The latest petroleum inventories (Sep-02-2026)

A mixed bag, with crude falling, as well as gasoline, jet fuel and SPR. Distillate edged up, as well as Jet fuel. 

Gasoline consumption is edging downward on a 4 week moving average. -2.8% compared to year ago levels, and -0.5% on the week to week 4 week average.

Pump prices for gasoline are staying in a somewhat narrow band. However diesel prices could very well break through all time highs, set in June of 2022. $6+ for a national average is certainly within the realm of possibility, with California diesel possibly topping $8 in the near future. 

So some fun facts. The U.S. consumer uses about 1/3 of global gasoline consumption, while the U.S. refiners produce about 1/6 of global diesel product, after export the U.S. consumes... about 12% of global diesel products. 

U.S. refiners are operating at near record levels, to meet the demand. The global demand of diesel... is driving the price upward, at an astonishing pace. Despite refining about half as much diesel, as gasoline, the refiners are making 70% more on that diesel. 

One would think the refiners might wish to make even more, by tweaking the process to produce more diesel. While that is theoretically possible, it would also cause gasoline stocks to slip, thereby driving up gasoline pump prices, which is more politically visible. 

So while there is a bit of stability in gasoline prices, the diesel market will be allowed to escalate prices until, it becomes politically visible. However the majority of the public will focus on the pump price directly in their face and a minority will possibly virtue signal their indigation of diesel prices.

What I am saying is... diesel prices are set to rise another 82¢ a gallon from today's price, while gasoline will likely stay in their current range.

Feel free to bookmark and come back in a few weeks, to see how accurate I am, or point out my inaccuracies. 

Just when will the debt overwhelm the system?

Current national debt...

A brief history (simplified)...

We went off the so called gold standard in the 60s and early 70s. We began trading in dollar assets. We imported a bit more than we exported in the 70s, largely due to oil imports. The dollar fell in value, which prompted the circulation of more dollars and thereby inflation. 

That led to the so called eurobonds (not to be confused with Euro Bonds). In this case the eurobonds were principally in deutschmarks, meaning the debt was to be repaid in deutschmarks, regardless of the trading value with the dollar... which was weakening against these eurobonds.

Famously, Paul Volcker dramatically raised interest rates, which propelled bond yields upward, with the resultant demand in dollar based debt instruments.

The era of the strong dollar, increased purchasing power for imported goods, which escalated. Normally, the profits from these imported goods, would have been repatriated to the exporting country currency, keeping the dollar vs foreign currency rather stable. 

However creative ways and methods, including opening up U.S. companies, property, etc. to foreign entities. Of course, the early and easiest route was strong demand for U.S. debt. This continued until the early 2000s, when more and more U.S. property became the target and the attraction to Treasury debt became relatively stable. The dollar remained strong, as competing countries currencies weakened. 

It became a necessity for everyone, to keep the dollar strong, as any weakening threatened the value of dollarized assets. 

The graph above, indicates the timing of the various "QE" programs. The FED was basically absorbing the debt at the primary dealer market to keep interest rates low and inflation at bay. 

When the "trust" hits zero, a hole of $300B~$400B will need to be somehow covered. Congress would need to authorize that additional expenditure.

Where will it come from?

1. Additional debt creation, requiring ever increasing interest rates. Who will purchase that debt and at what premium, that will likely be spiraling upward?
2. Could the FED enact a never before seen size of QE, in attempts to keep interest rates at bay?
3. Will congress finally be forced to massively cutting spending?

As for #1: There is no willpower in Congress, now, in the near future, or even when staring at the abyss... to reduce spending and limit further debt creation. We'll be have gone over the fiscal cliff, before such cuts are forced, via eurobonds, extreme interest rates and massive weakening of the dollar, of which would happen rapidly and dollar holdings will get dumped, as everyone is heading for the exits. 

As for #2: The FED in theory could enact a massive QE program, but it would require fiscal restraint by Congress. Remember that an unrestrained fiscal spending outlook, couple with a massive QE would eventually lead to undermining the entire financial system, which leads to same result as outlined in #1.

As for #3: Probably, once it is too late and public is clamoring for massive change. 

All of that is extreme, but the "Trust" will be bust in 4th quarter of 2032, per the latest estimate. There is also a national election during that 4th quarter, as well. 

If it goes bust, which I have spent most of this article predicting... an immediate and huge impact will hit the economy. Seniors that rely soley on S.S. trust fund income, will be in need of many of the other government programs, which will simply move the debt into those areas. Those that do not soley rely on the trust fund, will likely cut back on spending. 

In the interim, goods and services will take a hit and industries will need to reduce spending (manpower) to bridge gap. Additionally, they may require loans to cover expenses, while the various product pipelines reduce inventories to a new reality. Just as the government is driving up interest rates on their bonds, notes, bills, etc. This is not just a U.S. debt problem, as the sum total of debt worldwide is increasing at a rapid rate.

If you think none of this can happen, just remember... we were here before, when everything was tiny, compared to today, and when there was a willingness to address the problems.

I would suspect that 2033 will be the year of reckoning, although significant cracks will be observed in the runup to that period.

An update on July's inflation numbers with a look at C.O.L.A, and future of that Trust Fund

First off the July numbers...

The worrying part, is the Producer Price, which could be indicative of future pressure on retail prices.

Which briefly mention CPI-W, which is used for COLA. 

My current estimate is 3.4%-3.5%. Oddly, there seems to be a lot of grousing about this should be higher, or the data is manipulated, etc. What makes it odd, is there are some that inadvertently are wishing for higher inflation, so they get a higher increase. Given the lag time, this is rather insane. 

Of course, this inevitably leads to changing the way it is calculated. Typically, the CPI-E becomes part of that discussion. It would still be lagging, much the same way as CPI-W, although slightly higher... historically. 

The the subject morphs into the "trust" fund. There seems to be a majority opinion that something will be done, to defer that ±22% cut in a few years.

Which brings up the next question... can anyone really do anything. Frankly, I doubt that happening. Why you might ask.

There are 3 types of treasuries. Bills, Notes and Bonds.

Notes and bonds are paid the coupon interest, every 6 months. If a $100 note or bond is issued with a coupon rate of 4%, then two dollars is paid out every 6 months. The coupon rate is set on the primary dealer market. The yields we commonly see published is from the secondary market. Hence if a 5% yield is published, then then value of that note or bond has fallen below $100, when traded. It thereby indicates that future coupon rates will be higher. 

What is paid out on Notes and Bonds... goes agains the budget deficit. This added burden in debt service, will not likely ease... when those 100s of billions of dollars are added to keep social security at 100%.

Now the discussion turns to Bills, which are not paid interest, but rather more of a fee. The treasury sells a $100 treasury Bill for $98, with the guarantee of paying back $100 in 6 months. They pay they $100 by selling a $100 treasurt bill with a guarantee of paying back $102+ in 6 months. That cycle repeats.

The Notes and Bonds interest... shows up on the annual fiscal deficits. The Bills do not. The treasury bills get added to the National Debt. The national debt is rising at a faster nominal rate than the annual deficits, due to this accounting practice.

There is currenly over $8 trillion dollars of notes, with the number rising at a rapid rate. 

We are on a timeline where investors will require much higher premiums to finance these debt instruments. 

What I think will likely happen and the timeline... might be published at a later date.

Another week with the crude report from EIA.GOV.

Let's get the inventory numbers out of the way...

There is some y/y decline in the 4 week average of consumption...

Pump prices are somewhat steady on the gasoline side, although edging up on the diesel side. 

The prices still haven't broken through the 2022 highs and would have a long way to go in inflation adjusted dollars. The inflation adjusted figures are even more startling for 2008.

There is an old saying that we should learn from our mistakes. But are we able to learn from our mistakes, if we constantly blame others???

Should I Start Posting Again... or Not!

It has been awhile, although I have kept abreast of a few things.

First up... is inventory status of select energy components in the USA.

The SPR status is slowly declining, with the unknown being how much spoilage is there. At current rates of withdrawal, about 50 weeks remain... IF there is no spoilage. The Cushing inventory, which is included in the Crude numbers... is low, but not critical, given historical number. 

Of course, the BIG story is pump prices of gasoline. 

I would be a bit more concerned with the Diesel prices, but hey...

Gasoline consumption is -1.7% from last year, with it being -0.4% from last week. Whatever the price, the consumer seems to be adjusting, although still complaining. 

Looking forward, and based on current market pricing...

An uptick in gasoline is in the offing, but the diesel is set to rise rather swiftly, imo.

That finishes up this episode of an old guy foolishly expressing his opinion.

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 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.

Week Ending Report-August 9th, 2025

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

Trade Report

Petroleum Report

The international trade numbers are self explanatory in the linked report.

As for the petroleum report, usage of gasoline continues to drift downward, with pump prices in a narrow range. 

There is the potential for a hurricane in the next couple of weeks, but it is largely forecast to be near the east coast and not the gulf coast, or whatever you want to call it.

OPINION time:

Barely any movement in inflation expectations, although a slight move upward from now into the 4th quarter is in the offing. 

3rd Qtr. GDP projections remain positive, although barely, with 4th quarter in the same range and an uptick by first of year.

I guess if I were a president of a country at war and had suspended elections, knowing I wouldn't be re-elected... I would likely resist any form of peace, even if my citizens continued to die. Especially if the fighting was supported with foreign tax dollars... whether directly or through military munitions.

Week Ending Report-8-02-2025

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

GDP

Personal Income and Outlays

Weekly Crude Oil Report

The GDP exceeded forecasts, but not really by that much. It was just as much about the trade and services deficit, as was the first quarter negative. 

Personal Income and outlays was mostly positive. Here is the July Report card, which includes several variables.

A lot of pink, which is inflation heating up, but oddly... the PPI seems to be slipping. So maybe inflation is cooling. 

Also, of note... the report card was not updated to PCE revisions for prior months.

Here is the latest...

Here was previous month, with revisions highlighted...

There are always some revisions of Government numbers, but the past few years have been quite noticeable, imo. More on my opinion later.

The petroleum report continues to astound me, as U.S. consumption is well below last year.

OPINION time:

The firing of a government official in charge of employment numbers caused great gnashing of teeth. I have a different view than some of the current pundits. 

Those employment numbers have been suspect for some time. The past few years have seen monthly reports heralding better than expected hiring, with hardly any mention of prior months downward revisions. 

The aforementioned was a near monthly occurrence, with even a massive one time downward revision for several months prior... again without media comment. It was very hard to ignore the possibility of political intervention. And if not political intervention... then very lackluster data collection, of which improvement is much needed.

I should probably mention that many reports from the government are in constant revision stage. Contrary to public opinion... I consider the inflation reports to be the most accurate and reliable. The employment numbers being the least reliable. The rest fall in between those two, imo.

Week Ending Report-7-26-2025

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

https://www.census.gov/manufacturing/m3/adv/current/index.html

https://www.eia.gov/petroleum/weekly/crude.php 

Much was made of the -9.3% drop in Durable Goods from May, but the spin doctors overlooked the +16.5% rise for the previous month. Year to date from 2024, is up 7.9%. Probably why the spin didn't last very long. 

As for the petroleum sector, gasoline usage has fallen considerably on a 4 week moving average. Down -5.2% from year ago levels and -2.9% from last week. The inventory of gasoline slipped a bit, but the day's supply is increasing. 

Probably why pump prices are staying stagnant, compared to my last forecast. Not sure why the drop, which could be indicative of a slowing economy, although much of that data is contradictory. 

In any case, the sharp drop off is unexpected, at least to me.

Some meaningless thoughts...

The Late Show... I stopped watching the late show, early on in Colbert's tenure. His brand of humor did not match mine. Why the show is being canceled is beyond my realm of thought. Even if it were, I am not part of that important demographic.

Epstein files... I would have thought any Trump connections would have been exposed during his last term. Certainly during the Biden years. Perhaps the whole darn bunch have their names listed on... some yet to be released "file".

Clinton Saga... I am not a fan, but she is largely irrelevant, imho. It is good to know that most of the political back in forth is now focusing on days gone by. Maybe we will eventually move past all of this.

Or is the political news cycle a couple of decades behind?

Week Ending Report-7-19-2025

Several reports from the week, including...

CPI- https://www.bls.gov/news.release/cpi.htm

PPI- https://www.bls.gov/news.release/ppi.htm

Real Earnings- https://www.bls.gov/news.release/realer.htm

Advance Retail- https://www.census.gov/retail/sales.html

Petroleum- https://www.eia.gov/petroleum/weekly/crude.php

A brief snapshot of CPI, CPI-W, CPI-E, PPI...

A lot of pink on everything, but the PPI, which seems to have flattened out. The PPI forecast is a bit of upward movement over the next couple of months, but then descending. 

The Cost of Living Adjustment outlook, has edged upward...

The real earnings report, indicated a slippage in real earnings. 

The retail sales remains fairly flat, when factoring in inflation...

On the petroleum side, it would appear diesel prices are set to accelerate higher, while gasoline appears to be edging slightly higher.

In reality, the big story should have been the downward projections of the PPI, in the face of tariffs. 

That's about it, as I have nothing more to say.

Are We Heading Into A Recession?

Remember back when the 2022 1st and 2nd quarter GDP numbers came in... and those politically motivated types screamed "we are in a recession!"

We are about to undergo another episode of such nonsense, but from the opposite side of the political spectrum.

Hearkening back to that previous period of 2021/22, there were multiple factors that caused the inflation to accelerate into that annual high of 9.2% in June 2022. One of those factors was front loading of imports ahead of an impending West Coast port strike... planned for July 1, 2022. It didn't happen, but that front loading caused the trade deficit to balloon in the first 2 quarters of 2022.

Trade deficits are a drag on GDP. Interestingly enough, the adjustment from 2012 to 2017 dollars, resulted in significant revisions in those first 2 quarter of 2022. Subsequent revisions how has that 1st quarter of 2022 now at -1.0 from original -1.4 and the 2nd quarter now at +0.3, from the original -0.9.

On any given month, the trade deficit subracts about -4.3% from the GDP. During the 1st 2 quarters of 2020, the drag increased -5.2%. Hence the original 1st quarter would have been -0.5% revised to -0.1% and the 2nd quarter would have been flat, to a revised +1.2%. 

All of this to forewarn us the trade deficit has ballooned again. The February report... 

Yes, that is December and the reasoning is front loading to get ahead of possible tariffs. If that is true, which is likely, the January and February numbers could be even higher. 

Now much is made of that Atlanta FED forecast as now being -1.5% for 1st quarter GDP. The sky is falling, but what did the report actually say?

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -1.5 percent on February 28, down from 2.3 percent on February 19. After recent releases from the US Bureau of Economic Analysis and the US Census Bureau, the nowcast of the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points while the nowcast of first-quarter real personal consumption expenditures growth fell from 2.3 percent to 1.3 percent.

That's a -3.29% additional drag, due to extremely high imports. Without this, the GDP forecast would be about +2.2%.

All signs point to the next trade report, which is for January... could be even higher. That release is Thursday, March the 6th.

That Advance 2025 1st Quarter GDP will be released on April 30th.

I would think the data does not suggest we are heading into a recession, however... given the fickle nature of the American consumer and the extraordinary media bias, we will get one, whether we like it or not. 

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.

Producer Price Index and some other opinions

The Producer Price Index was released this morning and indicated an upturn.

Note that I did not revise the December, 2024 final demand, as did the BLS. Yes, December was revised upward to 3.5%. https://www.bls.gov/news.release/archives/ppi_01142025.htm

The nervous nellies will scream inflation is roaring back. Maybe so, but it will not repeat the horrors of 2021~2022. How can I say that? Once you understand the causes, the answer becomes easy.

• After the covid shutdown and collapse of international trade, the shipping industry was in disarray, with containers to move goods... in all the wrong places.
• Retailers had significantly reduced inventories to meet the slowing demand.
• There was a rather large stimulus paid to American citizens, on top of some previous payouts.
• The covid vaccine was becoming rapidly available.
• The American people were told that it was now safe to resume normal activities.
• An impending west coast port strike for mid 2022, which did not materialize.

Newly freed from fear Americans started immediately spending that stimulus money, which boosted retail sales by 10% in the first month.  The retailers, started ramping up orders significantly to restock the shelves, which exposed the problems with the shipping containers. This was compounded by retailers, pulling orders well ahead to heavily stock up... prior to the threatened west coast port strike. 

The shipping industry has finally recovered, the retail inventories have reached stability, and there are no strike threats on the horizon. There was consideration of a possible port strike on the east coast and gulf, which did increase orders, as well as impending tariff expectations, which also increased orders. 

The port strike is in the rear view mirror and the shipping industry sailed through it easily. The tariff question is still to be answered.

As a further note on retail sales... when adjusted for inflation, they have remained at that March, 2021 level. That will likely be the indicator of future demand... or lack thereof. 

Tariffs would likely weaken demand, so the expectation of massive inflation due to tariffs... not so much.