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.