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Chaos & The Triumph Of Survival

Chaos & The Triumph Of Survival

Authored by Egon von Greyerz via GoldSwitzerland.com,

One of the most horrifying works of art is Bruegel’s “The Triumph of Death” painted in 1562. The painting depicts the end of life on earth.

I…

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Chaos & The Triumph Of Survival

Authored by Egon von Greyerz via GoldSwitzerland.com,

One of the most horrifying works of art is Bruegel’s “The Triumph of Death” painted in 1562. The painting depicts the end of life on earth.

I sincerely hope that this is not what the world will literally look like in the next decade or two but metaphorically this is not an unlikely depiction of the chaos that could hit us all.

For a detailed description of the grim painting see here

The Black Death plague of the 14th century, which killed up to half of the world’s population, clearly had a major influence on the painter.

The moral message is that when chaos hits, the destruction will affect everyone, rich and poor, young and old. No one will escape by power or devotion.

The financial, economic and moral devastation which is about to hit the world will for more than 99.5% of the people come out of the blue like a flash from a clear sky.

For most people, coming events will thus be like the definition of the word CHAOS: “A state of total confusion and disorder”.

CHAOS NUMBER 1: COVID

Talking about disorder, just like the Black Death that inspired Bruegel’s painting, the world is now facing a global pandemic. But rather than the nearer 50% of global population that perished in the mid 1300s, today we are looking at total deaths from the current pandemic of 0.06% of the world population! And even that figure might be overestimated due to the classification rules applied.

For that minuscule percentage the world has now been paralysed for the third year soon.

There are lockdowns, quarantines, compulsory vaccines with unlined boosters, covid passports, closed schools, closed offices, major industries like leisure haemorrhaging, airlines going bankrupt, shortages of labour, components, products, closed borders, and for the few people who dare to and can travel across borders, more bureaucracy, paperwork and tests than in a police state. At the same time money printing and credit creation have gone exponential.

The politicians obviously blame the scientists for all the rules that they force upon the people.

It is interesting that with almost 200 countries in the world, each country has different rules how to deal with covid. If all these rules were based on science, you would have thought that the rules would have been the same for all 200 countries.

Or could it be as many observers believe that the politicians use the pandemic to their own advantage.

Or is it more likely that neither the scientists nor the politicians have got a clue how to deal with a disease that creates hardly any deaths in excess of normal deaths?

In Sweden for example, there has been no lockdown, no quarantine, no closed shops, no mask requirement and industry has operated normally. Covid cases and deaths are at the lower range of the European average. Hmmm – so much for all these punishing rules in most countries.

We were told that the vaccines would solve the problem but two shots haven’t so far as we were promised. So now everyone needs a booster every few months. With Big Pharma being both judge and jury plus benefiting from their own advice to the extent 100s of billions of dollars, how do we know the real truth?

As an example, I have a 19 year old vaccinated granddaughter who had Covid in August. Now she has got Covid for the second time, fortunately in the form of a normal cold. The government/scientist solution is clearly more vaccines at ever more frequent intervals. And still no one has properly tested the long term effects the vaccines have on our bodies. There just isn’t time for that!!?

The consequences of these constant changing of rules and shutdowns will clearly have a devastating effect on an already very fragile world economy and financial system.

CHAOS NUMBER 2: GLOBAL DEBT

So if scientists and governments haven’t got a clue how to deal with Covid, we can at least assume that central bankers and governments have got the economy and the financial system under control.

How wrong can we be?

Ever since the Federal Reserve was created in 1913, central and commercial bankers have successfully been running the financial system for their own benefit. But what really gave them carte blanche to print unlimited amounts of money was in August 1971, when Nixon closed the gold window. Since then, President Thomas Jefferson’s cynical view on bankers have really come to pass.

How incredibly prescient the above statement is. We must remember that the Fed is a private bank that totally controls the US financial system. And as long as the US dollar remains the reserve currency of the world, the Fed also controls major parts of the global financial system.

Jefferson will also be right regarding inflation and deflation. The current financial system is now entering a phase of inflation, most probably leading to hyperinflation as I have discussed many times in my articles

But before this financial system ends, the totally worthless debt must be destroyed through a deflationary implosion not only of the debt, but also the bubble assets financed by printed money created out of thin air.

So a deflationary depression is likely to be the end of yet another failed experiment of a fiat money system which was doomed the day it was created on Jekyll island 111 years ago. Jefferson of course told us this would happen already over 200 years ago.

If history teaches us anything, it is that no one learns from history and everyone thinks it is different today because we are here.

Plus ça change, plus c’est la même chose – The more it changes, the more it stays the same.

So back to Bruegel. An implosion of the financial system and consequently the global economy will clearly have major repercussions for life on earth.

We must remember that NEVER BEFORE IN HISTORY has there been a global debt crisis of this magnitude.

Never before have debt bubbles at this level in Europe, in North and South America, Asia, Africa and Oceania synchronised at the levels we are now experiencing. 

Just look at the magnitude of debt which has been created since 1971.

It took a few thousand years to get to a global debt of $1.5 trillion in 1971. And 29 years later debt had grown 66x to $100 trillion and since then it is up another 3x to $300T.

So when the shackles were thrown off by closing the gold window in 1971, there was a free for all between bankers and governments to create unlimited amounts of money.

And by golly they have succeeded! Global debt is up 200x since Nixon took away the gold backing of the dollar and all other currencies.

As regards the $3 quadrillion debt in 2030, I will comment later in this article.

The very final stage of this monetary era started in 2006 with the Great Financial Crisis. Tens of trillions of dollars printed, lent and guaranteed managed to patch up Humpty Dumpty temporarily.

But it was very clear to me and some other observers that the patch would not last long. So back in September 2019 the financial system came under severe pressure and central banks panicked in an attempt to save the bankrupt banking system with massive liquidity. Conveniently for the banks, they had an excuse for this money printing since Covid started a few weeks later.

Normally governments need to start a war to have an excuse to print serious money. But a pandemic created in a lab works even better.

The world is now in totally unchartered and very precarious waters. A ship in such danger does not require more than a minor storm to be hit by irreparable damage.

Nobody can forecast what will happen since we have nothing to compare with. But what is very likely is that the creature (from Jekyll Island) that has been created by bankers and governments will reach a terrible fate – a fate that only future historians can tell the world about.

CHAOS NUMBER 3: DERIVATIVES

Global derivatives outstanding were reported by the BIS in Basel (Bank of International Settlement) at $1.4 quadrillion in the mid 2000s. That figure was conveniently reduced by the BIS to around $600 trillion at the end of the 2000s by netting positions.

Banks like Deutsche or JP Morgan have reported gross outstanding derivatives of $40-50 trillion.

But all banks net the gross amounts of derivatives down to insignificant levels, arguing that these low and totally misleading amounts are their real exposures.

Well, the bankers can fool some of the people some of the time but in the end we know who the real fools will be!

The problem with netting is that when counterparties fail, gross risk remains gross.

Derivatives have been a most incredible money spinner for banks and other financial entities. There are today so many opaque ways of creating and hiding derivatives from the official reporting that no one has a clue of the real amount outstanding. But it could easily be in the quadrillions of dollars.

Remember that virtually every financial instrument created today consists of derivatives, whether it is ETF stock or bond funds, interest rate swaps, forex swaps, mortgage loans etc, etc, the list is endless.

Derivatives function very well in an manipulated orderly system when there is constant demand. But when the music stops and liquidity dries up, only then will we know the real amounts outstanding.

One of my very good contacts is an excellent interpreter of the risks in the system. He has created these inverse pyramids with the current financial system at the bottom resting on a small amount of gold with massive debt on top. Above that we see the known derivatives reported by the BIS of $600 trillion and on top of that the opaque financial system which is likely to be in the quadrillions of dollars.

No one knows the exact amount but it could easily be $2 quadrillion and probably more.

CHAOS NUMBER 4: TIMEBOMB

So if we look into the next 5-10 years and paint a picture of what could happen to the financial system, the risk the world is facing is horrifying.

Global debt will certainly grow from $300t to at least $500t. That figure is really a gross underestimate.

We add to that global unfunded liabilities (pensions, medicare etc) which are easily $500 trillion.

Finally we add the derivatives of $2 quadrillion – also probably too conservative.

When counterparties fail, central banks will need to print all that money to prevent banks from failing.

So if my assumptions are right, global debt will have grown from $300 trillion to $3 quadrillion in the next 5-10 years.

But I will probably be wrong on many accounts, like it won’t take as long as 10 years. We know from history that hyperinflation goes very fast. Also, most of the estimates of debt and derivatives are probably much too low.

Still, let’s assume that the world is now facing a timebomb of $3 quadrillion. A very frightening prospect indeed.

Warren Buffett knew he was right in 2002 when he called derivatives financial instruments of MASS DESTRUCTION. Sadly, we will soon see the evidence.

Since all monetary systems in history have come to an end, we have to assume that the biggest global bubble ever also will.

And since this morbid system touches all corners of our lives and has led to a decadent world where moral and ethical values have virtually disappeared, the world needs a cleansing in the form of a forest fire for new green shoots to start again.

PREPARE AND ACHIEVE THE TRIUMPH OF SURVIVAL

As I have pointed out in this article, nobody knows exactly how things will play out.

But what we do know is that risk is probably greater than any time in history. So prudence tells us to get out of bubble assets like stocks, bonds and speculative property. Once the fall starts, these assets are likely to lose 90% or more in real terms which means against gold.

The majority of stock investors are likely to buy all the dips as the market falls, not realising that they will ride the fall all the way down to the bottom. And this time the market will not recover for years or probably decades.

Also it is important to get out of debt except for a normal mortgage on your residential property.

Own physical gold and some silver (much more volatile). That will be your insurance against a rotten financial system.

We have owned and recommended physical gold for 20 years. Not once have we worried about the price. History tells us that governments and central banks destroy the value of money without fail.

But for the ones who do look at the gold price, I think that the correction in gold is finished. There is always a chance of a final move down of $50-100. But that would make no difference since the next big move up is soon coming to much higher levels.

Finally, we will have difficult times in the world. So helping family and friends is very important.

It is everyone’s responsibility to resist the Triumph of Death and achieve the Triumph of Survival – both financial and mental – for everybody we can help.

And remember that many of the best things in life are free – friendship, music, books, nature and many hobbies.

I wish all our readers Merry Christmas and Happy Holidays, as well as a Healthy and Harmonious 2022 in spite of the tumultuous era we are entering!

Tyler Durden Sat, 12/25/2021 - 23:45

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Missouri Bill Prevents Doctors Being Disciplined If They Prescribe Ivermectin Or Hydroxychloroquine

Missouri Bill Prevents Doctors Being Disciplined If They Prescribe Ivermectin Or Hydroxychloroquine

Authored by Naveen Athrappully via The…

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Missouri Bill Prevents Doctors Being Disciplined If They Prescribe Ivermectin Or Hydroxychloroquine

Authored by Naveen Athrappully via The Epoch Times (emphasis ours),

Missouri lawmakers passed legislation that prevents state licensing boards from disciplining doctors who prescribe ivermectin and hydroxychloroquine.

Missouri Gov. Mike Parson signs a bill in Jefferson City, Mo., on May 24, 2019. (Summer Balentine/AP Photo)

Sponsored by Rep. Brenda Kay Shields (R-Mo.), HB 2149 also bars pharmacists from questioning doctors or disputing patients regarding the usage of such drugs and their efficacy.

With a convincing 130–4 vote in the House, HB 2149 passed both chambers on May 12 and currently heads to the office of Gov. Mike Parson to be potentially signed into law.

The board shall not deny, revoke, or suspend, or otherwise take any disciplinary action against, a certificate of registration or authority, permit, or license required by this chapter for any person due to the lawful dispensing, distributing, or selling of ivermectin tablets or hydroxychloroquine sulfate tablets for human use in accordance with prescriber directions,” reads the draft of the bill (pdf).

It adds, “A pharmacist shall not contact the prescribing physician or the patient to dispute the efficacy of ivermectin tablets or hydroxychloroquine sulfate tablets for human use unless the physician or patient inquires of the pharmacist about the efficacy of ivermectin tablets or hydroxychloroquine sulfate tablets.”

Critics of the bill have noted that the Food and Drug Administration (FDA) has not given approval for usage of the drugs. Ivermectin and hydroxychloroquine have been divisive drugs and politically polarized throughout the pandemic.

“But, nevertheless, the Missouri legislature has chosen to ‘own the libs’ by issuing a gag order against every pharmacist in this state from offering their medical opinion on taking either one of those medications—even if it could kill their patient,” wrote former Democratic nominee Lindsey Simmons in a May 12 Twitter post.

Although 22 countries across the world have approved the use of ivermectin in treating COVID-19, the FDA maintains that the current data show the drug to be ineffective. Large doses can be dangerous, it says.

A recent study published in the International Journal of Infectious Diseases analyzed a national federated database of adults that compared ivermectin with the FDA-approved COVID-19 medication, remdesivir.

After using propensity score matching and adjusting for potential confounders, ivermectin was associated with reduced mortality vs remdesivir,” researchers wrote. “To our knowledge, this is the largest association study of patients with COVID-19, mortality, and ivermectin.”

According to The Associated Press, Missouri state Rep. Patty Lewis, a Democrat, agreed to the bill to satisfy a group of conservatives in the Senate. She added that the bill will not change anything significantly as medical boards do not engage in punishing doctors who prescribe drugs legally.

Tyler Durden Wed, 05/18/2022 - 23:25

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“They Shut Us Down”: Michigan Businesses Sue Whitmer For Losses Due To COVID Lockdowns

"They Shut Us Down": Michigan Businesses Sue Whitmer For Losses Due To COVID Lockdowns

Authored by Steven Kovac via The Epoch Times (emphasis…

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"They Shut Us Down": Michigan Businesses Sue Whitmer For Losses Due To COVID Lockdowns

Authored by Steven Kovac via The Epoch Times (emphasis ours),

A coalition of five bowling alleys and family entertainment centers is suing Michigan’s Gov. Gretchen Whitmer, a Democrat, for losses incurred due to her mandatory COVID-19 shutdowns in 2020.

Michigan Gov. Gretchen Whitmer listens to Democratic presidential candidate Sen. Kirsten Gillibrand (D-N.Y.) in Clawson, Mich., on March 18, 2019. (Paul Sancya/AP)

Michigan Dept. of Health and Human Services director Robert Gordon is also a defendant in the case.

The plaintiffs allege that the shutdowns imposed by Whitmer and Gordon were a “taking” of their businesses without just compensation in violation of both the state and the U.S. Constitution.

The case has been winding its way through the federal courts since January 2021.

Fred Kautz runs the lane oiler at Kautz Shore Lanes in Lexington, Mich., on May 13, 2022. (Steven Kovac/The Epoch Times)

The coalition lost the first round of the legal battle when the U.S. District Court for the Western District of Michigan ruled against it.

Oral arguments were recently held before a three-judge panel of the US Court of Appeals Sixth Circuit.

Plaintiff’s chief counsel David Kallman told The Epoch Times after the appeals court hearing, “The oral arguments from both sides were vigorous. The judges asked a lot of questions. It was the kind of proceeding that makes you proud to be a lawyer.

“Even the defense acknowledges that we are presenting ‘novel’ arguments.

“Michigan is the only state in the nation where a governor’s public health emergency powers were overturned as unconstitutional.

“If we lose in the court of appeals, we will take this case to the U.S. Supreme Court.”

Scott Bennett, executive director of the Independent Bowling and Entertainment Centers Association, told The Epoch Times,

“The governor’s actions were devastating to our industry.

“Things went from ‘two weeks to slow the spread’ to indefinite shutdowns.”

Bennett said that the forced closures were not based on solid scientific proof that bowling alleys and family entertainment centers would spread the virus any more than the Walmart stores or the GM plants that were allowed to remain open.

“They were allowed to operate with hundreds and even thousands of people in them but we had to shut down. We feel our industry was unfairly singled-out.

“We cannot stand for a repeat of such arbitrary treatment and don’t want the people of Michigan to forget what was done to them.”

With the recent uptick in COVID cases and the approaching mid-term elections, Bennett said his members that survived the 2020 shutdowns feel like it can happen all over again.

“It’s like operating day-to-day with a hammer held over your head. The uncertainty is altering business plans. The value of our businesses is dropping through the floor,” Bennett said.

Brian and Mindy Hill work the counter at their bowling alley in Imlay City, Mich. on May 13, 2022. (Steven Kovac/Epoch Times)

Fred Kautz, the proprietor of Kautz’s Shore Lanes in Lexington, Michigan, started working in the family business when he was 13.

The business has 12 bowling lanes, a bar, an arcade, a restaurant, and living quarters upstairs.

“We’ve owned this place for 42 years. For me and my family, it’s more than a place to work. It’s a way of life. And it has become an institution in our community—a real gathering place,” said Kautz.

He said he is still smarting from what happened after Whitmer’s executive actions were ruled unconstitutional by the Michigan Supreme Court in the fall of 2020.

“We got a little reprieve. We thought we were in the clear until she came back with another round of forced closures, this time under the authority of the Michigan Department of Public Health.

The first 30 days knocked us right on our butts. But we were willing to cooperate, to do our part. We were all scared and we did not want to see harm come to anybody.

We lost a lot of money at the time. We are coming back slowly, but our overall revenue is still down 20 percent from pre-pandemic days. That’s hard to make up.

“In the spring of 2020, I tried to do what was recommended and go along. Never again!

“If my Dad was still alive, he’d have never closed at all,” said Kautz.

Brian and Mindy Hill, owners of I.C. Strikes, a 16-lane bowling alley, bar, and snack bar in Imlay City said their business was hit hard by the shutdowns.

Brian was the town barber for 25 years, before purchasing the bowling alley where he learned to bowl as a child.

“We took over in December 2018. We’d saved up money to buy this place and make some upgrades. When COVID hit, we were forced to close down. It took all the money we saved for improvements just to survive,” said Brian.

The Hills said they never thought they’d see the day when their own government could do something like that to them.

Mary Bacon, assistant manager of Jump City, a family recreation center, cleans an arcade machine in Imlay City, Mich., on May 13, 2022. (Steven Kovac/The Epoch Times)

They shut us down. They took away our livelihood with no end date in sight. Then they wanted to loan us money. Think about that. They first put us in a situation where we had zero income to pay our previous debt. And then they wanted to loan us more money.

“Lots of small business people lost their businesses but kept their debt. It ruined them,” said Brian.

The Hills did apply for and receive a Small Business Administration loan at 3.25 percent interest for 30 years, and they participated in the Paycheck Protection Program which helped their business survive.

Up the road from the Hill’s bowling alley is Jump City, a large indoor recreation center offering an array of bouncy houses and arcade games for children.

Assistant manager Mary Bacon told The Epoch Times, “We lost a lot of business. We were forced to close for 15 months and had to make our payments with no income.”

Bacon remembers the morning of March 16, 2020, when many area businesses were gearing up for big St. Patrick’s Day celebrations.

“By afternoon everybody had to close. All that food went to waste.

“The shutdown was supposed to be for a couple of weeks. Nobody foresaw it would drag on for a year and three months.

“Oh, they said we could open again, but they so severely restricted the number of customers that we lost all of our big birthday parties. With so few kids allowed in, we couldn’t operate. We were losing too much money.”

Bacon said people are coming back to the center but are still scared, even though the games and bouncy houses are continuously cleaned and sanitized.

Navaeh Smalstig, 8, climbs out of a bouncy house at Jump City in Imlay City, Mich., on May 13, 2022. (Steven Kovac/The Epoch Times)

Before the pandemic, Danny Brown owned a roller rink in Grand Blanc and Owasso, two south-central Michigan towns.

“The lockdowns forced us to sell the Owasso rink for less than half of what we paid for it. We will be trying to make up our loss for years to come.”

Brown, who is a plaintiff in the lawsuit, told The Epoch Times, “To keep going I had to decide to triple our debt. Since the shutdown, I am three-quarters of a million dollars deeper in debt.

“Small businesses put everything on the line. All of our personal and family money. I am personally responsible for our debt. If I die my children will have to pay it.”

Brown said Michigan’s government acted without a real understanding and regarded the state’s small businesses as “nonessential throwaways.”

“One of the reasons we filed suit is to push the government to think differently,” he said.

According to Brown, family entertainment centers like skating rinks, bowling alleys, arcades, pool halls, miniature golf, and go-cart tracks have been nearly wiped out.

“A few years ago, there were 3,500 roller skating rinks in the United States. Now there are 700. There were five rinks in Genesee County, now there are two.” he said.

Brown attributes the decrease to years of ongoing government mandates and interference that led up to the COVID-19 lockdowns.

“They took, they stole our businesses!” he said.

Donn Slimmen, another plaintiff in the case, owns Spartan West Bowling in the west Michigan resort town of Ludington.

“The lockdown just about killed us. It was 14 to 15 months of agony. Our bank payments and utility bills didn’t stop. We went from being two to three months behind to more months behind.

“We entered into survival mode. We ate a lot of pork and beans and hotdogs. We’re still trying to work ourselves out of the hole. By the end of this summer, we might be solvent again.

“We were lucky to survive. We are still hanging on by threads,” said Slimmen.

Along with 16 bowling lanes, Slimmen operates a full-service restaurant.

It’s never come back. Pre-pandemic, we’d serve 200 customers at an ordinary Friday fish fry. Now our best night is 100.

“Our restaurant went from a thriving seated-guest business to a take-out operation grossing only two to three percent of the seated sales.

“We were spending $400 to take in proceeds of $100.

“The politicians and bureaucrats don’t understand. They never cleaned a toilet seat or climbed into a bowling machine to fix it,” said Slimmen.

Slimmen blames Gov.Gretchen Whitmer for the plight of his community and the state.

“You didn’t see Republican governors closing businesses. Their states did so much better.

“Drive through downtown Ludington or Muskegon and look at all the boarded-up storefronts. So many places are out of business. Michigan is in terrible shape,” Slimmen said.

The Tomassoni family has been in the bowling business for 84 years in the western Upper Peninsula town of Iron Mountain, Michigan.

We had to close bowling and our banquet facility a total of 161 days in two different periods of time in 2020. After the second shutdown, we could operate at 25 percent occupancy and only during restricted hours. No wedding receptions, no special events. It was a disaster.

“It ripped my heart out. I am so bitter towards my government,” said owner Pete Tomassoni.

Tomassoni’s business suffered further because of its proximity to Wisconsin which is only minutes away.

“Wisconsin closed for just 30 days. For the most part, they were wide open. That really hurt us.

“Our governor was picking and choosing which of our state’s businesses could operate. To force a business to close with no notice and without proven science is straight out wrong.

“I think that she came down so hard on small business because we, by and large, lean to the right.

“The state dangled the threat of yanking business licenses to keep people in line.

“Some of our businesses tried to defy the state and stayed open

Tyler Durden Wed, 05/18/2022 - 21:25

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Diesel Costs Deliver Body Blow To Trucking Industry, Impacting Broader Economy

Diesel Costs Deliver Body Blow To Trucking Industry, Impacting Broader Economy

By Noi Mahoney of Freightwaves

With diesel prices remaining…

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Diesel Costs Deliver Body Blow To Trucking Industry, Impacting Broader Economy

By Noi Mahoney of Freightwaves

With diesel prices remaining elevated — forcing significant costs onto shippers and trucking companies — the impact of fuel costs on inflation could put a dent in consumer spending, according to experts.

Diesel pump prices averaged $5.61 a gallon nationwide, 51% higher than diesel prices across the country in January

Economist Anirban Basu said the elevated price of diesel fuel damages the near-term U.S. economic outlook and “renders the chance of recession in 2023 much greater.”

“These high diesel prices mean that despite the Federal Reserve’s early stage efforts to curb inflationary pressures, for now, inflationary pressures will run rampant through the economy,” Basu, CEO of Baltimore-based Sage Policy Group, told FreightWaves. 

Earlier this month, the Federal Reserve announced a half-percentage-point increase in interest rates, the largest hike in over two decades. The U.S. inflation rate is at 8.3%, near 40-year highs.

Basu said consumer spending remains strong, even with elevated diesel prices, but that could change as shippers and trucking companies eventually must pass higher fuel costs on to the public. 

“One of the things we’ve been seeing in the U.S., particularly on the East Coast, is that diesel fuel inventories have been shrinking, which suggests that despite all this inflationary pressure, there’s still a lot of consumer activity, still lots of trucks on the road and the supply is unable to keep up with demand,” Basu said. “The higher price of diesel fuel will become embedded in the cost of everything consumers purchase.” 

Prices of fresh produce rising

Jordan DeWart, a managing director at RedWood Mexico, based in Laredo, Texas, said the types of consumer goods that could be immediately affected by higher diesel prices include fresh produce. Redwood Mexico is part of Chicago-based Redwood Logistics.

“With produce, that’s typically more in the spot rate business, and any of those smaller trucking companies are going to be heavily impacted by fuel costs,” DeWart said.

The U.S. imported more than $15 billion in fresh produce from Mexico in 2021, including avocados, tomatoes, grapes, bell peppers and strawberries, according to the U.S. Department of Agriculture.

“Everything coming northbound from Mexico through Laredo, the rates have been very sustained, but fuel prices keep going up, presumably with any differences being absorbed by the trucking companies in the spot market,” DeWart said. “When we talk to asset-based truckers, especially the smaller companies, they’re really feeling the pinch.”

It’s not only cross-border operators feeling the pinch. Growers and shippers in Texas’ Rio Grande Valley are also suffering because of increased fuel costs, said Dante Galeazzi, president of the Texas International Produce Association (TIPA).

“Our growers, shippers, importers, distributors … basically our entire supply chain has been and continues to be impacted by rising fuel costs,” Galeazzi told FreightWaves. “Between one-third to one-half of the costs for fresh produce is the logistics; you can see how quickly increases in that expense category can impact the base price.”

The Rio Grande Valley is the epicenter of the Lone Star State’s fresh produce industry, stretching across the southeastern tip of Texas along the U.S.-Mexico border. More than 35 types of fruits and vegetables are grown in the valley, which contributes more than $1 billion to the state economy annually.

“More concerning is that this wave of fuel increases is in line with the statistic that our industry is paying anywhere from 70% to 150% more year-over-year for OTR shipping,” Galeazzi said. 

TIPA, which is based in Mission, Texas, represents growers, domestic shippers, import shippers, specialty shippers, distributors and material and service providers. 

Right now, Rio Grande Valley growers and shippers are absorbing higher input costs instead of passing them on to consumers, but that could soon change, Galeazzi said.

“While the fresh fruit and vegetable industry continues to experience rising input costs across the board (seed, agrochemicals, labor, fuel, packaging, etc.), we have yet to experience sufficient upstream returns associated with those expense increases,” Galeazzi said. “Our industry is citing an 18% to 22% anecdotal increase to overhead costs. Meanwhile food inflation for fresh produce is hovering around 7%. That means the costs are slowly being felt by consumers, but it’s not yet at a commensurate level with input expenses.”

Diesel fuel prices at all time highs

The cost of diesel continues to soar across the country. Diesel pump prices averaged $5.61 a gallon nationwide, according to weekly data from the Energy Information Administration (EIA). That’s 51% higher than diesel prices nationwide in January. 

California averaged the highest fuel prices across the U.S., at $6 per gallon of gas and $6.56 per gallon for diesel, according to AAA. Diesel prices are also at an all-time high of $6.41 in New York.

The higher prices of diesel fuel and gasoline are being caused by a combination of factors, including surging demand and reduced refining capacity, along with the disruption to global markets caused by COVID-19, the current lockdown in China and the ongoing Russia-Ukraine conflict, said Rory Johnston, a managing director at Toronto-based research firm Price Street.

“The overarching oil market is feeling much tighter because of the Russian-Ukraine situation,” Johnston, also writer of the newsletter Commodity Context, told FreightWaves. “What we’ve seen is a larger immediate impact from the loss of Russian refined products; in addition to exporting millions and millions of barrels a day of crude oil, Russia also exported a lot of refined products, most notably middle distillates, like gasoline or diesel.”

Several refineries on the East Coast — including facilities in Newfoundland and Labrador, Canada — scaled back during the early days of the pandemic, which has hurt diesel capacity, Johnston said.

“There was also a refinery in Philadelphia that exploded just prior to the COVID-19 period starting,” Johnston said. “There’s not enough refining capacity on the global level, and particularly in the West right now and particularly in the northeastern U.S.”

He said he doesn’t foresee any relief from increasing diesel prices over the next few months or more.

“Things are going to be really tight for at least the next year, barring any kind of economic recession and some kind of demand slowdown materially,” Johnston said. 

DeWart said trucking companies that don’t have a fuel surcharge component or contract in place and are depending on spot rates could be in big trouble over the next several months as diesel prices either keep rising or stay higher than average. 

“Their fuel costs keep going up, but they’re really not able to negotiate higher rates right now with a really tight spot market,” DeWart said. “It’s really impacting small trucking companies, anyone that decided to kind of play the spot market, rather than being locked in contracted rates. They’re really feeling the pain right now.”

DeWart said for trucking companies, it’s critical to get some type of fuel reimbursement program in place “just to protect themselves in case the cost of fuel goes even higher.”

Tyler Durden Wed, 05/18/2022 - 19:25

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