Connect with us

Economics

The Loss Of US Refining Capacity Is Helping Drive Record Diesel Prices, And It Won’t Improve Anytime Soon

The Loss Of US Refining Capacity Is Helping Drive Record Diesel Prices, And It Won’t Improve Anytime Soon

By John Kingston of FreightWaves

Analysts…

Published

on

The Loss Of US Refining Capacity Is Helping Drive Record Diesel Prices, And It Won’t Improve Anytime Soon

By John Kingston of FreightWaves

Analysts and casual observers of oil markets rely on a very simple number to determine the strength of refined petroleum products relative to a barrel of crude: the 3:2:1.

There are far more complex models out there, but the beauty of the 3:2:1 is that anybody can calculate it. Take the futures price of Brent or West Texas Intermediate (WTI) and multiply it by three. Then take the price of reformulated blendstock for oxygenate blending (RBOB) gasoline, an intermediate product used to produce finished gasoline, multiply the cents-per-gallon price by 42 to get dollars per barrel, and then do the same with one barrel of ultra-low-sulfur diesel. Add the RBOB and diesel prices together, subtract the crude price, and you have your 3:2:1 number.

In 2019, the last full pre-pandemic year, the 3:2:1 for WTI averaged $18.63 a barrel, based on data from the daily settlements of the CME Group Inc. commodity exchange. It regularly dipped below $10 a barrel during the pandemic-gripped market of 2020. At the start of this year, it stood at around $20 a barrel.

The 3:2:1 for WTI in recent days has hovered just under $60 a barrel, and traders are shaking their heads because they readily admit they have never seen anything like it. Crude is up, but products such as diesel are up a lot further.

Oil markets are starting to accept that while the cutoff of an unknown quantity of Russian crude from the markets is clearly a factor in the surge in petroleum prices, markets also are getting hit with upward pressure from several years of refinery closures, particularly in the U.S. Combine that with pandemic-induced slowdowns in new refineries being built in other parts of the world and you have a squeeze on refining products that is clearly visible in that eye-popping 3:2:1 margin. More complex models of refining yields also are at levels not seen for years, if ever.

And it’s coming as high prices do not yet appear to be having a significant impact on demand. Product supplied, a proxy for U.S. demand in data supplied by the Energy Information Administration, was about 900,000 barrels per day less than the first week of June in 2019, but it’s also the second-highest level ever. And GasBuddy, a service that provides gasoline retail price information and demand, tweeted Sunday that weekend gasoline demand continued to show no signs of a downturn. 

And that’s part of the issue: a loss of refining capacity during the pandemic, both old and new, combined with refined products demand that has ratcheted up higher and faster than almost anybody thought possible. 

Energy economist Philip Verleger, in his most recent weekly report, summed up the issue through this headline: “It’s Refining, Stupid!”

Because oil products can be put on ships and moved thousands of miles, all consumers are impacted by the global refining market. A U.S. consumer does benefit from a barrel of new refining capacity built in Southeast Asia. And as the most recent BP Statistical Review shows, the world has been adding refining capacity at a steady clip, rising to 101.9 million barrels per day in 2020 from 93.8 million barrels per day in 2010. 

It was notable that the increase from 2019 to 2020 was small, just 200,000 barrels per day. There were other years during that span in which the annual jump was more than 1 million barrels a day. (The data goes through 2020.)

‘We lost some refining capacity’

But as Charles Kemp, a vice president at the refinery consulting firm of Baker & O’Brien, said, not all refinery additions are equal. 

Looking over the loss of refining capacity in the U.S. in recent years, Kemp told FreightWaves in a phone interview that “a factor that has not been accounted for is that yes, we lost some refining capacity. We could have lost some simple refining capacity without a significant fuel shortage. But we also lost complex conversion capacity.”

Not all refineries are alike. There are refineries that simply cook crude in a crude distillation unit — the most basic building block in a refinery — with a yield of products that are mostly considered intermediate products which require further processing is necessary to make a product such as gasoline. These refineries are often known in the industry as “teapots.”

And then there are giant refining complexes with a tremendous amount of what is known as conversion units. They have units such as cat crackers and cokers that can squeeze a high percentage of desired products such as gasoline or diesel out of those units. As one refining executive said years ago of his company’s refinery, “We could throw old shoes into that thing and get gasoline out of it.” 

With the recent loss of refineries in the world and a rapid recovery in petroleum demand post-pandemic, Kemp said, “we are short conversion capacity in this hemisphere.”

And though the market for refined products is global, that means that while new greenfield refineries or capacity expansions in other parts of the world can provide the U.S. with products directly or at least displace other supplies than can then head to the U.S., the cost of freight and other logistics costs come into play.

Andrew Lipow, an independent refining and markets consultant, noted a long list of non-U.S. refining projects that have been thrown off track, adding to the squeeze in refining capacity that has its roots in the loss of plants in the U.S.

Lipow ticked them off: an almost 700,000-barrel-per-day refinery in Kuwait that is likely to begin coming online this summer, long after its initial start date; a refinery of at least 200,000 barrels per day in Oman; and a new 300,000-barrel-per-day refinery in Malaysia that opened a few years ago but has experienced explosions that have kept it offline for months. 

Meanwhile, the U.S. was going through a capacity contraction that came after years of expansions. That growth in capacity came not through building new full refineries — that hasn’t happened since the 1970s — but through several other actions outlined by Lipow. 

The key numbers to know: According to the Department of Energy (DOE), U.S. refining capacity at the start of 2010 was about 17.7 million barrels per day. Ten years later, it had moved to just under 20 million barrels per day. But in the most recent weekly report, the DOE’s Energy Information Administration (EIA) listed U.S. capacity at 17.9 million barrels per day, almost down to the level it was at the beginning of 2010. U.S. consumption during that period rose to about 20.5 million barrels per day from about 18.6 million.

The movement upward without the construction of new refineries is what Lipow referred to as “capacity creep.” And despite those declining numbers out of the EIA, he said “it still exists.”

“You have small amounts, 5,000 barrels per day here, 10,000 there,” Lipow said, as refinery engineers find new ways to squeeze products out of their inputs. 

But broader trends have been offsetting that. For example, Lipow noted that as the U.S. began producing increasing amounts of light oil from shale formations, the problem was that the U.S. refining sector was not set up to process that quality of oil. Lipow said the solution to that was the construction of a type of processing facility called a “splitter,” which is not a full refinery but can take extremely light oil and make various refined products out of it. 

“But come December 2015 and the U.S. crude export ban was lifted,” Lipow said. “So there was no more need to build capacity. The excess crude could hit the world market.”

There were less subtle disruptions to U.S. refining capacity, such as the explosion of the Philadelphia Energy Solutions (PES) refinery and the subsequent decision not to rebuild that plant, the East Coast’s biggest. 

But Lipow said he sees the decision by PES not to rebuild as being driven in part by corporate decisions that concluded the future for refining is not bright. (Or as he noted, this is the golden age of refining. And if it lasts two years, that’s two out of 40.) 

“As a refinery, are you willing to invest hundreds of millions of dollars in capital expenditures to extend the life of the refinery by 30 to 40 years in an environment where fossil fuel demand has plateaued and government and state policies have been enacted to reduce demand?” Lipow said, laying out the conundrum refinery managers face as they look to the future.

He added that that sort of consideration was a major factor in several of the refinery closures in the U.S.: a Shell refinery in Martinez, California; a Phillips 66 refinery also near the San Francisco Bay area; and a smaller refinery in Cheyenne, Wyoming, shut by Holly Frontier. In all three cases, the sites were converted into renewable diesel facilities. But the total output is far less than the size of the crude units that are being shuttered. 

And it isn’t over. LyondellBasell Industries said in April it was going to close its Houston refinery by the end of 2023 after unsuccessful attempts to sell it. Refinery sales tend to be frequent and if the market for them is weak, the price generally drops to a level where a buyer pops up. A company saying it is taking the closure option because it simply cannot find a buyer aligns with much of what Lipow said.

John Mayes, vice president of industry analysis and special studies at the refinery consulting firm of Turner Mason & Co., was somewhat less pessimistic about the future of global refining expansions, though he was unambiguous that a permit for a new U.S. refinery would likely be impossible to obtain. 

“The ones that were started will get built,” Mayes said. But the deferral of new projects during the pandemic means that many of them won’t get built in the next five years. 

The line of new capacity that went straight down when the pandemic began, Mayes said, “will start going back up again.” And then at a certain point, he said, the industry will revert to its “consistent pattern of overbuilding and then underbuilding. With COVID, we were definitely moving into an environment where we were underbuilding.” 

Mayes also said the strong refining margins the market sees now will last for a few years, “and that will stimulate overbuilding.”

Tyler Durden Wed, 06/15/2022 - 09:25

Read More

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Government

Breaking the tape

The top performers among drugs launched in 2020 were each the first of their kind.

Published

on

Breaking the tape

The top performers among drugs launched in 2020 were each the first of their kind.

By Joshua Slatko • josh.slatko@medadnews.com

The leaders in pharma’s Class of 2020 were all firsts. Veklury, for COVID, and Tepezza, for thyroid eye disease, were each the first drug of any kind to be approved by FDA for their respective disease targets. And while other treatments for migraine exist, Ubrelvy was the first orally administered calcitonin gene-related peptide (CGRP) receptor antagonist (gepant) for the treatment of migraine attacks once they start. The era of follow-ons in pharma may not entirely be over; but surely the industry’s researchers are still breaking barriers. 

Earning nearly $5.57 billion in sales during the product’s first full calendar year on the market, Veklury was the first drug approved by FDA for the treatment of COVID-19.

Veklury

The very first drug to be approved in the United States for the treatment of COVID-19, Gilead’s Veklury received emergency use authorization from FDA during May 2020, an expanded EUA three months later, and full approval for treating patients with COVID requiring hospitalization during October 2020. Veklury had originally been developed for the treatment of hepatitis C and had been studied in Ebola and Marburg virus, without success. 

FDA approval was based on three randomized controlled trials including final results of the National Institute of Allergy and Infectious Diseases’ double blind, placebo-controlled Phase III ACTT-1 trial, which showed that treatment with Veklury resulted in clinically meaningful improvements across multiple outcome assessments compared with placebo in hospitalized patients with COVID-19. Based on the strength of these data, Veklury became a standard of care for the treatment of COVID-19 in hospitalized patients.

In the randomized, double-blind, placebo-controlled ACTT-1 trial, Veklury significantly improved time to recovery as compared to placebo – by five days in the overall study population (10 versus 15 days) and seven days in patients who required oxygen support at baseline (11 versus 18 days). As a secondary endpoint, Veklury also reduced disease progression in patients needing oxygen, resulting in a significantly lower incidence of new mechanical ventilation or ECMO (13 percent versus 23 percent). In the overall patient population, there was a trend toward reduced mortality with Veklury compared with placebo at Day 29.

In June 2021, Gilead announced positive data from three retrospective studies of the real-world treatment of patients hospitalized with COVID-19, adding to the body of mortality and hospital discharge data for patients treated with Veklury. All three of the real-world analyses observed that, in the overall patient populations, patients who received Veklury treatment had significantly lower risk for mortality compared with matched controls. A reduction in mortality was observed across a spectrum of baseline oxygen requirements. The results were consistently observed at different time frames over the course of the pandemic and across geographies. Two of the studies also observed that patients who received Veklury had a significantly increased likelihood of discharge from the hospital by Day 28.

In January 2022, FDA granted expedited approval of a supplemental new drug application for Veklury for the treatment of non-hospitalized adult and adolescent patients who are at high risk of progression to severe COVID-19, including hospitalization or death. The expanded indication allowed for Veklury to be administered in qualified outpatient settings that can administer daily intravenous infusions over three consecutive days. FDA also expanded the pediatric EUA of Veklury to include non-hospitalized pediatric patients younger than 12 years of age who are at high risk of disease progression.

These actions by FDA came amidst a surge in COVID-19 cases and the reduced susceptibility to several anti-SARS-CoV-2 monoclonal antibodies (mAbs) due to the Omicron variant. In contrast, Veklury targets the highly conserved viral RNA polymerase, thereby retaining activity against existing SARS-CoV-2 variants of concern. In vitro laboratory testing has shown that Veklury retains activity against the Omicron variant. 

Quarterly sales, VekluryThe FDA sNDA approval, pediatric EUA expansion, and updated National Institutes of Health Treatment Guidelines for COVID-19 that additionally recommend Veklury for treatment in non-hospitalized settings were based on results from the PINETREE Phase III randomized, double-blind, placebo-controlled trial. The study evaluated the efficacy and safety of a three-day course of Veklury for intravenous use for the treatment of COVID-19 in non-hospitalized patients at high risk for disease progression. An analysis of 562 participants randomly assigned in a 1:1 ratio to receive Veklury or placebo, demonstrated that treatment with Veklury resulted in a statistically significant 87 percent reduction in risk for the composite primary endpoint of COVID-19 related hospitalization or all-cause death by Day 28 (0.7 percent, 2/279) compared with placebo (5.3 percent, 15/283). In the study, no deaths were observed in either arm by Day 28.

In February, Gilead released data demonstrating the in vitro activity of Veklury against 10 SARS-CoV-2 variants, including Omicron. Results of Gilead’s studies were consistent with other in vitro studies independently conducted by researchers from institutions in other countries, including Belgium, the Czech Republic, Germany, Poland and the United States, which confirmed Veklury’s antiviral activity against multiple previously identified variants of SARS-CoV-2, including Alpha, Beta, Gamma, Delta and Omicron.

The study analyzed in vitro antiviral activity by two methods to understand the susceptibility of 10 major SARS-CoV-2 variants to Veklury. The study results showed similar activity of Veklury against the variants and an early ancestral A lineage isolate detected in Seattle, Wash. (WA1 strain). Specifically, Delta and Omicron variants both remained fully susceptible to Veklury, and these laboratory results demonstrated that Veklury has remained active against all major variants isolated over the past two years.

In April, FDA approved a supplemental new drug application for Veklury for the treatment of pediatric patients who are older than 28 days, weighing at least 3 kg, and are either hospitalized with COVID-19 or have mild-to-moderate COVID-19 and are considered high risk for progression to severe COVID-19, including hospitalization or death. This approval made Veklury the first and only approved treatment for pediatric COVID patients in the United States. Under the expanded indication, a three-day Veklury treatment regimen is recommended to help prevent hospitalization in non-hospitalized COVID-19 pediatric patients who are at high risk for COVID-19 disease progression. For hospitalized pediatric patients who do not require invasive mechanical ventilation and/or ECMO, a five-day treatment course is recommended. The approval was supported by results from the CARAVAN Phase II/III single arm, open-label study, which demonstrated that Veklury was generally well-tolerated among pediatric patients hospitalized with COVID-19 with a high proportion of participants showing clinical improvement and recovery, as well as data from trials in adults.

Tepezza

Tepezza

Tepezza was the first drug ever approved by FDA for the treatment of thyroid eye disease.

When it earned approval in January 2020, Horizon Therapeutics’ Tepezza became the first and only FDA-approved medicine for thyroid eye disease, a serious, progressive and vision-threatening rare autoimmune disease that is associated with proptosis (eye bulging), diplopia (double vision), blurred vision, pain, inflammation, and facial disfigurement. Tepezza is a fully human monoclonal antibody (mAb) and a targeted inhibitor of the insulin-like growth factor-1 receptor (IGF-1R) that is administered to patients once every three weeks for a total of eight infusions.

The FDA approval of Tepezza was supported by a robust body of clinical evidence, including statistically significant, positive results from the Phase II clinical study, as well as the Phase III confirmatory clinical study OPTIC. The OPTIC study found that significantly more patients treated with Tepezza (82.9 percent) had a meaningful improvement in proptosis (≥ 2 mm) as compared with placebo patients (9.5 percent) without deterioration in the fellow eye at Week 24. Additional secondary endpoints were also met, including a change from baseline of at least one grade in diplopia (double vision) in 67.9 percent of patients receiving Tepezza compared to 28.6 percent of patients receiving placebo at Week 24. In a related analysis of the Phase II and Phase III clinical studies, there were more patients with complete resolution of diplopia among those treated with Tepezza (53 percent) compared with those treated with placebo (25 percent).

In October 2020, Horizon announced new long-term follow-up data from the Phase II clinical trial of Tepezza, which showed a sustained response up to one year following completion of treatment for thyroid eye disease. All patients with Week 72 data (37/37) reported some improvement in at least one of the study outcomes from baseline. 97 percent (36/37) of study participants had an improvement in clinical activity score (decrease of at least 1 point). 86 percent (31/36) had any decrease in proptosis. One patient chose elective TED surgery at Week 70 and did not have proptosis measurements at Week 72. Of patients with baseline diplopia, 70 percent (23/33) had an improvement of at least one grade. 70 percent (26/37) had disease inactivation (CAS of 0 or 1 point).

During December 2020, Horizon announced that the company expected a short-term disruption in Tepezza supply as a result of government-mandated COVID-19 vaccine production orders related to Operation Warp Speed that dramatically restricted capacity available for the production of Tepezza at its drug product contract manufacturer, Catalent. In March 2021, FDA cleared a prior approval supplement to the previously approved Biologics Licensing Application giving Horizon authorization to manufacture more Tepezza drug product resulting in an increased number of vials with each manufacturing slot. The company began to resupply the market in April, which ended the supply disruption.

Tepezza Quarterly SalesIn April 2021, new pooled data from the Tepezza Phase II and III trials was published in The Lancet Diabetes & Endocrinology. This data further reinforced that Tepezza significantly improves proptosis and diplopia for TED patients in different subgroups, with most maintaining a long-term response. There was no evidence for acute disease rebound (increase in percentage of patients no longer meeting proptosis, diplopia or ophthalmic composite outcome) seven weeks after the last dose of Tepezza. Proptosis (87 percent; 62/71), diplopia (66 percent; 38/58) and ophthalmic composite outcome (92 percent; 66/72) responses were observed seven weeks after the last dose of Tepezza. A post-hoc analysis of the composite ophthalmic outcome indicated that 81 percent (68/84) of Tepezza patients versus 44 percent (38/87) of placebo patients were responders at Week 24. Proptosis (67 percent; 38/57), diplopia (69 percent; 33/48) and composite outcome response (83 percent; 48/58) were observed 51 weeks after the last dose of Tepezza for those who had long-term off-treatment data available.

Additionally, in a post-hoc analysis, Tepezza-treated patients with more severe disease (those with ≥3 mm of proptosis and/or inconstant or constant diplopia) and those with less severe disease at baseline both experienced significant improvements in proptosis and diplopia. In patients with more severe disease, those treated with Tepezza had a proptosis response of 79 percent (50/63) compared to 17 percent (11/65) of those who received placebo, and a diplopia response of 68 percent (38/56) compared to 31 percent of those who received placebo (15/49). In patients with less severe disease, those treated with Tepezza had a proptosis response of 71 percent (15/21) compared to 9 percent in those who received placebo (2/22), and a diplopia response of 80 percent (8/10) compared to 30 percent in placebo (3/10).

In post-hoc analyses, patients who received Tepezza in both the lower baseline CAS subgroup (4 or 5) and the higher CAS subgroup (6 or 7) demonstrated statistically significant improvements compared with placebo in proptosis and diplopia. Overall response and CAS of 0 or 1 response also improved.

Post-hoc analysis from the Phase III study also demonstrated that in patients treated with Tepezza, those with higher (≥10 IU/L) or lower (<10 IU/L) serum thyrotropin-binding inhibitory immunoglobulin (TBII) baseline levels both had a proptosis response (mean reduction of -3.65 mm and -3.01 mm, respectively) with no treatment difference between the two groups. In patients with higher baseline TBII, 71 percent (10/14) of patients who received Tepezza experienced an improvement in diplopia compared to 23 percent (3/13) of patients who received placebo.

In November 2021, Horizon announced findings of a real-world adherence analysis of Tepezza for the treatment of TED. The analysis found that more than 90 percent (n=995) of people who were prescribed Tepezza for TED went on to complete all eight infusions, indicating a high level of adherence to the medicine in clinical practice. The study evaluated 1,101 people living with TED (71 percent female, mean age 58 years) who started treatment with Tepezza prior to July 2020. Non-compliance was low at approximately 1 percent (n=15). Only 8 percent (n=84) reported that they discontinued because of adverse events.

In June 2022, Horizon announced results of a new analysis examining rates of hyperglycemia among patients treated with Tepezza for TED compared to placebo in the Phase II and OPTIC Phase III clinical trials. The analysis found a total of nine adverse event reports of hyperglycemia in eight patients (8/84, 10 percent) who received Tepezza, and one patient (1/86; 1.2 percent) who received placebo. The majority (5/8, 63 percent) of patients who experienced hyperglycemia while taking Tepezza had pre-existing diabetes. Of the hyperglycemic AEs reported in the Tepezza-treated patients, all were controlled with medicine. All reported AEs were grade 1 (>ULN-160mg/dl) or grade 2 (161 – 250mg/dl), and none led to study discontinuation. HbA1c levels increased by 0.22 percent in those treated with Tepezza compared to 0.04 percent among placebo patients.

Ubrelvy

Ubrelvy

Ubrelvy was the first orally administered calcitonin gene-related peptide receptor antagonist (gepant) to be approved by FDA for the treatment of migraine attacks once they start.

Approved by FDA in late December of 2019, Ubrelvy was the first orally administered calcitonin gene-related peptide (CGRP) receptor antagonist (gepant) for the treatment of migraine attacks once they start. Ubrelvy works by blocking CGRP, a protein that is released during a migraine attack, from binding to its receptors. It works without constricting blood vessels, which some older treatments were known to do. FDA’s approval was based on four clinical studies (ACHIEVE I, ACHIEVE II, UBR-MD-04, and 3110-105-002), which demonstrated efficacy, safety, and tolerability of orally administered Ubrelvy in the acute treatment of migraine. Both 50 mg and100 mg dose strengths demonstrated significantly greater rates of pain freedom and freedom from the most bothersome migraine-associated symptom at two hours, compared with placebo. Ubrelvy joined AbbVie’s portfolio when that company completed its acquisition of Allergan in May 2020. 

In August 2020, AbbVie announced Serena Williams as the spokesperson for Ubrelvy to raise awareness of an effective acute treatment option for people living with migraine. The multichannel marketing campaign featuring Williams highlighted how Ubrelvy works for people with different lifestyles by helping individuals treat their migraine attacks anytime, anywhere. As spokesperson, she was featured in a video, available on social media, talking with neurologist and paid AbbVie consultant Dr. Jennifer McVige about her experience with migraine and Ubrelvy. Williams was also included in print and digital advertising and other marketing initiatives.

In September 2021, FDA approved Abb­Vie’s Qulipta, another drug from the gepant family, for the preventive treatment of episodic migraine in adults. Qulipta is the first and only oral calcitonin gene-related peptide receptor antagonist specifically developed for the preventive treatment of migraine. The approval was supported by data from a robust clinical program evaluating the efficacy, safety, and tolerability of Qulipta in nearly 2,000 patients who experienced 4 to 14 migraine days per month, including the pivotal Phase III ADVANCE study, the pivotal Phase IIb/III trial, and the Phase III long-term safety study.

Ubrevly quarterly salesIn the pivotal Phase III, multicenter, randomized, double-blind, placebo-controlled, parallel-group ADVANCE trial, the primary endpoint was change from baseline in mean monthly migraine days across the 12-week treatment period. All Qulipta dose groups met the primary endpoint and demonstrated statistically significant reductions in mean monthly migraine days compared to placebo. Patients treated with 60 mg of Qulipta across 12 weeks experienced a 4.2-day reduction from baseline of 7.8. A key secondary endpoint in the ADVANCE trial measured the proportion of patients that achieved a ≥50 percent reduction in monthly migraine days across the 12-week treatment period. The trial demonstrated that 56 percent/59 percent/61 percent of patients in the 10 mg/30 mg/60 mg Qulipta arms, respectively, achieved a 50-100 percent reduction, compared to 29 percent of patients in the placebo arm.

During June, AbbVie submitted a supplemental NDA to FDA for Qulipta to support the preventive treatment of chronic migraine in adults. If approved, Qulipta would be the first gepant cleared for the broad indication of the preventive treatment of migraine, including episodic and chronic. The supplemental NDA submission includes data from the pivotal Phase III PROGRESS trial in patients with chronic migraine, which supplements the existing data in episodic migraine. People living with chronic migraine experience headaches for 15 or more days per month, which, on at least eight of those days per month, have the features of migraine.

The Phase III PROGRESS trial met its primary endpoint of statistically significant reduction from baseline in mean monthly migraine days compared to placebo across the 12-week treatment period in adults with chronic migraine. The trial also demonstrated that treatment with Qulipta 60 mg once daily (QD) and 30 mg daily (BID) resulted in statistically significant improvements in all six secondary endpoints. This includes a key secondary endpoint that measured the proportion of patients that achieved at least a 50 percent reduction in mean monthly migraine days across the 12-week treatment period. 

Josh Slatko, Med Ad News Josh Slatko is contributing editor of Med Ad News and PharmaLive.com.

Read More

Continue Reading

Economics

Housing Affordability Index Drops To Lowest Rate Since 1989, Still Way Too High

Housing Affordability Index Drops To Lowest Rate Since 1989, Still Way Too High

Authored by Mike Shedlock via MishTalk.com,

The National…

Published

on

Housing Affordability Index Drops To Lowest Rate Since 1989, Still Way Too High

Authored by Mike Shedlock via MishTalk.com,

The National Association of Realtors says "affordability" dropped to 98.5 in June, the lowest since 1989.

Housing Affordability Index and mortgage rates via St. Louis Fed.

Affordability in June Was the Worst Since 1989

The Wall Street Journal reports Affordability in June Was the Worst Since 1989

It was more expensive to buy a U.S. home in June than it has been for any month in more than three decades, as record-high home prices collided with a surge in mortgage rates.

The National Association of Realtors’ housing-affordability index, which factors in family incomes, mortgage rates and the sales price for existing single-family homes, fell to 98.5 in June, the association said Friday. That marked the lowest level since June 1989, when the index stood at 98.3.

Housing Affordability Index

The NAR's Housing Affordability Index is based on median income data current  through 2017, projected forward. 

Only 13 months of data is available on Fred, the St. Louis Fed repository.

Affordability is based on whether the median family earns enough income to qualify for a 30-year fixed mortgage loan on the median single-family home without spending more than 25% of the income on payment for principal and interest.

An index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 means a median family has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. 

Inquiring minds may wish to look at the NAR's Housing Affordability Index Calculations.

Curiously, the NAR concludes the median household can nearly always afford the median home price.

Do you believe that? More importantly, even if accurate, so what? 

The median person who can afford a home and wants a home probably already has a home. 

First Time Buyer Index

In terms of new and existing home sales, what matters is what a buyer who does not have a home, but wants a home, is willing to pay and can pay. 

The First-Time Buyer Index for 2022 Q2 fell to 68 assuming a starter home price of $351,500. 

Can 68 percent of would-be buyers afford (and find) a $351,500 home in a neighborhood in which they want to live? 

68 percent is a much more reasonable number than the overall 98.5 percent calculation, but that still strikes me as too high. 

Case-Shiller National Home Price Index

I have not updated my full set of Case-Shiller home price charts for a while but that chart is current (May data). 

Case-Shiller lags by a few months so it's even worse than shown. 

The pre-pandemic index was 212 and it's now 306. That's a 44 percent jump with real median wages declining, property taxes soaring, food soaring, and energy soaring.

Yet, the NAR says that median overall affordability has declined only to the 98.5 percent level. Yeah, right.

Meanwhile, rent and food keep rising and the price of rent will be sticky. Gasoline is more dependent on recession and global supply chains.

Food Prices Rise Most Since February 1979

For more on the price of food, please see Food at Home is Up 13.1 Percent From a Year Ago, Most Since February 1979

For more on rent, please note Tennant's Unions Demand Biden Declare a National Emergency to Stop Rent Gouging

For more on producer prices please see Producer Prices Decline For the First Time Since the Pandemic Due to Energy

Spotlight on Fed Silliness

The Fed has blown three consecutive bubbles trying to produce two percent consumer inflation while openly promoting raging bubbles in assets especially housing.

*  *  *

Please Subscribe to MishTalk Email Alerts.

Tyler Durden Sun, 08/14/2022 - 12:30

Read More

Continue Reading

Economics

Summer Teen Employment

Here is a look at the change in teen employment over time.The graph below shows the employment-population ratio for teens (6 to 19 years old) since 1948.The graph is Not Seasonally Adjusted (NSA), to show the seasonal hiring of teenagers during the sum…

Published

on

Here is a look at the change in teen employment over time.

The graph below shows the employment-population ratio for teens (6 to 19 years old) since 1948.

The graph is Not Seasonally Adjusted (NSA), to show the seasonal hiring of teenagers during the summer.

A few observations:
1) Although teen employment has recovered some since the great recession, overall teen employment had been trending down. This is probably because more people are staying in school (a long term positive for the economy).

2) Teen employment was significantly impacted in 2020 by the pandemic.

Click on graph for larger image.

3) A smaller percentage of teenagers are obtaining summer employment. The seasonal spikes are smaller than in previous decades. 

The teen employment-population ratio was 38.4% in July 2022, down from 38.9% in July 2021. The teen participation rate was 43.6% in July 2022, down from 43.8% the previous July. 

So, a smaller percentage of teenagers are joining the labor force during the summer as compared to previous years. This could be because of fewer employment opportunities, or because teenagers are pursuing other activities during the summer.

3) The decline in teenager participation is one of the reasons the overall participation rate has declined (of course, the retiring baby boomers is the main reason the overall participation rate has declined over the last 20+ years).

Read More

Continue Reading

Trending