are we just that weak? Frankly, the lack of resolve by western countries can be pinned on a very divided public. It should also be pointed out that while a large number of countries voted to condemn the invasion and a very few rejected the U.N. condemnation... the abstentions were by countries with nearly 1/2 of the global population. We in the west need to toughen up or the future will be grim, imo.

Putin

It is not uncommon for idiots such as myself to make stupid statements. To have national leaders uttering such statements is borderline insane. 

Uttering that someone in Putin's inner circle should take him out, is something idiots like me would say. I would suspect that Putin's inner circle are not nice people and have their own vested interests, which might include assuming Putin's leadership position at some point... once their own vested interests are in place and could safely assume that role. In other words, someone that is whispering in Putin's ear and Putin considers as being faithful to him. Possibly even a more sinister version of Putin.

I am reminded of Fidel Castro. Fidel Castro came to power by ousting Fulgencio Batista, a person which was reviled by the US. Castro was treated with open arms, appearing on American Television as some kind of conquering hero... until he quickly lost that mantle and became the most hated by the same groups. It did not take long and led to assassination attempts, severing of diplomatic ties, The Bay of Pigs and finally leading to the Cuban Missile Crisis.

Be damn careful of what you wish.

Summation

I suspect the Ukraine invasion will shortly be displaced on American television as inflation and economic worries become more prominent. As for inflation, the polls seem to indicate that 50% of the American public blames Biden and 25% blame Putin. Which may explain the Administration's reluctance to sever Russian Imports and the Republicans are keen on doing just that. Politics is always in play.

I frequent various European news editions and this will likely be the same, and they have a much bigger dependence on Russia's energy. 

How we got in this shape can and should be discussed, but afterwards we must acknowledge... WE ARE IN THIS SHAPE! What are we DO about it and not just talk about it?

Works of Fiction

From Deutsche Welle

Ran across this in Deutsche Welle... 

The fiction debut of the former US presidential candidate with mystery author Louise Penny has again stirred a discussion on what prompts politicians to write fiction.

How can I resist? Clinton and works of fiction. Politicians and works of fiction. I can find no satire tags in the article, but how can it be anything other than satire. 

So yes, I frequently observe foreign news websites, as everyone tends to favor their own government/ideology and what we see in the U.S. is not what others see. The truth generally "lies"  somewhere in the middle.

Many of those European papers are lamenting the U.S. shift to the Pacific and the need to possibly come together and form a European Union military alliance... in place of NATO.

Apparently this is due to the U.S. not seeking European consultation over Afghanistan, but rather seeking to further U.S. interests. The E.U. seemed to think that they could tell the U.S. what to do and somehow are deeply concerned the U.S. hasn't done what they are told.

Not sure how the EU arrived at their former illusion or should it be delusion. At what point did the U.S. indicate the EU held any sway over U.S. policies?

Good, bad or whatever, the U.S. under Trump stated the U.S. was leaving Afghanistan. Biden was in agreement, although attempting to blame it all on Trump. In any case, Biden made it clear the U.S. was leaving and gave hard dates. 

Granted the final exit was terrible and poorly planned, but for the EU to attempt to blame the entirety of the mess on the U.S. is ludicrous at best. These complainers had ample time to gather forces to secure a better outcome... but didn't. 

It's because they couldn't or wouldn't. Simply easier to blame someone else and say the U.S. has failed some obligation to the EU that never existed. The EU has had its weakness exposed and does not like it. There is a lot of talk, but nothing will ever come of it, imo. 

Until then, I will consider the discussion of a EU military as a work of fiction.