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IHS Market Warns Of “Armageddon” For US Propane Market 

IHS Market Warns Of “Armageddon” For US Propane Market 

The expanding energy crisis is causing propane to rocket higher (read: here) as supplies dwindle to below seasonal levels as research firm IHS Markit Ltd. warns of “armageddon” during the Northern Hemisphere winter.

IHS analyst Edgar Ang told attendees during a virtual presentation on Tuesday that US propane inventories are at a record low and will be extremely tight as cold weather is ahead. Mean temperatures in the Lower US 48 are expected to dip into the 60-55F range through the end of this month.

Heating degree days are set to soar by month end, suggesting the heating season has already begun.

Ang said 1Q22 prices are already above later-dated supplies that “it may indicate players are preparing for propane-market armageddon.” He warned some areas of the country might be prone to shortages this winter.

Propane prices, which are used for heating resident and commercial building structures and also used for industrial production of plastics, have jumped to the highest in a decade due to increasing overseas demand and tight production. The surge comes as a global energy crunch threatens to derail the global economy.

In a separate report, the Energy Information Administration (EIA) expects households that use propane and heating oil this year will spend much more than last. This could strip out some of their spendings in other areas of the economy, such as eating out.

Soaring energy prices, plus food, shelter, and other costs, will continue to pressure the Biden administration to solve persistent inflation that eats away at real wages.

Making matters worse IHS expects a cooler winter that could boost energy demand and continue to place a bid under propane prices, analyst Veeral Mehta said.

It’s only now that the Biden administration wishes there was global warming.

The Future of the World Economy is Perma-Crisis

These Aren’t Shortages — They’re the Beginning of the Longest, Hardest Economic Collapse in History

Image Credit: 7News Screenshot

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Not Getting Better: Relentless Retail Inventory Squeeze amid Shortages & Supply Chain Chaos

Not Getting Better: Relentless Retail Inventory Squeeze amid Shortages & Supply Chain Chaos

Holiday selling season is going to be a mess: Look not for what you want but for what the store has.

The holiday selling season is approaching, and a whole litany of weird shortages is ricocheting through the economy. Stuff suddenly gets hung up somewhere, on a ship, or in a port, and then ends up somewhere else, or it’s on backorder for months, as manufacturers are struggling with material shortages and in in Asia with Covid outbreaks that shut down factories for weeks at a time.

And stimulus-fueled demand in the US has been huge and relentless, while retailers are struggling with inventories, some more than others.

Catastrophic shortages at auto dealers got even worse.

Auto dealers, particularly new-vehicle dealers, are experiencing catastrophic shortages of popular models, as automakers have been getting blasted by semiconductor shortages that simply refuse to abate, leading to rotating shutdowns of assembly plants globally.

Auto dealers are the largest retailer segment, with their sales normally accounting for over 20% of total retail sales, and with their inventories normally accounting for 33% of total retail inventories.

Inventories at auto dealers, measured in dollars, declined to a new multi-year low of $151 billion in August, according to data released by the Commerce Department on Friday.

The long-term dollar-increase in inventory levels that you can see in the chart above is a reflection of higher costs per vehicle in inventory. But the number of vehicles in inventory has been in the same range for two decades, as unit sales have mostly been below the peak achieved in the year 2000.

It’s even worse during the current shortages: Inventory in dollars – though it collapsed – is being inflated by the shift to high-end models as automakers are prioritizing the biggest money makers.

…click on the above link to read the rest of the article…

Now A U.S. Government Official Is Telling Us That The Supply Chain Nightmares Could Potentially Last For Years

Now A U.S. Government Official Is Telling Us That The Supply Chain Nightmares Could Potentially Last For Years

The truth is starting to come out, and a lot of people aren’t going to like it.  When the supply chain problems and the shortages began, government officials repeatedly assured us that they would just be temporary, and most of us believed them.  But now it has become clear that they aren’t going to be temporary at all.  In fact, during a recent interview with Bloomberg, U.S. Transportation Secretary Pete Buttigieg admitted that some of the supply chain problems that we are currently facing could last for “years and years”.  I don’t know about you, but to me “years and years” sounds like a really long time.

Of course that is not the only time that Buttigieg has made such a claim.  During another recent interview, he used the words “long term” to describe what we are facing…

Buttigieg has said in recent interviews that “it’s an incredibly complicated situation,” but the government is holding virtual “roundtables” with port operators, labor unions and private companies. Nevertheless, he told MSNBC last Thursday, the “challenges” will continue, not only “going into the next year or two, but going into the long term.”

Isn’t it remarkable how the outlook for our economic future has changed so dramatically in just a matter of a few months?

Earlier this year, we were told that we would soon be entering a new golden era of prosperity.

But now inflation and shortages are causing chaos everywhere we look.

Earlier today, I came across a Daily Mail article that boldly declared that “stores across America have empty shelves” right now…

Stores across America have empty shelves thanks to a series in supply chain problems that are prolonging inflation and could stretch into the new year, with some retailers like Costco and Walmart limiting the amount of toilet paper in some stores.

More than 60 cargo ships are waiting to dock in California, carrying hundreds of thousands of containers, and may be stuck for months in a traffic jam after arriving from China and Asia. Millions of dollars of American goods are still sitting in warehouses in China, awaiting shipment.

In addition to the unprecedented backlogs that we are witnessing at our major ports, it has also become far, far more expensive to send products across the Pacific Ocean.

Just check out these numbers

Covid is at the center of world’s energy crunch, but a cascade of problems is fueling it

Covid is at the center of world’s energy crunch, but a cascade of problems is fueling it

“It’s like a car that’s been taken off the road for a while and now we want to restart it quickly — it takes time,” according to an expert.
A man uses his smartphone flashlight to light up his bowl of noodles at a restaurant during a blackout in northeastern China.

A man uses his smartphone flashlight to light up his bowl of noodles at a restaurant during a blackout in northeastern China.Olivia Zhang / AP

LONDON — Much of the world is suffering a punishing energy crisis.

Homes and factories across China are shrouded in darkness. India’s coal-fired power stations are running on scraps. Dozens of British utilities firms have gone bust. Spain announced emergency legislation after household utility bills shot up more than a third in one year. And there are fears that a harsh winter in the United States could deliver Americans’ most expensive heating costs in years.

Energy shortages are sweeping the world even before winter’s cruelest months freeze the Northern Hemisphere, and officials and experts point out that the multiple issues behind the crunch will make solutions harder to come by.

This cocktail of causes is a mix of bad weather, China trying to kick its addiction to dirty coal and even allegations that Russia is throttling the natural gas market for political gain. But most experts agree the central driving force has been the Covid-19 rebound. Stirring out of lockdowns, people are simply consuming energy faster than production can be rekindled after a year of idling.

“It’s like a car that’s been taken off the road for a while and now we want to restart it quickly — it takes time,” said Jianzhong Wu, a professor specializing in energy infrastructure at Wales’ Cardiff University.

…click on the above link to read the rest of the article…

China Coal Futures Hit Record High As Mines Flood; Worsening Power Shortages Hit Rust Belt 

China Coal Futures Hit Record High As Mines Flood; Worsening Power Shortages Hit Rust Belt 

China’s top coal-producing region has been devastated by torrential rains and flooding this past week. About 9% of the coal mines in Shanxi province, an area responsible for producing 30% of China’s supply, have closed operations. The direct effect of this has been a spike in coal futures.

Heavy rainfall flooded Shanxi over the weekend. More than 120,000 people have been evacuated, and 60 of the 682 coal mines in the province have been closed. Industrial yards and manufacturing complexes have also been shuttered due to flooding.

The province is usually a dry area but record-breaking rain last week complicated things for the mining industry. This also comes at a time when Beijing has called on mining companies to boost output amid a nationwide power crunch.

Source: Bloomberg 

As a result, Coal futures on the Zhengzhou Commodity Exchange jumped 12% to $218.76 per ton, a new record high, on Monday.

A devastating and widespread power crunch has hit China in recent months, resulting in as many as 20 provinces or about 66% of the country’s GDP have announced some form of power cuts. Due to the growing energy crisis, Goldman Sachs told clients last month that the energy crisis will severely impact the country’s economic growth.

Source: Bloomberg

For the fourth quarter, Citic Securities analysts told clients, China faces a gap of 30 million to 40 million tons of coal. This translates into reducing industrial power use by 10% to 15% in November and December. UBS Group AG said this would result in a 30% slowdown in activity in energy-intensive industries like steel, chemicals, and cement-making.

Beijing has also approved electricity prices to increase by 20% against the benchmark, compared with a current cap of 10%, allowing more power plants to economically produce power considering high costs for fossil fuels, such as coal, natural gas, and crude.

…click on the above link to read the rest of the article…

An energy crisis is gripping the world, with potentially grave consequences

How China and Europe are catching the brunt of it

The cooling towers at the coal-fired NTPC Ltd. Dadri Power Plant in Uttar Pradesh, India. The country, which relies on coal for about 70 percent of electricity generation, has already seen signs of power shortages. (Anindito Mukherjee/Bloomberg News)

Energy is so hard to come by right now that some provinces in China are rationing electricity, Europeans are paying sky-high prices for liquefied natural gas, power plants in India are on the verge of running out of coal, and the average price of a gallon of regular gasoline in the United States stood at $3.25 on Friday — up from $1.72 in April.

As the global economy recovers and global leaders prepare to gather for a landmark conference on climate change, the sudden energy crunch hitting the world is threatening already stressed supply chains, stirring geopolitical tensions and raising questions about whether the world is ready for the green energy revolution when it’s having trouble powering itself right now.

The economic recovery from the pandemic recession lies behind the crisis, coming after a year of retrenchment in coal, oil and gas extraction. Other factors include an unusually cold winter in Europe that drained reserves, a series of hurricanes that forced shutdowns of Gulf oil refineries, a turn for the worse in relations between China and Australia that led Beijing to stop importing coal from Down Under, and a protracted calm spell over the North Sea that has sharply curtailed the output of electricity-generating wind turbines.

“It radiates from one energy market to another,” said Daniel Yergin, author of “The New Map: Energy, Climate, and the Clash of Nations.”

…click on the above link to read the rest of the article…

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

European policymakers and some traders blame Russia for the low volume of gas stored across the region which has sent both gas and electricity prices surging to record highs.

Russia’s pipeline gas export monopoly Gazprom has met commitments for long-term contracts, its clients confirm. But it has not raced to book extra pipeline capacity for spot buyers, despite European calls for more supplies.

Some policymakers and traders have speculated additional gas has been deliberately withheld to make a diplomatic point and accelerate the approval of the Nord Stream 2 pipeline. Others say Russia has withheld gas to create a shortage, drive up prices and increase export revenues, similar to the way the OPEC+ producer group raises oil prices and its revenues.

The other possibility is Russia has not supplied more gas because it faces its own shortage and wants to rebuild domestic stocks after they were depleted by a cold winter in 2020/21.

There is no empirical way to determine which theory is correct or what Russia’s intentions have been. But whatever the reason, the result is the same: gas is in short supply and European energy prices have hit record levels.

Escalating energy prices are a global phenomenon. Shortages of gas, coal, electricity and to a lesser extent oil are evident across North America and Asia as well as Europe. In every case, very high and rapidly rising prices this year are a reaction to very low and rapidly falling prices last year during the coronavirus-driven recession.

Energy prices have always been strongly cyclical. In this instance, an exceptionally severe cyclical slump in 2020 has produced an equally extreme cyclical upswing in 2021.

…click on the above link to read the rest of the article…

US Heating Oil Supplies Lowest In Decades Ahead Of Winter

US Heating Oil Supplies Lowest In Decades Ahead Of Winter

Americans are hoping the energy crisis in Asia and Europe won’t spread stateside. But industry insiders warn that winter blackouts across the US are possible as low fossil fuel stockpiles may lead to shortages amid heightened demand.

The latest concern is ultra-low stockpiles of heating oil (distillate fuel oil). In the winter of 2019–2020, about 5.5 million households used heating oil as their primary heating source, and 81% of those households were in the Northeast.

Energy Information Administration (EIA) reports there are only 31.2 days of the demand for heating oil, the lowest levels since 2000.

Low stockpiles ahead of cooler weather could be problematic for consumers who may be burdened with high energy costs, or worse, fuel shortages. Below is the two-week forecast for the US Lower 48, underlining cooler weather trends are nearing and how consumers shouldn’t wait until the last minute to fill up their tanks.

Suzanne Danforth, an analyst at Wood Mackenzie Ltd., told Bloomberg low stockpiles of heating oil won’t be as severe as the gas crisis in Europe where prices went parabolic, though she warned: “It’s going to be tight, very tight.”

One of the reasons behind low supplies is due in part to the deep freeze in Texas earlier this year that paralyzed refiners and knocked out as much as 5.5 million barrels a day of processing capacity, causing a tremendous drawdown of diesel inventories.

Inventories continued tightening through the year as a surge in truck drivers was seen to transport goods across the country. There’s also been a rise in jet fuel demand as travel rebounded, and let’s not forget farmers’ increasing diesel demand during harvest. The timing of refiners shutting down for maintenance could amplify the tightness.

…click on the above link to read the rest of the article…

The Current Supply Chain Crisis Could Throw The Global Economy Off Course!

The Current Supply Chain Crisis Could Throw The Global Economy Off Course!

Be ready! The current supply chain crisis is becoming noticeable to most at this point and it could toss the entire global economy off course.  With just the right problem, we could all be facing shortages that would make the toilet paper incident of 2020 look like a daydream.

Be ready! The current supply chain crisis is becoming noticeable to most at this point and it could toss the entire global economy off course.  With just the right problem, we could all be facing shortages that would make the toilet paper incident of 2020 look like a daydream.

The Guardian has explained that all of the problems with the supply chain, including shortages, are in one way or another tangled up in the surge of post-pandemic consumer demand. Of course, when all of the problems are taken together, they threaten what one leading economist calls a “stagflationary wind” that could blow the global economy off course. The supply chain problems are also bigger than we are currently being told according to many who work in the transportation and manufacturing industries.

“The supply chain problems are much more persistent than most policymakers expected, although companies are less surprised,” Mohamed El-Erian, and adviser to the insurance giant Allianz and president of Queens’ College, Cambridge, said. “Governments are having to rethink quickly because the three elements – supply side, transport, labor – are coming together to blow a stagflationary wind through the global economy.”

Instead of waiting on the government’s response, which will more than likely only include the printing of more money and the push of the inflation rate higher, we should be preparing

…click on the above link to read the rest of the article…

Life’s a Beach Until the Tsunami Hits: Four Waves Nobody Cares About–Yet

Life’s a Beach Until the Tsunami Hits: Four Waves Nobody Cares About–Yet

Four monster waves are about to crash onto the Fed’s beach party and sweep away the unwary revelers.

Hey, is the water in the bay receding? Never mind, free drinks are on the Federal Reserve, so party on, life’s a beach, asset bubbles will never pop, we’re safe. Of course you are. The Fed is all-powerful and would never let a rogue wave turn all its precious phantom wealth into broken detritus.

The water is fast receding and a wave is visible if you care to look, but nobody cares to look. Why bother? The Fed is invincible, that’s all you need to know to mint another fortune.

Just to keep life interesting, let’s look anyway. Gordon Long and I discuss four monster waves that are about to crash onto the Fed’s beach party and sweep away the unwary revelers:

1. Declining liquidity: while everyone is focused on the Fed’s ceaselessly repeated reassurance that the liquidity spigot will never be closed, never ever ever, so party on, asset bubbles will never pop, never ever ever, other central banks have already started reducing global liquidity while domestically, the Treasury General Account (TGA) is soaking up liquidity to fund the federal government’s monumental deficit spending.

2. Declining global growth: long before the pandemic swept ashore in 2020, global growth was faltering: the business cycle had not been abolished, despite Fed assurances that growth and asset bubbles will continue expanding until they reach Alpha Centuri and beyond (Dow one trillion, yowza baby!), growth by any conventional measure (PMI, ISM, industrial production, global trade flows, etc.) had stagnated or rolled over.

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Rabo: Global Supply Chains Simply Will Not Be Able To Cope With Even More Stimulus

Rabo: Global Supply Chains Simply Will Not Be Able To Cope With Even More Stimulus

The Story is the Story

Today is a US payrolls Friday. I have covered 277 of these releases. A handful were of any lasting interest, signalling something the market didn’t already know beforehand, and a few dozen more were higher/lower enough to get a few days of trading from. The expectation is 500K, which I remind everyone is way, waaay lower than the implied “1 million a month” that was promised at the start of the year. And that is all I feel I need to add, given there will be 279 to follow, and so on (and on). Meanwhile, ongoing stories vastly outweigh the significance of any data.

The US debt-ceiling can is being kicked to 3 December. Hurrah for cans and hurrah for kicking! None of the larger problems on fiscal stimulus are being addressed, however. Indeed, the latest news is that Senator Manchin is insisting $1.5trn is as high as he will go. However, there are also suggestions that this may not mean choosing between three key programs Progressives want, but would instead see the 10-year timeframe compacted. In other words, a smaller headline bill with all the inflationary demand-boosting effects up front for a few years (presumably into the next election cycle…). And against a backdrop of global and US supply chains that simply will not be able to cope. That’s a story we will keeping seeing all over.

Global food prices in September already leaped again according to the FAO. That might not be seen in certain locations which no longer allow the FAO website to be accessed. However, the global story is still there even if the data aren’t…

…click on the above link to read the rest of the article…

Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense

Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense

The era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization.

Global corporations didn’t go to all the effort to establish quasi-monopolies and cartels for our convenience–they did it to ensure reliably large profits from control and scarcity. Not all scarcities are artificial, i.e. the result of cartels limiting supply to keep prices high; many scarcities are real, and many of these scarcities can be traced back to the stripping out of redundancy / multiple suppliers of industrial essentials to streamline efficiency and eliminate competition.

Recall that competition and abundance are anathema to profits. Wide open competition and structural abundance are the least conducive setting for generating reliably ample profits, while quasi-monopolies and cartels that control scarce supplies are the ideal profit-generating machines.

The incentives to expand the number of suppliers, i.e. increase competition, are effectively zero. America’s corporations spent $11 trillion buying back their own stocks over the past decade; that’s equal to the combined GDP of Japan, Germany and Italy. If adding new suppliers to the global supply chain were profitable, some of that $11 trillion would have exploited those vast profits.

The financial reality is attempting to compete with an established cartel that has captured regulatory and political mechanisms is a foolhardy waste of capital. If firing up a new supplier of essential solvents, etc. was so captivatingly profitable, the why wouldn’t Google and Apple take a slice of their billions in cash and go make some easy money?

The barriers to entry are high and the markets are limited. A great many specialty lubricants, solvents, alloys, wires, etc. are essential to the manufacture of all the consumer and industrial products that are sourced globally, but the markets are narrow: manufacturers need X amount of a specialty solvent, not 10X.

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Winter’s discontent

Winter’s discontent

“Now is the winter of our discontent
Made glorious summer by this son of York;
And all the clouds that low’r’d upon our house
In the deep bosom of the ocean buried.”
Shakespeare, Richard III

This may become the winter of our discontent as people around the world face a widening energy crisis, rationing because supplies are limited due to delivery shortages, production limits, cost, or by government mandate.  We likely face a severe reduction in the amount of energy and goods available.  We need to understand a simple truth…the path to renewable energy was never going to be easy.  The only way to reduce green house gas emissions is to reduce the combustion of higher carbon fuels, but this will not be easy because fossil fuels are needed to create a renewable energy system.  The transition is likely to cause imbalances in the energy supplies, and this has many ramifications for the goods upon which we depend. Yes, we use energy to heat and cool our homes and businesses, but we also use energy to manufacture goods, transport goods, and produce food.  We need to understand how much fossil energy our lifestyle requires.  We must make drastic cuts in energy consumption if we are to create an economy that runs off renewable energy,  particularly while we are building an entirely new system.  If we cut fossil energy supplies too quickly, where will the energy and goods we need today come from?

Renewable energy sources such as wood, solar, wind, and water power are all driven by the sun’s energy which is free.  To capture free renewable energy we rely on trees that produce wood, on the movement of the atmosphere that creates wind, and the water that falls from the sky to fill rivers and reservoirs…

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Things do not have to run out for their scarcity to become destabilizing

Things do not have to run out for their scarcity to become destabilizing

Economic cornucopians who believe “innovation” and “substitution” will solve every constraint on the resources needed for modern civilization use a clever piece of misdirection to deflect the arguments of those concerned about limits. These cornucopians say that the claim by the limits crowd that we will “run out” of resources we need to maintain the smooth functioning of our complex industrial society is nonsense.

But that statement is a straw man designed to avoid the real issue, an issue which we see in abundance all around us today, namely: Things do not have to run out for their scarcity to become destabilizing. This is a key argument among those concerned about limits and the effects of those limits on the stable functioning of modern society.

We have not run out of fossil fuels but shortages are creating widespread problems in China and Europe. We are not running out of water in the world, but there is not enough of it in the right place to supply all the needs of those living in the American Southwest. That lack of water is leading to a reduction in geothermal power generation as well. And, drought in California is reducing the amount hydroelectric generation by a third so far this year.

High natural gas prices in Europe are not only affecting those who burn the fuel for heat and transportation, but also those who use natural gas as a chemical feedstock. Two British fertilizer plants ceased operations because the high price of natural gas is making it too costly to produce nitrogen fertilizers…

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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