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More than 65 per cent of Canada abnormally parched or in drought at the end of March

An out-of-control wildfire, dubbed Wildfire MWF012, is seen burning west of Saprae Creek on April 21, 2024. PHOTO BY ALBERTA WILDFIRE

Wildfires erupted across Canada’s main oil producing province of Alberta and an evacuation order was issued as the region braces for a repeat of last year’s unprecedented season.

Members of the Indigenous first nation community of Cold Lake Number 149, northeast of Edmonton on the Saskatchewan border, were told to evacuate, according to a notice issued at 4:49 p.m. local time. Other regions west of the Cold Lake blaze were put on standby, with three wildfires in the province listed as out of control as of late Monday.

More than 65 per cent of Canada was abnormally parched or in drought at the end of March, leading the nation to brace for another smoke-filled summer. Unusually hot, dry weather contributed to the country’s worst-ever wildfire season last year, darkening skies over New York and other U.S. cities and prompting Alberta oil and gas drillers to shut as much as 300,000 barrels of oil equivalent a day of production.

An evacuation alert for residents of Saprae Creek, about 25 kilometres southeast of the oilsands capital of Fort McMurray, was cancelled. Massive forest fires burned down swathes of Fort McMurray eight years ago, forcing thousands of residents to evacuate and temporarily shutting more than one million barrels a day of oil production.

India’s most innovative cities including Bengaluru run out of water

April 5, 2024

India’s most innovative cities including Bengaluru run out of water

Tech professionals are leaving India’s IT hub of Bengaluru amid an intensifying drought that has gripped the city as it sweats through another torrid pre-monsoon season

A thirsty growth engine | Photo: Bloomberg

At the time Egypt’s pyramids were being constructed, one of the cradles of global civilization grew up in the Indus Valley around the borders of Pakistan and India. Its grid-planned cities produced sewerage networks, delicate artworks and an undeciphered writing system. Then a 900-year drought emptied its urban areas and sent its population back to a simpler, poorer village life on the plains of the Ganges.

Something grimly similar is happening right now.

Tech professionals are leaving India’s IT hub of Bengaluru amid an intensifying drought that has gripped the city as it sweats through another torrid pre-monsoon season, the Deccan Herald reported this month. More than half of the wells the city depends on for groundwater have dried up after failed rains last year, leaving businesses and citizens dependent on trucked-in water tankers.

In neighbouring Kerala, which catches much of the monsoon rainfall before it reaches inland stretches of Bengaluru’s Karnataka state, a minister has even written to Bengaluru’s companies, suggesting they relocate because “water is not an issue at all” in his state, the Times of India reported.

That seems in poor taste in southern India, where fights over the distribution of river flows between parched states have gone on for decades. He’s not wrong, though. Indeed, these pressures are only going to grow as populations rise and climate change makes the cycles of drought and monsoon more pronounced.

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A Million Simulations, One Verdict for US Economy: Debt Danger Ahead

April 4, 2024

A Million Simulations, One Verdict for US Economy: Debt Danger Ahead

Bloomberg Economics ran a million forecast simulations on the US debt outlook. 88% of them show borrowing on an unsustainable path.

The Congressional Budget Office warned in its latest projections that US federal government debt is on a path from 97% of GDP last year to 116% by 2034 — higher even than in World War II. The actual outlook is likely worse.

From tax revenue to defense spending and interest rates, the CBO forecasts released earlier this year are underpinned by rosy assumptions. Plug in the market’s current view on interest rates, and the debt-to-GDP ratio rises to 123% in 2034. Then assume — as most in Washington do — that ex-President Donald Trump’s tax cuts mainly stay in place, and the burden gets even higher.

Simulations Show Range of Uncertainty Around CBO’s Forecasts

10th and 90th percentile results of a million scenarios

Sources: Congressional Budget Office, Bloomberg Economics

With uncertainty about so many of the variables, Bloomberg Economics has run a million simulations to assess the fragility of the debt outlook. In 88% of the simulations, the results show the debt-to-GDP ratio is on an unsustainable path — defined as an increase over the next decade.

The Biden administration says its budget, featuring a slew of tax hikes on corporations and wealthy Americans, will ensure fiscal sustainability and manageable debt-servicing costs.

“I do believe we need to reduce deficits and to stay on a fiscally sustainable path,” Treasury Secretary Janet Yellen told lawmakers in February. Biden administration proposals offer “substantial deficit reduction that would continue to hold the level of interest expense at comfortable levels. But we would need to work together to try to achieve those savings,” she said.

Trouble is, delivering on such a plan will require action from a Congress that’s bitterly divided on partisan lines.

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

Pakistan’s Dystopian Warning to the World

March 8, 2023

Pakistan’s Dystopian Warning to the World

Supporters of former Prime Minister Imran Khan at a rally in Rawalpindi in November. Photographer: Asad Zaidi/Bloomberg

Pakistan has touted itself as one of the world’s cradles of civilization, flourishing for thousands of years along ancient trade routes passing through the fertile Indus Valley.

Now it presents a dystopian vision of the future, bankrupt, unstable and threatened by climate catastrophe. Its fate offers a warning to other heavily indebted nations on the precipice, from Sri Lanka to Zambia.

Pakistan is due to hold elections no later than October, and political jostling is narrowing the nuclear-armed nation’s options.

Opposition leader Imran Khan, who was ousted from the premiership last year, is in a bitter standoff with Prime Minister Shehbaz Sharif over control of the country of 230 million. He’s held mass rallies in recent months to pressure the government into an early vote, while the authorities have filed numerous cases against him and issued a warrant for his arrest.

As Islamabad fiddles, the country is burning up its foreign reserves, and investors see a growing risk of default. The government is living hand to mouth, reliant on outside loans from China while negotiating with the International Monetary Fund for the remaining funds in a $6.5 billion bailout — its 13th since the late 1980s.

Pakistan already got a taste of economic disaster last year when deadly floods displaced millions. Such calamities are unlikely to be a one-off, with climate scientists forecasting massive increases in river flows as a result of melting Himalayan glaciers, inundating farmland and obliterating infrastructure — interspersed with drought.

Pakistan could hardly have a more strategic location, lodged between Iran and India and with China and Afghanistan to the north. That, plus its sheer size as the world’s fifth-most populous nation, make it too big to be allowed to fail.

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World’s most-crucial fuel diesel heads for shortage touching everything

November 29, 2022

World’s most-crucial fuel diesel heads for shortage touching everything

Within the next few months, almost every region on the planet will face the danger of a diesel shortage

Photo: Bloomberg

No fuel is more essential to the global economy than diesel. It powers trucks, buses, ships and trains. It drives machinery for construction, manufacturing and farming. It’s burned for heating homes. And with the high price of natural gas, in some places it’s also being used to generate power.

Within the next few months, almost every region on the planet will face the danger of a diesel shortage at a time when supply crunches in nearly all the world’s energy markets have worsened inflation and stifled growth.

The toll could be enormous, feeding through into everything from the price of a Thanksgiving turkey to consumer bills for heating homes this winter. In the US alone, the surging diesel cost will mean a $100 billion hit to the economy, according to Mark Finley, an energy fellow at Rice University’s Baker Institute of Public Policy.

“Anything and everything that gets moved in our economy, diesel is there,” Finley said. “Moving stuff around is one thing. People potentially freezing to death is another.”

In the US, stockpiles of diesel and heating oil are at their lowest point ever for this time of year in data going back four decades. Northwest Europe is also facing a low buffer — inventories are forecast to hit a low this month and then tumble even more by March, shortly after sanctions come into play that will cut the region off from Russian seaborne supplies. Global export markets have gotten so tight that poorer countries like Pakistan are getting shut out, with suppliers failing to book enough cargoes to meet the nation’s domestic needs.

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New York, New England ration heating oil even before peak winter

October 23, 2022

New York, New England ration heating oil even before peak winter

The US Northeast is so short on heating oil that the fuel used to power home furnaces is being rationed even before the start of winter.

Some wholesalers in Connecticut are putting retailers on allocation, meaning they can only get a limited amount of fuel based on availability, according to Chris Herb, president of the Connecticut Energy Marketers Association, which represents around 600 family-owned retailers in the state. These retailers must in turn ration their customers.

The measure, designed to prevent panic buying, highlights the extreme fuel tightness across the New York Harbor and New England regions that has attracted the attention of the White House. National Economic Council Director Brian Deese told Bloomberg Television earlier this week that diesel inventories are “unacceptably low” and “all options are on the table” to bulk up supply and cut costs to consumers. In New England, where more people burn diesel — the same product as heating oil — to warm their homes than anywhere else in the country, stockpiles are a third of typical levels for this time of year, government data show.

A main hurdle to replenishing regional fuel supplies has been a steep, sustained backwardation in the diesel market. Backwardation happens when prompt deliveries are priced at a premium over deliveries in the future, which in effect causes product to lose value over time. “There’s just no incentive to store large amount of product,” said Michael Ferrante, president of the Massachusetts Energy Marketers Association

In addition to the scarcity, there’s also the cost. Wholesale heating oil in New York Harbor averaged $4.09 a gallon on Thursday, compared with $2.46 at the same time a year ago, according to data from price reporting agency Argus Media…

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JPMorgan Sees ‘Stratospheric’ $380 Oil on Worst-Case Russian Cut

July 4, 2022

JPMorgan Sees ‘Stratospheric’ $380 Oil on Worst-Case Russian Cut

An employee walks across the top of an oil storage tank at an oil field near Salym, Russia. — An employee walks across the top of an oil storage tank at an oil field near Salym, Russia.

Source: Bloomberg

Global oil prices could reach a “stratospheric” $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts, JPMorgan Chase & Co. analysts warned.

The Group of Seven nations are hammering out a complicated mechanism to cap the price fetched by Russian oil in a bid to tighten the screws on Vladimir Putin’s war machine in Ukraine. But given Moscow’s robust fiscal position, the nation can afford to slash daily crude production by 5 million barrels without excessively damaging the economy, JPMorgan analysts including Natasha Kaneva wrote in a note to clients.

For much of the rest of the world, however, the results could be disastrous. A 3 million-barrel cut to daily supplies would push benchmark London crude prices to $190, while the worst-case scenario of 5 million could mean “stratospheric” $380 crude, the analysts wrote.

“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote. “It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia’s side.”

A World That’s More Expensive Is Starting to Destroy Demand

March 28, 2022

A World That’s More Expensive Is Starting to Destroy Demand

Buyers are balking at high prices for fuel, food and metals, threatening to tip economies back into recession.

The Central de Abastos Market in Mexico City.

Photographer: Alejandro Cegarra/Bloomberg

Prices for some of the world’s most pivotal products – foods, fuels, plastics, metals – are spiking beyond what many buyers can afford. That’s forcing consumers to cut back and, if the trend grows, may tip economies already buffeted by pandemic and war back into recession.

The phenomenon is happening in ways large and small. Soaring natural gas prices in China force ceramic factories burning the fuel to halve their operations. A Missouri trucking company debates suspending operations because it can’t fully recoup rising diesel costs from customers. European steel mills using electric arc furnaces scale back production as power costs soar, making the metal even more expensive.

Global food prices set a record last month, according to the United Nations, as Russia’s invasion of Ukraine disrupted shipments from the countries that, together, supply one-quarter of the world’s grain and much of its cooking oil. More-expensive food may be frustrating to the middle class, but it’s devastating to communities trying to claw their way out of poverty. For some, “demand destruction” will be a bloodless way to say “hunger.”

Source: Bloomberg

In the developed world, the squeeze between higher energy and food costs could force households to cut discretionary spending – evenings out, vacations, the latest iPhone or PlayStation. China’s decision to put its top steelmaking hub under Covid-19 lockdown could limit supply and push up prices for big-ticket items like home appliances and cars. Electric vehicles from Tesla Inc., Volkswagen AG and General Motors Co. may be the future of transportation, except the lithium in their batteries is almost 500% more expensive than a year ago.

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

The U.K. is two months away from a brutal cost-of-living crisis

January 22, 2022

The U.K. is two months away from a brutal cost-of-living crisis

Soaring inflation is causing headaches around the world, but in Britain the squeeze is coming from all sides

Commuters walk over London Bridge during the morning rush hour in central London. Britain’s acute cost-of-living crunch will hit in April. PHOTO BY DANIEL LEAL/AFP VIA GETTY IMAGES

Soaring energy prices and rising inflation are causing policy headaches around the world. In the U.K., though, the government is raising taxes at the same time, kicking off an economic experiment in one of the countries worst-hit by the pandemic.

Britain’s acute cost-of-living crunch will hit in April, instantly stretching household and company budgets and penalizing the poorest households, many of which have already been most impacted by COVID-19.

The squeeze is coming from all sides. U.K. consumer price-growth hit a 30-year high of 5.4 per cent in December, and is wiping out wage gains. The Bank of England is jacking up interest rates faster than the Federal Reserve. A cap on domestic energy costs is expected to rise by 50 per cent in April, just as taxes increase in a bid to repair the U.K. public finances. Brexit hasn’t come cheap, either.

The Resolution Foundation think tank says the outcome will be a “living standards catastrophe,” and the Centre for Economics and Business Research reckons annual living costs for a typical U.K. household will rise by 1,980 pounds (US$2,700) — even before taxes go up.

While lawmakers in Westminster debate whether Prime Minister Boris Johnson should resign over whether he broke lockdown rules, the cost of living is fast becoming the country’s key political battleground, and a real danger for him — or for his successor.

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

China stockpiling food at historically high levels

January 15, 2022

China stockpiling food at historically high levels

At the end of 2021, NIKKEI Asia reported that China, with less than 20% of the world’s population, has managed to stockpile more than half of the world’s maize and other grains, leading to steep price increases across the planet and dropping more countries into famine.¹

On January 5, 2022, Bloomberg reported that food prices have hit 10-year highs, causing worldwide concern.²

“Supply-chain bottlenecks, labor shortages, bad weather and a surge in consumer demand are among the factors responsible for the spike. So, too, is a lesser-known phenomenon: China is hoarding key commodities,” Bloomberg’s Adam Minter said.

According to the U.S. Department of Agriculture, China will hold 69% of the world’s corn reserves, 60% of its rice, and 51% of its wheat by mid-2022.

China is maintaining its food stockpiles at a ‘historically high level,’ said Qin Yuyun, head of grain reserves at the National Food and Strategic Reserves Administration.

“Our wheat stockpiles can meet the demand for one and a half years. There is no problem whatsoever about the supply of food.”

The projections represent increases of around 20 percentage points over the past 10 years, and the data clearly shows that China continues to hoard grain.¹

In 2005, China was importing food (not including beverages) for less than $10 billion USD.

In 2010, the number rose to more than $20 billion USD and continued rising year-over-year until $80 billion USD in 2019 and nearly 100 billion in 2020, up to 4.6 times from a decade before.

References:

¹ China hoards over half the world’s grain, pushing up global prices – NIKKEI Asia

² One Reason for Rising Food Prices? Chinese Hoarding – Bloomberg

Featured image: Food silos at Dailan, China on January 11, 2022. Credit: Copernicus EU/Sentinel-2, TW

Deep freeze disrupts crude flows in oil sands and Bakken shale

January 8, 2022

Deep freeze disrupts crude flows in oil sands and Bakken shale

A deep-freeze in Canada and Northern U.S. is disrupting oil flows, causing a surge in crude prices just as American stockpiles are declining.

With temperatures from North Dakota to Northern Alberta below zero Fahrenheit (-18 Celsius), TC Energy Corp.’s Keystone pipeline was shut on Tuesday before resuming later the next day. In North Dakota’s Bakken shale, production has started to succumb to the freeze, sending local crude prices to their highest since November. Canadian oil has also jumped.

The disruptions mean less supplies at a time when U.S. stockpiles have been shrinking every week since mid-November and getting closer to September’s three-year low. Drillers have been slow to restore output to pre-pandemic levels as they prioritize shareholder returns over growth. This further supports growing predictions that the oil market will return to a deficit this year, with some like Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield expecting oil to range from US$75 to US$100 a barrel.

Embedded Image

Even though Western Canada and North Dakota are usually cold this time of year, temperatures have been lower than usual.

Western Canadian Select crude’s discount to the U.S. benchmark has shrunk by almost US$3 dollars since Dec. 27, to US$12.10 per barrel on Wednesday.

Bakken crude in the Clearbrook, Minnesota, hub rose 90 cents a barrel in the past two days to reach a US$1.25 premium to Nymex futures Wednesday, a two-month high. The same grade traded this week in Wyoming at a premium to New York futures for the first time since Nov. 18.

Keystone carries 590,000 barrels a day of Canadian oil from Alberta to the U.S. Midwest.

Prior to resuming operations, TC Energy said that its staff have been challenged by extremely cold temperatures impacting the oil flow through its Hardisty terminal. Temperatures there fell to about -24 degrees Celsius (-11 Fahrenheit) on Wednesday afternoon.

Meanwhile, Enbridge Inc. said it was seeking crude supplies for its main pipeline system across Canada and U.S. to keep its pipes running at scheduled rates.

Pakistan Textile Exports Hit by Gas Crunch, Industry Body Says

January 4, 2022

Pakistan Textile Exports Hit by Gas Crunch, Industry Body Says

$250 million of textile exports were lost in Dec., group says
Energy minister rejects claims low gas supplies are to blame

Pakistan’s natural gas shortage is hurting its crucial textile exports, according to an industry trade organization, putting even more stress on the nation’s struggling economy.

About $250 million of textiles exports were lost last month after mills in Punjab were forced to shut for 15 days, said Shahid Sattar, executive director of All Pakistan Textile Mills Association. Factories in the province are dependent on power generated from regasified imports of liquefied natural gas, while domestic supply is being diverted to other regions, he said.

Pakistan has become a fast-growing import market for LNG as local supply has subsided over the last few years. But competition for the fuel — used as an electricity feedstock and for heating and cooking — has intensified due to global shortages, sending spot prices to levels that Pakistan can’t afford.

“The high gas prices are prohibitive,” Sattar said in an interview. The “supply shortfall is due to the energy ministry’s inability to arrange supply, and is hurting the very future of Pakistan’s exports and economy.”

Pakistan’s government, which has been criticized by the opposition for mishandling LNG imports, refutes claims that textile exports dropped because of low gas supplies. More than 90% of mills shifted to using electricity from the grid when gas wasn’t sent to their power generation units last month, Energy Minister Hammad Azhar said by phone, adding that “the electricity is being offered at regionally competitive rates.”

Pakistan restored gas to the textile sector last Wednesday after the association halted litigation against the government on the supply cut, and agreed to energy audits of their captive power plants. Only half of the companies have restored connections, while the rest are still running their mills on the national grid, according to the ministry.

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Tiny North American Oat Crop Could Be Coming for Your Breakfast

October 9, 2021

Tiny North American Oat Crop Could Be Coming for Your Breakfast

The smallest harvest ever in the U.S. is expected to shrink supplies needed for everything from Cheerios to oat milk

A drought struck North America’s oat fields this season, and farmers are harvesting such a small crop that prices have risen to record highs, signaling inflation for breakfast staples like oatmeal and trendy alternative milk.

Severe hot and dry weather probably slashed oat production by nearly half to an 11-year low in Canada, the world’s biggest exporter. Similarly in the U.S., one of the world’s top consumers of the grain, the harvest will be the smallest ever. The result is all-time high costs that will likely filter down to consumers.

The situation for North American farmers was so dire in the summer that many cut their losses and harvested damaged plants to be sold as feed for animals. That means even less will be available for making popular foods like granola bars and Cheerios, the No. 1 cold cereal in the U.S.

“You can’t make a Cheerio out of barley,” said Randy Strychar, president of Ag Commodity Research and Oatinformation.com.

While major food companies haven’t announced price increases related to oat products yet, the higher costs for the grain can only add to the food inflation that’s been rampant this year. Global food prices recently touched a decade high, according to a United Nations index, while oat futures on Friday climbed as much as 2.1% to reach an all-time high of $6.36 a bushel.

The oat has a humble history as a staid breakfast choice in the form of oatmeal or cereal. But more recently it’s become a trendy darling of millennials. Food companies targeting younger, affluent consumers are billing it as an accessible superfood. Environmentalists tout it as a key crop for reducing carbon emissions in agriculture…

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

Someone is betting that oil will soar to a record US$200 per barrel

October 6, 2021

Someone is betting that oil will soar to a record US$200 per barrel

Crude oil prices are falling after inventories revealed a build in stockpiles for the first time in eight weeks after natural disasters knocked several U.S. refineries offline.

Could the energy crunch get so bad that oil prices hit US$200 a barrel? One options trader thinks so.

Brent US$200 calls for December 2022, options contracts that would profit a buyer from a rally toward that level, traded 1,300 times on Wednesday. While the contracts don’t expire until October next year, they could profit from any sharp spike in prices this winter or next summer.

In a market where a single cargo of crude would currently fetch about US$160 million, the US$130,000 wager on oil reaching an all-time high is tiny. However, it reflects the fact that a growing number of options traders are betting that an energy crunch this winter may see prices rip higher.

Embedded Image Brent crude, the global benchmark, hit US$80 for the first time in three years this week. Market watchers see demand exceeding supply to the tune of more than a million barrels a day and expect that switching from gas to oil because of high power prices could exacerbate that deficit. Bank of America Corp. this week underlined an earlier call that crude could top US$100 a barrel at some point over the winter, if it is exceptionally cold.

It’s not just US$200 calls that have been trading in recent days. Holdings in Brent US$100 calls through to the end of next year have climbed by 20,000 contracts this month.

U.S. Oil Production Has Already Passed Its Peak, Occidental Says

October 18, 2020

U.S. Oil Production Has Already Passed Its Peak, Occidental Says

“It’s just going to be too difficult to replace the 2 million barrels a day of production that we’ve lost, and then to further grow beyond that,” Chief Executive Officer Vicki Hollub said Wednesday at the Energy Intelligence Forum. “Over the next three to four years there’s going to be moderate restoration of production, but not at high growth.”

Occidental is one of the biggest producers in the U.S. shale industry, which added wells at such a rate prior to the spread of Covid-19 that the country became the world’s top crude producer, overtaking Saudi Arabia and Russia, ushering in an era that President Donald Trump called “American energy dominance.”

U.S. oil production is stuck below it's pre-pandemic high

Shale’s debt-fueled expansion came to a juddering halt due to lower gasoline demand and oil prices, but also because of Wall Street’s increasing reluctance to fund growth at any cost. Shale operators are increasingly prioritizing cash flow and returns to investors over production growth.

Occidental, which vies with Chevron Corp. to be the biggest producer in the Permian Basin, has been forced to throttle back capital spending, lower growth targets and cut its dividend in a bid to save cash during the downturn. Its finances were already severely challenged by the debt taken on through its $37 billion purchase of rival Anadarko Petroleum Corp. last year.

Hollub said global consumption stands at about 94 billion barrels a day, and it will take a Covid-19 vaccine before it returns to 100 million barrels. Due to cutbacks around the world, supply and demand for oil will likely balance again by the end of 2021, she said.

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

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