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Global Diesel Shortage Raises Risk Of Even Greater Oil Price Spike

Global Diesel Shortage Raises Risk Of Even Greater Oil Price Spike

By John Kemp, Senior Market Analyst at Reuters

Global stocks of diesel…



Global Diesel Shortage Raises Risk Of Even Greater Oil Price Spike

By John Kemp, Senior Market Analyst at Reuters

Global stocks of diesel and other middle distillates have fallen to the lowest seasonal level since 2008, when similar shortages of these transport and industrial fuels helped to propel oil prices to a record high. Distillate fuel oil inventories in the United States are 30 million barrels (21%) below the pre-pandemic five-year seasonal average and at the lowest level since 2005, the U.S. Energy Information Administration said.

Stocks in Europe are 35 million barrels (8%) below the pre-pandemic five-year average at the lowest level since 2008, Euroilstock, which compiles inventory data on behalf of the European Union, found.

And middle distillate stocks in Singapore are 4 million barrels (32%) below the pre-pandemic five-year average and also at the lowest since 2008, according to the country’s Ministry of Trade and Industry.

Combined inventories across the three locations have fallen by 110 million barrels compared with the same point last year, as consumption has persistently outpaced production. (

Demand for diesel and other middle distillates is highly geared to the economic cycle since they are mainly used in freight transportation, manufacturing, farming, mining and oil and gas extraction.

The rapid rebound in economic activity after the first wave of the pandemic and associated lockdowns, and its focus on diesel-intensive manufacturing and freight, has boosted use of the fuel. At the same time, refiners have restrained crude processing to deplete the excess stocks that built up during the coronavirus recession and adapt to lower demand from passenger airlines for jet fuel. But the continued depletion of distillate inventories has become unsustainable.

Russia’s invasion of Ukraine and the subsequent boycott of Russian fuel threatens to make diesel shortages worse (“Shell, BP halt spot German diesel sales on scarcity fears”, Reuters, March 10). Actual or potential fuel shortages have been reported in France, Germany, Hungary and Sweden (“Austria's OMV restricts Hungary fuel sales as supply fears grip Europe”, Reuters, March 11).

Distillate production will have to be raised above consumption for a period to rebuild stocks to a more comfortable level.

There is some scope for refiners to boost distillate output by increasing crude processing back to pre-pandemic rates but that will transform a shortage of distillate into a shortage of crude oil.

Pressure to stabilize and rebuild distillate inventories will cause refiners’ crude consumption to accelerate later this year and into 2023. But the global crude market is already exceptionally tight and the extra crude demand will cause it to tighten further.

The global distillate shortage is threatening to create a severe spike in oil prices just as it did in the first half of 2008.

If prices are adjusted for inflation and converted to 2022 values, Brent crude surged from an already high $135 per barrel at the end of February 2008 (not far from recent prices) to $187 per barrel at the end of June and briefly above $196 in July.

“If something cannot go on forever, it will stop,” economist Herbert Stein, who had been U.S. President Richard Nixon’s chief economic adviser, said in 1986. In this case, the only question is how the depletion of distillate stocks will be turned around. Faster production. Slower consumption. Or both.

Either the oil industry must find a way to boost crude and distillate supplies or the economic expansion must slow to ease diesel demand.

Tyler Durden Sat, 03/12/2022 - 11:30

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Spread & Containment

“That 70s Show”

The hit TV series "That 70s Show" aired from 1998 to 2006 and focused on six teenage friends living in Wisconsin in the late 70s. The irony was that the…



The hit TV series “That 70s Show” aired from 1998 to 2006 and focused on six teenage friends living in Wisconsin in the late 70s. The irony was that the actors playing the teenagers were not born in the late 70s and had never experienced life during that period. Many alive today cannot fathom a lifestyle devoid of the internet, cable television, mobile phones, and social media. Oh…the horrors.

Yet, today, almost 50 years later, financial commentators, many of whom were not alive at the time, suggest that inflation and yields will repeat “That 70s Show.” Understandably, the increase in inflation and interest rates from their historic lows is cause for concern. As James Bullard noted, “Inflation is a pernicious problem,” which is why the Federal Reserve lept into action.

“When the US Federal Reserve embarked on an aggressive campaign to quash inflation last year, it did so with the goal of avoiding a painful repeat of the 1970s, when inflation spun out of control and economic malaise set in.” – CNN

That concern of “spiraling inflation” remains the key concern of the Federal Reserve in its current monetary policy decisions. It has also pushed many economists to point back at history, using “That 70s Show” period as the yardstick for justifying their concerns about a resurgence of inflation.

“The chair of the Federal Reserve at the time, Arthur Burns, hiked interest rates dramatically between 1972 and 1974. Then, as the economy contracted, he changed course and started cutting rates.

Inflation later roared back, forcing the hand of Paul Volcker, who took over at the Fed in 1979, Richardson said. Volcker brought double-digit inflation to heel — but only by raising borrowing costs high enough to trigger back-to-back recessions in the early 1980s that at one point pushed unemployment above 10%.

‘If they don’t stop inflation now, the historical analogy [indicates] it’s not going to stop, and it’s going to get worse,’ said Richardson, an economics professor at the University of California, Irvine.”

However, such may be an oversimplification to suggest Burns was wrong and Volker was right. The reason is the economy today is vastly different than during “That 70s Show.”

Today Is Very Different Than The 1970s

During the 70s, the Federal Reserve was entrenched in an inflation fight. The end of the Bretton Woods and the failure of wage/price controls combined with an oil embargo sent inflation surging. That surge sent markets crumbling under the weight of rising interest rates. Ongoing oil price shocks, spiking food costs, wages, and budgetary pressures led to stagflation through the end of that decade.

What was most notable was the Fed’s inflation fight. Like today, the Fed is hiking rates to quell inflationary pressures from exogenous factors. In the late 70s, the oil crisis led to inflationary pressures as oil prices fed through a manufacturing-intensive economy. Today, inflation resulted from monetary interventions that created demand against a supply-constrained economy.

Such is a critical point. During “That 70s Show,” the economy was primarily manufacturing-based, providing a high multiplier effect on economic growth. Today, the mix has reversed, with services making up the bulk of economic activity. While services are essential, they have a very low multiplier effect on economic activity.

One of the primary reasons is that services require lower wage growth than manufacturing.

Wages vs Inflation

While wages did rise sharply over the last couple of years, such was a function of the economic shutdown, which created a supply/demand gap in the employment matrix. As shown, full-time employment as a percentage of the population fell sharply during the pandemic lockdown. However, with full employment back to pre-pandemic levels, wage growth declines as employers regain control over the labor balance.

Full Time Employees To Population

Furthermore, the economic composite of wages, interest rates, and economic growth remain highly correlated between “That 70s Show” and today. Such suggests that while inflation rose with the supply/demand imbalance created by the shutdown, the return to normalcy will lower inflation as economic activity slows.

Economic composite index vs Inflation

With a correlation of 85%, the inflationary decline will be coincident with economic growth, interest rates, and wages.

Economic composite correlation to inflation

Unlike “That 70s Show,” where economic growth and wages were rising steadily, which allowed for higher levels of interest rates and inflation, There is a singular reason why a repeat of that period is quite impossible.

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The Debt Burden And Economic Weakness

What is notable about “That 70s Show” is that it was the culmination of events following World War II.

Following World War II, America became the “last man standing.” France, England, Russia, Germany, Poland, Japan, and others were devastated, with little ability to produce for themselves. America found its most substantial economic growth as the “boys of war” returned home to start rebuilding a war-ravaged globe.

But that was just the start of it.

In the late ’50s, America stepped into the abyss as humankind took its first steps into space. The space race, which lasted nearly two decades, led to leaps in innovation and technology that paved the wave for the future of America.

These advances, combined with the industrial and manufacturing backdrop, fostered high levels of economic growth, increased savings rates, and capital investment, which supported higher interest rates.

Furthermore, the Government ran no deficit, and household debt to net worth was about 60%. So, while inflation increased and interest rates rose in tandem, the average household could sustain its living standard. The chart shows the difference between household debt versus incomes in the pre- and post-financialization eras.

income vs debt ratios

With the Government running a deep deficit with debt exceeding $32 trillion, consumer debt at record levels, and economic growth rates fragile, consumers’ ability to withstand higher inflation and interest rates is limited. As noted previously, the “gap” between income and savings to sustain the standard of living is at record levels. The chart shows the gap between the inflation-adjusted cost of living and the spread between incomes and savings. It currently requires more than $6500 of debt annually to fill the “gap.

Consumer Spending Gap

It Is Not The Same

While the Fed is currently engaged “in the fight of its life,” trying to quell inflation, The economic differences are vastly different today. Due to the heavy debt burden, the economy requires lower interest rates to sustain even meager economic growth rates of 2%. Such levels were historically seen as “pre-recessionary,” but today, they are something economists hope to maintain.

Graph showing Economic growth by cycle with data from 1790 to 2020.

This is one of the primary reasons why economic growth will continue to run at lower levels. Such suggests we will witness an economy:

  • Subject to more frequent recessionary spats,
  • Lower equity market returns, and
  • A stagflationary environment as wage growth remains suppressed while the cost of living rises.

Changes in structural employment, demographics, and deflationary pressures derived from changes in productivity will magnify these problems.

While many want to suggest that the Federal Reserve is worried about “That 70s Show,” we would be lucky to have the economic strength to support such a concern.

The Fed’s bigger worry should be when the impact of higher rates causes a financial break in a debt-dependent financial system.

The post “That 70s Show” appeared first on RIA.

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Federal Reserve trails global counterparts in balance sheet reductions, data reveals

Quick Take The Federal Reserve’s balance sheet of total assets has seen a reduction of an additional $75 billion in the past week, with total assets…



Quick Take

The Federal Reserve’s balance sheet of total assets has seen a reduction of an additional $75 billion in the past week, with total assets now slightly surpassing the 8 trillion mark. For context, prior to the COVID-19 pandemic, the Fed’s balance sheet was approximately $3.5 trillion.

Despite the considerable distance yet to be covered, substantial efforts have been made to reduce the balance sheet via quantitative tightening, achieving a reduction of about 5.5% year to date.

It is interesting, however, to juxtapose this with other leading global central banks. The Bank of England (BOE) has surpassed the Fed’s reduction rate with a 6.5% decrease, the People’s Bank of China (PBoC) at 7.5%, and both the Bank of Japan (BOJ) and the European Central Bank (ECB) have outpaced with reductions exceeding 10%.

This continuation of quantitative tightening will put further pressure on bond yields, with the U.S. 10-year treasury yield rising to 4.5%.

This data underscores the concerted global effort by central banks to rebalance their respective financial territories, navigating the delicate path of recovery in the post-pandemic world.

Fed Balance Sheet: (Source: FRED)

The post Federal Reserve trails global counterparts in balance sheet reductions, data reveals appeared first on CryptoSlate.

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Britain’s Parliament Demands That Rumble, X Deplatform Russell Brand

Britain’s Parliament Demands That Rumble, X Deplatform Russell Brand

Authored by Andrea Widburg via American Thinker (emphasis ours),




Britain's Parliament Demands That Rumble, X Deplatform Russell Brand

Authored by Andrea Widburg via American Thinker (emphasis ours),

Two hundred and fifty years ago, Great Britain bequeathed to us our notions of due process and free speech. That country, however, no longer exists. Instead, we have a country that is demanding that Russell Brand, who has been accused of alleged sexual wrongdoing that occurred decades ago (charges he denies), must be deplatformed from Rumble, a site built upon free speech. Fortunately, Rumble is standing strong.

Image: Russell Brand. YouTube screen grab.

Russell Brand has admitted that he was a sex and drug addict. Then, he cleaned up his act. I don’t doubt that he did regrettable things during his years of debauchery, although whether he did anything illegal or even outside the bell curve of a sex-saturated society has never been examined in a law court of law.

During those same years of debauchery, Brand was an out-and-proud leftist, as well as an edgy (very edgy) comedian. Now, though, during his years of clean living, Brand has become something of a libertarian, talking to people like Tucker Carlson and Ben Shapiro because he stood against COVID and vaccine madness.

Given that Brand has been red-pilled and is becoming redder by the day, many conservatives think it’s not a coincidence that he has suddenly been accused of sexual wrongdoing dating back a couple of decades. Regarding the specific accusations, I haven’t read the details and, frankly, I’m not interested.

The fact is that I’m very suspicious of charges floating up after decades. The “he said-she said” dynamic that bedevils many sex crimes is multiplied by the passage of time. That’s why we have statutes of limitations. Indeed, much as I think Joe Biden is capable of sex crimes, the only reason I believed Tara Reade’s allegations was because her mother called Larry King and discussed the issue when it happened.

[ZH: X received a letter as well...]

 The letter acknowledges in its opening sentence that there is no proof that Brand misbehaved. There are only “allegations.” The same letter, from Dame Caroline Dinenage, the Committee’s chair and, believe it or not, a conservative MP, says that the Committee is “concerned that he may be able to profit from his content on the platform.” In other words, based on allegations of long-past crimes, the British Parliament would like to see someone deprived of his income. (And yes, I assume Brand is rich, but it’s the principle of the thing.) The Committee’s sole concern is that “creators are not able to use the platform to undermine the welfare of victims of inappropriate and potentially illegal behaviour.” As far as I know, there aren’t victims. There are only accusers who have managed to survive for decades without talking. After a fair trial (something increasingly unlikely in the third decade of the 21st century), we can revisit whether there are actual victims. To his great credit, Pavlovski wrote a polite “stick it up your derriere” letter in response:

I especially love this bit:

We regard it as deeply inappropriate and dangerous that the UK Parliament would attempt to control who is allowed to speak on our platform or to earn a living from doing so. Singling out an individual and demanding his ban is even more disturbing given the absence of any connection between the allegations and his content on Rumble. We don’t agree with the behavior of many Rumble creators, but we refuse to penalize them for actions that have nothing to do with our platform.

That’s exactly right. The final sentence—“We emphatically reject the UK Parliament’s demands”—is something that would have made America’s Founders proud.

It’s deeply disturbing that a government would try to destroy an individual based on ancient allegations. What’s sad about this action is that it was Britain that bequeathed to us our fundamental concerns with free speech (the First Amendment) and due process (the Fifth Amendment). George Orwell saw it coming, but that doesn’t mean we have to be happy that it’s here.

[ZH reactions have been sharply critical of the UK government's move to deplatform someone who hasn't been convicted of anything. In particular, Elon Musk has had Brand's back]:

Tyler Durden Fri, 09/22/2023 - 05:00

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