Crude Reserves

Oil leads all prices higher, more BS from the BLS and dirty tankers get busy...

(Source: Getty Images)

Bill Bonner, reckoning today from London, England...

We took the train up to London to attend a conference.  

Too busy to put thoughts together carefully, today, we will just toss them into a heap.  

First, Dan reported yesterday, “two pieces of unpleasant data. August CPI up 3.6% year-over-year. And oil prices at 10-month highs. Good for our Trade of the Decade. Bad for CPI readings in the next few months as higher energy prices hit the index.

From BLS: 

The all items index increased 3.7 percent for the 12 months ending August, a larger increase than the 3.2-percent increase for the 12 months ending in July. The all items less food and energy index rose 4.3 percent over the last 12 months. The energy index decreased 3.6 percent for the 12 months ending August, and the food index increased 4.3 percent over the last year.

Here's USA Today with the same story:

Inflation accelerated for a second month in August on a spike in gasoline prices and an underlying measure of household expenses rose more than anticipated, highlighting that the Federal Reserve's battle to tame consumer prices may not be over.

More Jiggling

There was another quirk in the inflation numbers worth mentioning. According to the BLS, the cost of health insurance went down – a remarkable 6%.

Did the price of health insurance really go down? Apparently not. What really happened was more ‘ledgerdemain’ by the number crunchers. They took a 2% increase and turned it into a 4% decrease – by jiggling the numbers. And as rising prices become a bigger and more persistent nuisance, we expect to see more jiggling.  

And here’s the inevitable effect. Breitbart reports:

Real Household Income Suffers Biggest Drop In 12 Years

Real median household income was $74,580 in 2022, a drop of 2.3 percent from the prior year, the Census Bureau said Tuesday.

This is the biggest drop in household income since 2010, when it fell 2.6 percent. That means it is worse than the pandemic decline of 2.2 percent. It is the fourth worst year in records going back to 1985.

In our comments this week and last, we focused on how that is possible. Is this not the greatest economy, in the greatest country, in the greatest period in human existence?

Apparently not. But why not?

Progress… of a Kind

Over the last 40 years, the US economy produced plenty of material progress for the capitalists – increases in their stock and bond portfolios. But few gains – other than those (most unmeasurable gains from technology) – for the proletariat. The median man in 2023 earns the same real, median wage he did in 1975.

Is that progress? Maybe, but not the kind of progress we were looking for.

A rise in the cost of energy was cited as the primary cause of the higher inflation reading. Did you notice that the price of oil is back over $90 a barrel? 

In the midterm election cycle, Joe Biden drained the Strategic Petroleum Reserve to try to keep gasoline prices down. Now, another election cycle is coming up…and there’s little oil left in the SPR to pump out.  

The nation’s inventories are said to be lower than they’ve been at any time in the last 40 years. So, supplies are likely to be tight…with higher prices at the pump.

The fight against inflation is not going to be so easy after all.

Stansberry Newswire:

These recent price movements are largely due to the ongoing oil-production cuts from Saudi Arabia and Russia. On Tuesday, the two nations announced they're continuing their cuts of 1.3 million barrels per day through the end of the year.

The last time that oil prices were near $90 a barrel, the U.S. Strategic Petroleum Reserve ("SPR") had 250 million more barrels of crude oil than it does now.

The SPR is currently at its lowest level since 1983.

This means that the U.S. no longer has the slack to offset rising energy costs when a geopolitical event happens.

Panic on the Pampas

Meanwhile, Tucker Carlson goes to Argentina to discover where inflation leads.   

Argentina has 47 million people, explains an economist he interviews on Twitter, and what they don’t know about inflation isn’t worth knowing. But of those 47 million only 11 million are employed…and take out those who work for the government, and you are left with only 7 million who have actual, wealth-producing jobs.  

The inflation rate is now about 10% PER MONTH.

“Every month,” Carlson reports, “people get 10% poorer.”

That has left the country with a lot of very poor people. The ‘child poverty rate,’ for example, is 60%. And Argentina has slipped from being one of the world’s richest countries to being an economic ‘no man’s land.’

But the most interesting thing coming from Argentina is the ‘Milei phenomenon.’   Would you believe it, Dear Reader…a politician who is proposing to shrink the size of government, reduce taxes, return to real money, get rid of thousands of do-nothing government employees and dismantle the country’s central bank? 

For the first time since the American Revolution, comes a substantial political movement that aims for less government, not more.  

Most amazing of all…he’s winning! In the recent primaries, Milei came out in front.

Tucker Carlson says he will broadcast his interview with Milei, later today.

Regards,

Bill Bonner

Joel’s Note: Dear readers noticing their gas bills sneaking higher are not crazy… even if they are being gaslit by the clowns in congress. As you can see from the chart below, forwarded by our man up in Laramie, Dan Denning, the rising oil price is once again leading gas prices higher…

At $3.84 per gallon for regular, prices at the pump are at their highest they’ve been this year.

“This is good for the stocks on our Official List,” wrote Tom Dyson in yesterday’s note to BPR’s members. “Demand for crude oil is probably the highest it’s ever been… around 102 million barrels per day. But Saudi Arabia and Russia are choking back their oil production. 

“According to a report out today by the International Energy Agency, global oil demand is eclipsing supply by 1.2 million barrels per day which is causing record inventory draws. Unless there’s a recession, or OPEC opens the taps again, oil prices should keep rising.”

Of course, price movements like this are both a burden… and an opportunity. As Tom outlined in yesterday’s note, more and more refining capacity is being added nearer to production. That is, away from the “NIMBY” west – think Europe, North America and Australia…where it’s considered “dirty” – and closer to the greasy origins over in the Middle East and North Africa (MENA).

So not only can oil exporting countries capture more of the profit from their own natural resource, western countries can pat themselves on the back for being “environmentally friendly”… all while outsourcing the dirty work to places most people can’t find on a map.

Umm…win-win?

As far as investment opportunities go, it also means more upside for oil tankers charged with transporting the refined product to market, where it will be used by the pure of heart and mind. Tom added one such “pure tanker play” to the official list yesterday.

Access all Tom and Dan’s paid research by becoming a BPR member right here…