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A recession indicator with a perfect record has been flashing red for 20 months. It may not be wrong yet.

June 13, 2024

A recession indicator with a perfect record has been flashing red for 20 months. It may not be wrong yet.

A recession indicator with a flawless record has been flashing red for 20 months.
The economist behind the inverted yield curve says it’s too soon to declare it’s wrong this time.
Campbell Harvey, a Duke finance professor, pointed to signs of a cooling job market to back his concerns.

A recession indicator with a perfect track record has been flashing red for 20 months now, but the economist who pioneered its use warned against dismissing it just yet.

“I think it’s way too early to declare a failure,” Campbell Harvey told Fox Business about the inverted yield curve.

The 3-month Treasury yield has climbed above the 10-year yield before eight of the past eight recessions dating back to the 1960s, without any false positives. Harvey, a finance professor at Duke University, first identified that pattern over 30 years ago.

The same yield curve has been inverted for around 20 months since October 2022. But past recessions have struck with up to a 23-month lag, Harvey noted.

“We’re still not out of the woods,” he said, noting the indicator will only exceed its historical lead time if there’s still no downturn by October.

Even so, he advised investors not to rely on his alarm bell alone, but to combine it with other measures to gain a fuller picture of the economy’s health and outlook.

Harvey pointed to several economic “red flags” including employment figures for May that were released on Friday. Headline unemployment ticked up to 4%, with Black unemployment jumping from 5.6% to 6.1%. The labor force participation rate also dropped to 62.5% as some people exited the job market.

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America’s plastic catastrophe

April 27, 2024

America’s plastic catastrophe

China stopped taking our plastic waste. Now we’re drowning in it.

A globe wrapped in plastic — Americans produce 40 million tons of plastic waste each year. And it has to go somewhere. Carl Godfrey for BI

America has long had a plastic problem. It’s an urgent question — what do we do with the 40 million tons of plastic waste we produce annually? One year of plastic waste is roughly enough to smother the entirety of Manhattan a meter deep, and it has to go somewhere. For years, the answer was simple: Make a lot of it, dump most of it in the landfill, and make the rest of it someone else’s problem — the US regularly exported 7 million tons a year to China alone. Some of it was melted into lesser plastic; the rest was incinerated or buried.

But then, in 2018, China cut off plastic imports.

Now, America is coming to terms with a hard truth: Plastic was never designed to be recycled and there’s no profitable way to recycle 91% of it. The environmental impacts have been disastrous. About 430 million tons of plastic are produced globally every year, accounting for 14% of global oil demand. The refinement of plastic alone emits up to 235 million tons of greenhouse gases a year. Most of that plastic breaks down into microplastics that make their way into the air, rain, and our bodies. Almost 95% of America’s water supply contains plastic fibers.

While the US, the UK, and other European countries responded to China’s ban by sending their waste to places like Thailand and Malaysia, those countries then followed China in cutting off waste imports. The message was clear: The Global South would no longer be a dumping ground for the West.

A scavenger drinks water while collecting plastic waste to sell to a recycling center at a landfill in Medan, North Sumatra, Indonesia in March 2024 — For decades, America sent its plastic waste to countries like China and Indonesia. Kartik Byma/AFP/Getty Images

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

Oil prices aren’t the Fed’s biggest problem right now — American demand is, says an economist

April 24, 2024

Oil prices aren’t the Fed’s biggest problem right now — American demand is, says an economist

Inflation could see a resurgence in 2025, BlackRock strategists warned. Jonathan Kitchen/Getty Images

“I think what’s difficult for the Fed currently is actually the part of CPI that is being driven by demand, rather than the supply issues or the energy issues, which are perhaps easier to deal with,” Samy Chaar, the chief economist of Lombard Odier, told Bloomberg TV. The Swiss private bank managed 193 billion Swiss francs, or $212.8 billion, in assets at the end of December.

A key inflation metric for the Fed, the Personal Consumption Expenditures Price Index, was little changed in March over its 2.8% reading in February. Federal Reserve chair Jerome Powell highlighted the index earlier this week as he signaled that interest rate cuts may come later, rather than sooner.

The US economy has been strong, with job growth and retail sales also rising more than expected for the month of March.

“The problem with the US is the sticky part that comes from services. Services is demand, and that demand needs to come from somewhere — and that’s a robust economy,” Chaar told Bloomberg. A gauge from the Institute for Supply Management showed the US service sector expanded moderately in March.

“Consumers are consuming because they have jobs, because they have rising incomes,” Chaar said.

This means inflation is fueled by demand rather than oil supply, even if a rise in energy prices complicates the Fed’s job, he said.

The Fed is now trying to engineer a soft landing for the hot US economy without causing it to tip into a recession.

“I would say the biggest challenge here for the Fed is to manage the demand of the US economy,” Chaar said. “It comes from domestic America, not from the Middle East.”

Drivers could see gas prices surge to nearly $7 a gallon in some US states as refinery issues bite supply and Chinese demand bounces back, GasBuddy says

January 3, 2023

Drivers could see gas prices surge to nearly $7 a gallon in some US states as refinery issues bite supply and Chinese demand bounces back, GasBuddy says

Gas pump — Gas prices could top $4 a gallon in most major US states next year, GasBuddy says.

Gas prices could surge toward $7 a gallon in some US states in 2023, according to GasBuddy.
Cold snaps across the US and revived energy demand from China are the two key factors that could push up prices.
“2023 is not going to be a cakewalk for motorists. It could be expensive,” said Patrick De Haan in a blogpost.

Brace for a spike in US gas prices next year due to refinery disruptions and amid renewed energy demand from China as the Asian nation reopens its economy, according to GasBuddy.

“2023 is not going to be a cakewalk for motorists. It could be expensive,” said Patrick De Haan, head of petroleum analysis at the firm, which tracks fuel costs, in its 2023 fuel outlook.

The national average price of gas at the pump could top around $4 a gallon in most major US cities as early as May next year, De Haan said, from $3.18 on Friday. Cities in the West Coast state of California, such as San Francisco and Los Angeles, could see gas prices approach nearly $7 a gallon in the summer of 2023, according to GasBuddy.

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Crude oil could hit $125 a barrel as Russia’s reaction to a US-led price cap threatens to squeeze supply, UBS says

October 13, 2022

Crude oil could hit $125 a barrel as Russia’s reaction to a US-led price cap threatens to squeeze supply, UBS says

US oil tanker — Oil prices are ticking upwards again after falling for the past three to four months.

UBS expects oil will hit $125 a barrel if Russia reacts to a planned G7 oil price cap as promised.
Russia has said it will cut its exports if the US-led cap comes in, which would tighten crude supply.
“As we get further draws, you’re going to see prices going up. That simple,” Dominic Schnider told CNBC.

Crude oil could hit $125 a barrel as Russia’s response to a US-led price cap plan threatens to tighten the global market even further, a top UBS commodities strategist has said.

Moscow has said it’s prepared to cut its oil output if the G7 nations carry through with the price cap, warning the measure will end up primarily hurting those behind the plan.

Dominic Schnider, head of commodities at UBS Global Wealth Management, said that could pull another 1 million barrels a day at a time when the oil market is already facing a supply squeeze from the OPEC+ decision to slash its production targets.

“The Russians were clear: ‘If you force us to accept the price cap, we’re simply not going to deliver crude to you,” Schnider said in a Tuesday interview with CNBC,

“And so I think that kind of situation means, maybe, from a global supply perspective, there’s an additional 1 million barrels at risk here.

“As we get further draws, you’re going to see prices going up. That simple. And we’re looking at $110-$125, that’s for us our point of gravity when it comes to crude oil,” he added.

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

Germans told to stop whining, wear 2 sweaters and have candles and flashlights ready in case of blackouts this winter

October 12, 2022

Germans told to stop whining, wear 2 sweaters and have candles and flashlights ready in case of blackouts this winter

Wolfgang Schaeuble attends the first of a two-day federal party congress of the German Christian Democrats (CDU) on September 09, 2022. — Wolfgang Schäuble, former president of the German parliament, told Bild-TV that people should wear two sweaters this winter amid the energy crisis.

German politician Wolfgang Schäuble said on Bild-TV people should stop whining in the energy crisis.
He told Germans to wear two sweaters in cold temperatures and have candles ready for blackouts.
Germany and the rest of Europe face high energy bills as Russia chokes gas supply to the continent.

Germans should stop whining and be prepared with sweaters and candles this winter in case of blackouts amid the energy crisis, according to politician Wolfgang Schäuble.

In an interview on Tuesday with Bild-TV, the former finance minister and president of the German government said Germans should “just put on a sweater, or maybe a second sweater” in the event of a freezing-cold winter.

“You don’t have to whine about it, you have to recognize that a lot of things can’t be taken for granted,” he told the news channel.

European leaders have raised concerns about the possibility of power cuts this winter because of the squeeze in energy supplies. “That’s why you should always have a few candles, matches and a flashlight at home,” Schäuble told Bild-TV.

The 80-year-old also warned Germans not to assume the government could solve financial problems such as soaring inflation and energy costs.

“If we suggest to people that everything is unlimited, we are overexploiting. Then people get the impression that the state can do everything – that is not sustainable,” Schäuble told Bild-TV.

Russia continues to hold back natural gas supplies to Europe after the West imposed sanctions on Moscow for invading Ukraine. As a result of the shortages, energy prices have sky-rocketed, leaving some people struggling to afford food and other basic items.

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

Get ready for blackouts from London to LA, as the global energy crisis overwhelms grids and sends energy prices skyrocketing

September 11, 2022

Get ready for blackouts from London to LA, as the global energy crisis overwhelms grids and sends energy prices skyrocketing

Illuminated Buildings By River Against Sky During Sunset — Part of Manhattan without power, seen from East River Houses.

Climate change and soaring energy prices could make widespread blackouts more common, even in wealthy nations.
Californians narrowly averted statewide blackouts, and Britons impacted by the war in Ukraine will soon pay nearly double for electricity.
As energy costs soar higher, a new age of rolling outages and grid instability looms large.

Stock up on batteries, candles, and non-perishable snacks. Blackouts are coming.

For the first time in decades, the western world is preparing for widespread and rolling energy shortages. The US, UK, and EU have all been squeezed by Russia’s invasion of Ukraine, soaring costs for electricity and fuel, and record-breaking heat waves. While fall is just around the corner, the worst of the energy strain is likely still to come.

Even wealthy nations won’t be spared, at least without broad broad policy change and private-sector overhauls. Add in the accompanying economic costs and extreme health risks, and you have a very difficult situation.

In California, it will materialize as outage warnings and restrictions on your air conditioning. Then in coming years, Texans, Illinoisans, and Missourians will join the suffering of their west coast peers amid sweltering heat and rolling blackouts.

And across Europe and the UK, residents not used to heat waves will either face skyrocketing energy bills or dangerously hot summers — a situation made worse by their reliance on Russian gas, the flow of which has been essentially cut off entirely.

In the US, climate change risks decades of ‘extreme danger’

Amid record-high temperatures on the west coast Tuesday afternoon, California’s grid operator ISO urged residents to limit their energy use and cautioned that rolling blackouts could arrive.

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

A potential ‘black swan’ for US oil prices is being overlooked: unreliable electricity grids

July 13, 2022

A potential ‘black swan’ for US oil prices is being overlooked: unreliable electricity grids

Electricity grid problems in the US are a potential “black swan” that could wreak havoc in energy markets, according to Cornerstone Futures research director Brynne Kelly.

In an analyst note, the energy trader argues that failing power grids and electricity shortages could be the next vulnerability in the supply chain for oil and its products, such as gasoline.

Those under-the-surface risks are being overlooked, and that makes them a possible “black swan” — an unpredicted event with a severe impact. While crude oil isn’t much used to generate electricity, power itself is needed to make oil, Kelly noted.

“Said another way, a failing power grid COULD BE the next oil chain supply problem,” she said.

“Problems with power grids across the US and other countries are a potential catalyst for chaos in energy markets that are underappreciated.”

The reliability of the US electricity grid is being taken for granted, Kelly said. But it’s under pressure as the industry goes through a mandated shift from fossil fuels to clean energy sources, and with the peak summer demand ahead.

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

Entire industries in Germany could collapse due to Russian natural-gas supply cuts: union head

July 4, 2022

Entire industries in Germany could collapse due to Russian natural-gas supply cuts: union head

Germany’s Economic Minister Robert Habeck speaks to press in Dusseldorf, Germany.

Listen to The Refresh: Insider’s real-time news podcast.

Entire industries in Germany could collapse due to natural-gas supply cuts from Russia, said Yasmin Fahimi, the country’s top union official.

“Entire industries are in danger of collapsing permanently because of the gas bottlenecks: aluminum, glass, the chemical industry,” Fahimi, the head of the German Federation of Trade Unions, told Bild am Sonntag. “Such a collapse would have massive consequences for the entire economy and jobs in Germany.”

The chemical industry, which employs about 346,000 people, is the third-largest industry in Germany, according to Germany Trade & Invest, the country’s investment promotion agency.

Germany — Europe’s largest economy — is reliant on piped natural gas from Russia, which accounts for 35% of its imports of the fuel. The industrial powerhouse imports almost all of the natural gas it uses, which accounts for about a quarter of the country’s total energy mix, according to the economy ministry.

The country’s energy crisis is already driving inflation to record highs, which threatens social stability, Fahimi told Bild am Sonntag.

Russian state gas giant Gazprom has already cut gas flows to Germany via the key Nord Stream 1 pipeline by 60% from last month, citing an equipment hold-up in Canada as a result of sanctions over the war in Ukraine.

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

Oil markets are pricing in long-term supply deficits and OPEC+ will face historic lows in spare capacity, warns IEA

June 17, 2022

Oil markets are pricing in long-term supply deficits and OPEC+ will face historic lows in spare capacity, warns IEA

Fatih Birol, head of IEA — IEA Executive Director Fatih Birol.

The IEA issued a warning for global oil markets Wednesday, saying supply challenges will persist.
Three million barrels per day of Russian crude will disappear as sanctions set in, the IEA predicts.
“Severely restricted refining capacity is causing markets to price in long-term supply deficits in key refined products,” the report said.

The current turmoil across energy markets is set to worsen in 2023, as OPEC+ will face severe supply challenges while fuel prices will stay high, the International Energy Agency warned in its first forecast for next year.

The Paris-based think tank said Wednesday that global oil supplies will “struggle” to keep up with rising demand.

In particular, it highlighted that Russian barrels will disappear from this year’s market at a rate of 3 million barrels per day as more sanctions set in. That result in overall OPEC+ production falling by 520,000 barrels per day next year.

“OPEC+ would have to further tap into its dwindling capacity cushion, reducing it to historic lows,” the IEA said in its report.

Over recent months, oil prices have skyrocketed thanks to dwindling stockpiles and repercussions from Russia’s invasion of Ukraine. In March, the price of Brent crude briefly hit $139 a barrel. It’s hovering near $120 Wednesday.

US gas prices, too, have surged, recently breaking the $5-a-gallon threshold for the first time ever. And the IEA warned prices will stay high for a while as refineries live “hand-to-mouth” amid low crude and product inventories.

“Severely restricted refining capacity is causing markets to price in long-term supply deficits in key refined products,” the agency said. “This translates into a structurally elevated product price outlook.”

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

IEA chief warns of summer fuel shortages and a triple energy crisis that will outstrip the oil shocks of the 1970s

June 1, 2022

IEA chief warns of summer fuel shortages and a triple energy crisis that will outstrip the oil shocks of the 1970s

gas station — International Energy Agency chief Fatih Birol has warned of a triple energy crisis that could be “much bigger” and longer lasting than the 1970s.

The US and Europe face fuel shortages as summer vacations get underway, the head of the IEA told Der Spiegel.
Fatih Birol warned of potential diesel, petrol, and kerosene shortages, and said the current energy crisis was worse than the 1970s.
“We have an oil crisis, a gas crisis and an electricity crisis simultaneously,” he said.

The US could see fuel shortages this summer once people start taking their vacations — and Europe could take a particular hit from the lack of supply, the head of the International Energy Agency has warned.

“When the main holiday season starts in Europe and the US, fuel demand will rise,” Fatih Birol told Der Spiegel. “Then we could see shortages — for example, in diesel, petrol or kerosene, particularly in Europe.”

Birol also told the German newspaper that the energy crisis now underway will be more severe and longer-lasting than the oil price shocks of the 1970s, given it’s applying pressure on three fronts.

“Back then it was just about oil,” he said in the interview published Tuesday. “Now we have an oil crisis, a gas crisis and an electricity crisis simultaneously.”

Oil prices spiked in 1973 and 1979 as the Yom Kippur War and the Iranian Revolution interrupted Middle Eastern crude exports. Geopolitical events have hit the market again in 2022, as western nations impose sanctions on Russia over its invasion of Ukraine.

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

Inflation and soaring gas prices have forced a North Carolina logging company to shut down after 37 years in business

May 17, 2022

Inflation and soaring gas prices have forced a North Carolina logging company to shut down after 37 years in business

As of Monday, gasoline cost $4.491 per gallon, per the US Energy Information Administration.Johner Images/Getty Images

A logging business in North Carolina is shutting down over accelerating inflation and soaring gas prices.
“I haven’t talked to a logger in the last few years that is actually making money,” its owner said.

A family-run logging business in North Carolina is shutting down after being unable to cope with accelerating inflation and soaring gas prices.

Bobby Goodson, who set up Goodson’s All Terrain Logging 37 years ago, said that he couldn’t find a way to keep the business running.

“I haven’t talked to a logger in the last few years that is actually making money,” Goodson said in a video posted on his YouTube channel on May 10, where he announced that he was closing his business.

Goodson said that he was going to start selling off his equipment. “I can’t park the stuff for six, eight months, a year waiting for the economy to turn around,” he said.

Fuel prices have been soaring in the US as a result of post-pandemic demand and the conflict in Ukraine. As of Monday, regular gasoline cost $4.491 per gallon on average, up $1.463 from the same time a year ago, per the US Energy Information Administration, an increase of nearly 50%. Though crude oil prices have eased recently, oil refiners have become a bottleneck in the energy market, pushing up gas prices.

“When you got a fleet of trucks, and you’re running probably 700 to 800 miles a day, a truck is going to get five miles to the gallon,” Goodson told News Channel 12, an ABC-affiliated network. “That fuel increase kills you. And so I didn’t see any way out.”

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

Saudi Arabia warns that the world is running out of energy capacity: ‘I have never seen these things’

May 11, 2022

Saudi Arabia warns that the world is running out of energy capacity: ‘I have never seen these things’

The EU is planning a complete ban on Russian oil imports.

Saudi Oil Minister Prince Abdulaziz bin Salman warned Tuesday that the world is “running out of energy capacity at all levels.”
“I am a dinosaur, but I have never seen these things,” he said at a conference.
A UAE official also warned that more investment is needed in the energy sector for OPEC+ to deliver sufficient supplies.

The amount of unused capacity that the world can tap to produce more energy products is running out, warned top oil ministers.

Referring to recent price spikes for refined products, Saudi Oil Minister Prince Abdulaziz bin Salman said at a Tuesday conference, “I am a dinosaur, but I have never seen these things,” according to Bloomberg.

“The world needs to wake up to an existing reality. The world is running out of energy capacity at all levels,” he added.

Prices for crude oil have surged more than 50% from a year ago to roughly $105 a barrel. But prices for refined products like diesel have soared even higher. In the US, diesel prices are up 78% to $5.50 a gallon, Bloomberg data shows.

The United Arab Emirates’ oil minister said OPEC+ may not be able to deliver on sufficient energy supplies down the line without more investments.

“We’ve been warning about the lack of investment,” Suhail al Mazrouei said in an interview in Abu Dhabi, Bloomberg reported. “That lack of investment is catching up with a lot of countries.”

Mazrouei added that “politicization” of the oil market has pushed supply prices higher.

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

China and Russia are working on homegrown alternatives to the SWIFT payment system. Here’s what they would mean for the US dollar.

May 2, 2022

China and Russia are working on homegrown alternatives to the SWIFT payment system. Here’s what they would mean for the US dollar.

Vladimir Putin and Xi Jinping — Russian President Vladimir Putin and Chinese President Xi Jinping.

Some Russian banks have been banned from SWIFT, a cross-border messaging service for banks.
India was reportedly considering a Russian proposal to use the SPFS for payments in rubles.
Moscow is also working with Beijing to connect to the Chinese messaging system.

In the aftermath of Russia’s unprovoked invasion of Ukraine, some Russian banks were banned from SWIFT, the Belgium-based messaging service that lets banks around the world communicate about cross-border transactions. The ban has hampered cross-border transactions for Russia’s trade and financial systems, isolating the country economically.

Now, both Russia and China are looking to establish alternatives to the US dollar hegemony.

Russia is touting an alternative ruble-based payment system called the System for Transfer of Financial Messages (SPFS). The system was set up in 2014. In late April, the country’s central bank said it would start keeping the names of participants secret.

China’s Cross-Border Interbank Payment System (CIPS) — which processes payments in Chinese yuan — also has potential to replace SWIFT. The system has an expansive network of 1,280 financial institutions, said Peter Keenan, the cofounder and CEO of Apexx, a payments provider that used to work with Russia’s domestic Mir payment card. That’s compared to SPFS’ much smaller network of 400 users.

There are few alternatives to SWIFT, Keenan told Insider: “This is one of the reasons why Russia is looking to CIPS and an alternative for Asian payments specifically.”

Here’s how China and Russia’s SWIFT alternatives could cause disruptions in the global payments system and the dollar’s dominance.

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

Sand for fracking is now 3 times as expensive as it was last year, and it’s one of several reasons US oil production isn’t increasing

March 26, 2022

Sand for fracking is now 3 times as expensive as it was last year, and it’s one of several reasons US oil production isn’t increasing

Fracture manager Eric Vaughan holds a mixture of sand and water which will be pumped down the pipes as shale gas developer Cuadrilla Resources will start fracking for gas next week at its Preston New Road site near Preston — A hydraulic fracturing manager holds a mixture of sand and water which is pumped down the pipes at a shale gas site in the UK.

Russia’s invasion of Ukraine has knocked 1.5 million barrels of oil per day out of the global supply.
With prices spiking, US oil producers have not significantly stepped up production.
One reason: the special sand needed for fracking is 185% more expensive.

With Russian oil on the international blacklist due to the invasion of Ukraine, the world is seeking a replacement for as many as 4.5 million barrels per day.

Indeed, analysts at Rystad energy consultancy estimate that global trade of crude is down by an average of 1.5 million barrels per day since the beginning of Russia’s assault on its Eastern European neighbor.

Nearly a month on, crude oil is trading at over $110 per barrel, a price which has historically motivated oil companies to ramp up production, but the output of US drillers hasn’t appeared to move significantly.

One of the key reasons actually predates the war in Ukraine: the special sand required for hydraulic fracturing (frac sand) in shale oil production has gotten a lot more expensive.

Frac sand is made of silica crystals processed from pure sandstone, with a small grain size and round shape that allows natural fluids like oil and water to pass between them. At a drilling site, sand is mixed with water and special chemicals, then injected into the ground at high pressure to break up shale to release and pump out the oil inside.

That material now costs between $40 and $45 per ton, Rystad Energy analyst Ryan Hassler told Axios — nearly 185% higher than last year. Two years ago, sand prices were in the teens.

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

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