Posts filed under “Energy”
Interesting discussion regarding new ways to plant and fertilize: The most popular fuel-reducing strategy involves a radically new way of planting seeds. Instead of breaking up the ground with a plow to plant seeds, no-till farming leaves the remains of last year’s crop on the surface. Drills punch through this mat of vegetation…Read More
The Wars in the Middle East and North Africa Are NOT Just About Oil … They’re Also About GAS The Iraq war was really about oil, according to Alan Greenspan, John McCain, George W. Bush, Sarah Palin, a high-level National Security Council officer and others. Dick Cheney made Iraqi’s oil fields a national security priority…Read More
Australia 2nd Q GDP came in at +0.6% Q/Q, well below +1.4% in the 1st Q and below the +0.7% rise expected. Y/Y, the economy grew by +3.7%, though this pace of growth will decline sharply in H2 as capex in the mining sector (currently just in iron ore, but likely to extend to coal)…Read More
Click to enlarge:
Source: Bianco Research
The chart above shows the amount of oil in the Strategic Petroleum Reserve (SPR). Highlighted on the chart above are the five releases of oil from the reserve.
In 1996 and 2000 these releases occurred during the presidential campaign season for what seemed like no urgent need. The other three occurred because geopolitical events or weather disrupted supply – 1990 (Desert Storm), 2005 (Hurricane Katrina) and 2011 (Arab Spring with Libya going off-line).
Based on the story below, it sounds as though this is nothing more than politics during the election season.
Reuters.com – Exclusive: White House dusting off plan for potential oil release
The White House is “dusting off old plans” for a potential release of oil reserves to dampen rising gasoline prices and prevent high energy costs from undermining the success of Iran sanctions, a source with knowledge of the situation said on Thursday. U.S. officials will monitor market conditions over the coming weeks, watching whether gasoline prices fall after the September 3 Labor Day holiday, as they historically do, the source said. It was too early to say how big a drawdown would be from the U.S. Strategic Petroleum Reserve and, potentially, other international reserves if a decision to proceed was taken, the source said. Oil prices have surged in recent weeks, with Brent crude prices closing in on $120 a barrel, up sharply from around $90 a barrel in July. The United States and other Group of Eight countries studied a potential oil release in the spring but shelved the plans when prices dropped. With prices high again, U.S. officials were now collecting information from the market about potential needs and studying futures, production numbers and data on Iranian oil exports. “The driving force in this is both impact on the economy and impact on the Iran sanctions policy,” the source said, noting that Washington did not want rising oil prices to create a windfall for Iran while oil embargo and international sanctions were having an effective impact. The United States has yet not held talks with international partners about a coordinated move. The source noted that Britain, France, Germany and other partner nations in the Paris-based International Energy Agency were receptive to a potential release a few months ago when conditions were similar.
Click to enlarge: The Financial Times –Iran’s oil output falls to a 20-year low Iran’s oil production has fallen to its lowest level since the aftermath of the Iran-Iraq war 20 years ago as western sanctions threaten Tehran’s economic lifeline. Oil traders and western policy makers who monitor Iranian oi production estimate that Tehran…Read More
Never a good sign to see falling prices in gasoline heading right into the teeth o driving season — it means that demand is soft, and that suggests economic slowing . . . Daily Gas Prices Source: Bianco Research Charts Of The Week July 11, 2012
Here is a twist: We used to discuss how the Fed loved their core (ex food & energy) inflation measures. I termed that Inflation Ex-Inflation, and if you look around TBP, you will see lots of mentions of that measure.
Take a closer look at Energy, one of the biggest non-housing components. As noted this morning, Commodities have entered a Bear Market. Gas & Oil are not contributing much inflationary pressures. If anything, Energy costs now are acting as a drag on Inflation.
Call it Inflation Ex-Deflation (Do you want to guess what that means for the Fed’s love of the Core Inflation (ex food & energy)?
Consider the Federal Reserve inflation target of 2.0%. Jim Bianco notes that inflation is moderate at 1.73%. However, if you take a closer look at the chart below of core CPI — you will see a 2.3% on a year-over-year basis (blue line) and a heady 2.71% on a three-month annualized basis (red line).
Sum it up and it means inflation less energy is largely running above the Federal Reserve’s target.
Energy Now A Drag On Inflation
Source: Bianco Research
More charts after the jump