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.

Allow Me To Butt In, With a Rebuttal of Sorts

Here is the premise...

Some politician said it is the patriotic duty of gasoline suppliers to reduce costs and some rich dude says the politician is misdirecting or unaware of how the market works. This happened to flow right into some of my social media accounts.

This prompted one poster to reply with this. I won't do a screen capture, as it might be some violation of something. You can open the link. Crude Oil (WTI) is up 40% and Gasoline is up 60%, both from 1 year ago. It does seem to support the theory, that gasoline prices are out of line.

The problem being WTI and Brent are Global Benchmarks and Gasoline is basically a U.S. market... benchmark. So why is this? (click to enlarge)

This seems to have started diverging last fall. Here is the Price history of WTI Crude and Gasoline Futures. Which seems to be the product of exporting more gasoline than importing. For that information, here is the export history and the import history. (Weekly, in thousand of barrels).

IF gasoline futures had stayed in line with WTI, the futures would be around $3.44 and we (U.S.) would be averaging around $4.29 at the pump... nationally, and we would still be griping. 😭

I made this easy(?) to read graph on the difference...

Yes, we have upped the exports of gasoline and thereby forced the gasoline futures to battle with global pricing structures... just to keep gasoline in the USA. 

I didn't check on every country, as various countries are subsidizing, but I do keep tabs on the U.K. Even when factoring in the U.K. using a bit higher octane rating, the U.S. gasoline is a bit cheaper... when backing out taxes. This is not intended to explain away U.S. prices, but rather the nature of global pricing structures.

As to the patriotic theme, that is clearly intended for an American audience that sees a familiar name and thinks of it as an AMERICAN brand. In fact, they are Multi-National (Global) Enterprises. So they likely are being patriotic... but to what nationality?

Our patriotic politicians could reinstate the crude oil export ban, that was overturned in late 2015, and it would bring down the WTI price, but does not help the gasoline side of the equation, as there were no limits on gasoline exports. 

Has releasing 1 million barrels a day from the SPR done anything? Why yes, it has kept the WTI from going through the roof and gasoline following a similar track. 

Speaking of the SPR, with the draw of 1 million barrels per day to end at end of October... the U.S. is already planning to replenish those barrels.

Not sure what that will do to crude or gasoline futures, but there will be somebody, somewhere, ready to complain and blame someone. That someone will always be of the opposite political persuasion. 

It is sad to watch... but somehow, very entertaining as well. 

As for the Crude oil and petroleum products, much the same trend, for those interested...

Time to Reflect on My Grocery Hoarding.

I haven't reviewed my overall results and status for bit, so here goes. But am I really a hoarder. I wasn't early on, but became one. 

Early on, I found myself scrambling, just to keep certain things in supply. Obviously toilet paper was an issue and I even ordered from God knows where. Many paper products were not to be found on the shelves and on line ordering became the go to source. 

Even on line was bereft of many of these items. Staples such as a variety of beans, as well as other pantry items were not to be found. Granted, I was picky about brand, etc. but still it was quite a challenge. Even distilled water disappeared from shelves and led me to distilling my own... with limited success. 

By fall of 2020, the shortages seemed to have eased up. I was using curbside for groceries from 2 different stores and was still coming up with "out of stock" on numerous items. For example the T.P. orders were for different quantities and was very hit and miss... until one week, all quantities from both stores were in the basket. I stopped ordering curbside on the same day, as the vehicle was absolutely full. About 18 months of T.P. and I could wipe that from the list for awhile.

The pantry items started rolling in as well. I built some shelves in the den and began piling up the goods. By end of 2020, I was well supplied.

Here it is, middle of 2022 and I am still hoarding, but have long since began reducing volumes in storage. I am about half of where I was in late 2020, with more to go.

In 2020, people were hoarding because of Covid, but it would appear that inflation is now in the driver's seat, with people starting to buy pantry items before the price goes up. 

Where do I stand? I will continue to back off the storage and really see no purpose to stockpiling. I understand the concern of food "shortages" being a possibility... but the cynic in me suggests this could be a bit of fearmongering for the USA, although not for certain regions of the world. Besides, I have been hoarding fat for years and it might not hurt to reduce that bit of buildup. 

I think the food "shortage" will most likely be food insecurity and that could be worrying, as prices of basic commodities rise out of range of many people. 

End of the Month... June 2022

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

First up is the various inflation gauges...

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

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

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

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

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

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

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

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

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

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

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

Review of EIA Weekly Report for 6-29-2022

 

The EIA.gov has released the latest weekly report. 

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

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

As for Natural Gas...

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

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

That's it for now!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bored on a Saturday Night

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

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

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

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

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

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

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

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

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

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

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

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

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

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