Analysis of current economic conditions and policy
Brent Spot Surges, vs. Weekly Diesel and Other Derivatives
Brent spot FOB through yesterday:
Diesel today (AAA): $6.31/gallon.
7 thoughts on “Brent Spot Surges, vs. Weekly Diesel and Other Derivatives”
Macroduck
By the way, here’s Claudia Sahm on the Fed’s rate hike in relation to supply-shock driven inflation:
“…the Fed should not chase energy prices. The Fed is not trying to bring gasoline prices down with higher rates. It could, but at too high a price: massive demand destruction and employment losses. Instead, the Fed needs to contain the spillovers into non-energy prices, a risk that grows the longer energy prices stay elevated…By taking a little demand out of the economy, a modest rate increase can push more of those costs into margins and less into consumer prices.”
Pushing costs into margins rather than consumer prices is exactly the right goal, but it’s a tricky business. We are far from a perfectly competitive market, which means producers have more lattitude in decision making than they would when facing greater competition. They might, for instance, cut costs instead of margins; labor is the biggest expense for many businesses, so cutting workers and restraining wages might come before cutting margins.
Our political chit-chat makes a big deal about political pressure on the Fed, and rightly so. The FOMC has stood up to political pressure even with Warsh in the chair, and that’s good, but by far the larger political factor in our inflationary environment is our attack on Iran and imposition of tariffs.
In the same way that two wrongs don’t make a right, Fed policy makers have decided that two bad policies can’t add up to good policy. On balance, we still have bad policy, but it’s not the Fed’s fault.
Macroduck
Off topic – Walking through the parking lot of a local grocery, I heard a couple of young men say “don’t shoot”. They sounded calm, and I assumed they were doing a “black lives matter” bit to entertain themselves – they weren’t particularly black. Anyhow, the door of a car stopped in the parking lot opened and a woman got out and walked toward the young men. I heard her say something about “and I’ve got a .45 in the car.”
Decided it was just young men doing a bit. I pulled out my phone and pointed it at her license plate, and she got back in her car and left, running her mouth at me all the while. I talked to the young men, along with an older fellow who had beat feet when he saw the gun, and yes, she had threatened all three with a gun. All because of a near miss between two vehicles in the parking lot.
Be careful out there.
Cage's Longlegs
I have seen more of this in everyday life out on the roads, and also as someone who listens to local police scanner maybe average 30 minutes per day. What you are talking about is real and more common. A big spike in road rage. I will say writing down or taking videos of license plates seems to be an amazingly “soothing” thing for the person threatening violence (or committing ANY crime).
I attribute it to 2–3 things. Summer heat, video games, and people who, due to lack of real life social interaction, taking their social cues from the internet and social cues from movies (Example Demi Moore’s “The Substance”, PURE garbage, that many American housewives wanted to nominate for an Oscar). I see this happening over broad swaths of the American public, not just “those derned New Yorkers” or those “Caleeehfornias liberals”. I find it abnormally freaky. And that’s coming from someone who considers themselves very bad at IRL social interactions nearly all my life—-so the fact that I am noticing and it seems even past surreal says something.
Macroduck
This happened in Tennessee, home of the Covenant School shooting, the Antioch School shooting, and 46 other school shootings since 2005. So yeah, typical behavior these days.
baffling
I have been arguing here for a while now that prices would increase drastically once we hit physical scarcity. and I was perplexed that prices stayed so low for so long. part of that was a clever move by Saudi to reroute a lot of Persian gulf oil to their west coast for delivery. part of it was the success of us navy in escorting tankers out of the Persian gulf. you only need to successfully move a portion of the persian gulf supply line to keep physical scarcity from happening in the short term. but it looks like the sh!t will hit the fan by October, or before the elections. in texas I have seen gasoline prices increase by about $0.50 per gallon over the past week or so. pretty dramatic. One you get gas with a $4 handle, people notice.
what are the odds of another rate hike at the end of October, right before the election?
Baffling
West texas crude priced only about $1.40 per barrel less than brent crude this morning. Thoughts on why? Spread seems small. Is brent getting cheaper or wti more expensive?
pgl
Have no fear – Trump is telling us Venezuela will be pumping 10 trillion barrels of oil per day. OK – maybe he did not go quite that far but Bessett told the Congress this week there is some magic new $13 billion coming to us from Venezuela. When press to name the bank account – he said he couldn’t. I can – Don Junior’s personal account.
By the way, here’s Claudia Sahm on the Fed’s rate hike in relation to supply-shock driven inflation:
“…the Fed should not chase energy prices. The Fed is not trying to bring gasoline prices down with higher rates. It could, but at too high a price: massive demand destruction and employment losses. Instead, the Fed needs to contain the spillovers into non-energy prices, a risk that grows the longer energy prices stay elevated…By taking a little demand out of the economy, a modest rate increase can push more of those costs into margins and less into consumer prices.”
Pushing costs into margins rather than consumer prices is exactly the right goal, but it’s a tricky business. We are far from a perfectly competitive market, which means producers have more lattitude in decision making than they would when facing greater competition. They might, for instance, cut costs instead of margins; labor is the biggest expense for many businesses, so cutting workers and restraining wages might come before cutting margins.
Our political chit-chat makes a big deal about political pressure on the Fed, and rightly so. The FOMC has stood up to political pressure even with Warsh in the chair, and that’s good, but by far the larger political factor in our inflationary environment is our attack on Iran and imposition of tariffs.
In the same way that two wrongs don’t make a right, Fed policy makers have decided that two bad policies can’t add up to good policy. On balance, we still have bad policy, but it’s not the Fed’s fault.
Off topic – Walking through the parking lot of a local grocery, I heard a couple of young men say “don’t shoot”. They sounded calm, and I assumed they were doing a “black lives matter” bit to entertain themselves – they weren’t particularly black. Anyhow, the door of a car stopped in the parking lot opened and a woman got out and walked toward the young men. I heard her say something about “and I’ve got a .45 in the car.”
Decided it was just young men doing a bit. I pulled out my phone and pointed it at her license plate, and she got back in her car and left, running her mouth at me all the while. I talked to the young men, along with an older fellow who had beat feet when he saw the gun, and yes, she had threatened all three with a gun. All because of a near miss between two vehicles in the parking lot.
Be careful out there.
I have seen more of this in everyday life out on the roads, and also as someone who listens to local police scanner maybe average 30 minutes per day. What you are talking about is real and more common. A big spike in road rage. I will say writing down or taking videos of license plates seems to be an amazingly “soothing” thing for the person threatening violence (or committing ANY crime).
I attribute it to 2–3 things. Summer heat, video games, and people who, due to lack of real life social interaction, taking their social cues from the internet and social cues from movies (Example Demi Moore’s “The Substance”, PURE garbage, that many American housewives wanted to nominate for an Oscar). I see this happening over broad swaths of the American public, not just “those derned New Yorkers” or those “Caleeehfornias liberals”. I find it abnormally freaky. And that’s coming from someone who considers themselves very bad at IRL social interactions nearly all my life—-so the fact that I am noticing and it seems even past surreal says something.
This happened in Tennessee, home of the Covenant School shooting, the Antioch School shooting, and 46 other school shootings since 2005. So yeah, typical behavior these days.
I have been arguing here for a while now that prices would increase drastically once we hit physical scarcity. and I was perplexed that prices stayed so low for so long. part of that was a clever move by Saudi to reroute a lot of Persian gulf oil to their west coast for delivery. part of it was the success of us navy in escorting tankers out of the Persian gulf. you only need to successfully move a portion of the persian gulf supply line to keep physical scarcity from happening in the short term. but it looks like the sh!t will hit the fan by October, or before the elections. in texas I have seen gasoline prices increase by about $0.50 per gallon over the past week or so. pretty dramatic. One you get gas with a $4 handle, people notice.
what are the odds of another rate hike at the end of October, right before the election?
West texas crude priced only about $1.40 per barrel less than brent crude this morning. Thoughts on why? Spread seems small. Is brent getting cheaper or wti more expensive?
Have no fear – Trump is telling us Venezuela will be pumping 10 trillion barrels of oil per day. OK – maybe he did not go quite that far but Bessett told the Congress this week there is some magic new $13 billion coming to us from Venezuela. When press to name the bank account – he said he couldn’t. I can – Don Junior’s personal account.