Energy News Beat

Three years ago, Google set an ambitious plan to address climate change by going “net zero,” meaning it would release no more climate-changing gases into the air than it removes, by 2030.

But a report from the company Tuesday shows it is nowhere near meeting that goal.

Rather than declining, its emissions grew 13% in 2023 over the year before. Compared to its baseline year of 2019, emissions have soared 48%.

Google cited artificial intelligence and the demand it puts on data centers, which require massive amounts of electricity, for last year’s growth.

Making that electricity by burning coal or natural gas emits greenhouse gas emissions, including carbon dioxide and methane, which warm the planet, bringing more extreme weather.

The company has one of the most significant climate commitments in industry and has been seen as a leader.

Lisa Sachs, director of the Columbia Center on Sustainable Investment, said Google should be doing more to partner with cleaner companies and invest in the electrical grid.

“The reality is that we are far behind what we could already be doing now with the technology that we have, with the resources that we have, in terms of advancing the transition,” she said.

Google Chief Sustainability Officer Kate Brandt told The Associated Press, “Reaching this net zero goal by 2030, this is an extremely ambitious goal.

“We know this is not going to be easy and that our approach will need to continue to evolve,” Brandt added, “and it will require us to navigate a lot of uncertainty, including this uncertainty around the future of AI’s environmental impacts.”

Some experts say the rapidly expanding data centers needed to power AI threaten the entire transition to clean electricity, an important part of addressing climate change. That’s because a new data center can delay the closure of a power plant that burns fossil fuel or prompt a new one to be built. Data centers are not only energy-intensive, they require high voltage transmission lines and need significant amounts of water to stay cool. They are also noisy.

They often are built where electricity is cheapest, not where renewables, such as wind and solar, are a key source of energy.

Global data center and AI electricity demand could double by 2026, according to the International Energy Agency.

Other major tech company sustainability plans are also challenged by the proliferation of data centers. They caused Microsoft’s emissions to grow 29% above its 2020 baseline, the company said in an environmental sustainability report in May.

Tech companies make the case that AI, including tools such as ChatGPT, is not only partially causing climate change, it’s also helping to address it.

In the case of Google, that could mean using data to predict future flooding, or making traffic flow more efficiently, to save gasoline.

Amanda Smith, senior scientist at the climate nonprofit Project Drawdown, said those who use AI — both large companies and individuals just making memes — need to do so responsibly, meaning using the energy only when it benefits society.

“It’s up to us as humans to watch what we’re doing with it and to question why we’re doing that,” Smith added. “When it’s worth it, we can make sure that those demands are going to be met by clean sources of power.”

Google’s emissions grew last year in part because the company used more energy; 25,910 gigawatt-hours more, an increase from the year before and more than double the hours of energy consumed just four years earlier. A gigawatt-hour is roughly the energy that a power plant serving several hundred thousand households puts out in one hour.

On the positive side, as Google’s consumption grows, so has its use of renewable power.

The company said in 2020 it would meet its massive need for electricity using only clean energy every hour of every day by 2030, all over the world. Last year, Google says, it saw an average of 64% carbon-free energy for its data centers and offices around the globe. The company says its data centers are, on average, 1.8 times as energy efficient as others in the industry.

Sachs, at Columbia University, credited Google for its ambition and honesty, but said she hopes “that Google would join us in a more rigorous conversation about how to accelerate” clean energy amid the climate crisis, “so that it doesn’t get much worse before it starts getting better.”

Source: Apnews.com

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The European Commission has issued a positive opinion on the technical and nuclear safety aspects of the project for units 3 and 4 of Romania’s only nuclear power plant, the Romanian Energy Ministry announced on Tuesday.

With the Commission’s green light, the plant, managed by the country’s sole nuclear power producer, the state-owned Nuclear Electric Company, and located in the southeastern town of Cernavodă, will receive two additional CANDU reactors.

Energy Minister Sebastian Burduja said on Tuesday that the two new reactors are expected to “make an essential contribution to national and regional energy security by producing clean, zero-emission energy.”

The Commission’s opinion confirms that the project is in line with the objectives of the Euratom Treaty, which requires nuclear developers to notify the Commission in advance of investment projects and demonstrate compliance with the highest nuclear safety standards. It also contains several recommendations typical of such projects.

With four nuclear units soon to be operating, Romania is expected to avoid 20 million tonnes of CO2 emissions per year and create more than 19,000 jobs in related industries.

Once the two units come on stream, Romania’s electricity mix will change significantly, with nuclear power expected to account for around 30% of the country’s electricity production over the next decade, up from about 20%, the Nuclear Electric Company added.

Source: Euractiv.com

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It’s no secret that the vast majority of the so-called elites are advocates of climate alarmism and are taken in by the Green New Scam.

Whether this preference is based on ignorance of the science, ideological zeal, a willful desire to hurt American growth or simple greed because of their investments in Green New Scam infrastructure varies case by case.

The typical upper-income supporter of the climate cult including academics, media figures and celebrities is probably ignorant of the fact that there is no evidence that CO2 emissions cause climate change and that the real causes are solar cycles, volcanoes, ocean currents and atmospheric moisture not caused by humans.

Climate Alarmists Have It Backward

The historical record actually demonstrates that warming periods produce higher CO2 levels — not the other way around. CO2 doesn’t cause warming. It’s caused by natural warming.

In other words, climate alarmists have causation completely backward.

Climate alarmism is based almost entirely on computer models, which depend on the inputs the modelers themselves build into them. A model is only as good as the inputs and assumptions programmed into it.

Virtually every one of these models has overestimated warming, sometimes by orders of magnitude, because it’s based on faulty assumptions that overestimate the impact of CO2 on climate.

In other words, it’s junk science. But they keep relying on these models because their political agenda requires it.

Climate: The New Communism

There’s no doubt that a fair number of neo-Marxists embrace the climate scam because they know it damages U.S. industry, raises costs to U.S. consumers and helps to undermine the U.S. economy.

Following the end of the Cold War and the collapse of communism, anti-capitalistic collectivists admitted that they needed to promote the climate agenda because the only way to combat global warming is through collective action. It requires a coordinated global effort that limits national sovereignty.

The neo-Marxists are impervious to evidence; they just want to hurt America and wasting money on windmills instead of building new refineries is a good way to do it. That leaves the greed crowd.

The Real “Green” in the Green Agenda

They’re early investors in windmills, solar modules, lithium car batteries, EVs, charging stations, carbon credits and other infrastructure of the climate scam. They stand to make billions of dollars off the narrative with help from extravagant government subsidies.

They don’t really care if it all collapses in the end (which it will) as long as they get rich at taxpayer expense in the meantime. All of this behavior is clear as far as it goes. What is not clear is the extent to which the Green New Scammers are doing this with your money.

The best example is multibillionaire Larry Fink, who runs the giant BlackRock investment fund. Fink has been aggressive in promoting the climate scam along with racial quotas, DEI and defunding police.

He’s entitled to his opinions. But is he entitled to pursue his radical agenda with pension fund money from conservative states and institutions? Fortunately, a backlash has begun against Fink and his fellow wokesters.

More state pension fund managers are beginning to pull their funds from BlackRock and other investment managers that pursue far-left policies not in the best interests of their beneficiaries. This backlash may not change Larry Fink’s lifestyle. But over time, it might change the world for the better.

The EV Sham

A major part of the climate agenda includes electric vehicles (EVs). I’ve been warning for years that EVs aren’t feasible as a transportation solution for more than relatively few Americans and that they are little more than glorified golf carts despite the $70,000-and-up price tags.

In the first place, EVs don’t cut carbon emissions. The car itself does not have emissions, but it’s charged with electricity from power plants that do.

The batteries are made with poisonous chemicals and metals including lithium, cobalt, copper and nickel that come from mining operations that use enormous amounts of water and electricity to extract the needed materials.

It takes thousands of tons of ore to extract enough critical minerals to make one battery. EVs don’t take a charge in extreme cold, and the batteries can’t hold a charge. Travel range is grossly overstated for many reasons, including the fact that EV car heaters drain the batteries (with internal-combustion engines, ICEs, the engine makes heat which can easily be directed into the car to keep passengers comfortable with no additional energy required).

Resale values of EVs are close to zero because buyers of used EVs have to shell out $25,000 or more for new batteries after the vehicle is about seven years old. The list of drawbacks goes on.

Most Americans have resisted EVs because they understand the disadvantages. But many Americans were drawn to the false promise of emission-free transportation and other ridiculous claims by the Green New Scammers. Now even the most committed EV buyers are waking up.

I Want My ICE Car Back

A new survey by consulting firm McKinsey and Co. shows that 29% of EV owners in nine major economies want to return to ICE vehicles. When the sample is narrowed to just the U.S., 46% of those surveyed want to return to ICEs.

The McKinsey officials who conducted the survey claim to be “surprised” by those results. That probably says something about the fact that McKinsey experts are just as deluded about EVs as the buyers surveyed.

When breaking down the results, 45% say EVs are too expensive, 33% say they have charging concerns and 29% are concerned about the limited driving range.

The truth is that the EV was invented in 1837 and reached the peak of its popularity in 1910 just before the mass production of internal-combustion cars by Henry Ford. The American public got it right when they flocked to the Model T.

It sounds like they’re getting it right again after a brief infatuation with the false promise of the EV. The bottom line is that the Green New Scam is falling apart.

It can’t happen soon enough.

Source: Dailyreckoning.com

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The French nuclear giant EdF, the government owned company that manages the country’s vast fleet of nuclear power stations, has reportedly scrapped its plans to develop a new design for small nuclear reactors because of fears of soaring costs.

EdF, which is now fully government owned after facing potential bankruptcy due to delays and massive cost over-runs at its latest generation large scale nuclear plants, had reportedly been working on a new design for SMRs for the last four years.

The French investigative outlet L’Informé reported on Monday that EdF had scrapped its new internal SMR design – dubbed Nuward – because of engineering problems and cost overruns. It cited company sources as saying EdF would now partner with other companies to use “simpler” technologies in an attempt to avoid delays and budget overruns.

Reuters confirmed the development, citing an email from a company spokesman that confirmed the program had been abandoned after the basic design had been completed.

“The reorientation consists of developing a design built exclusively from proven technological bricks. It will offer better conditions for success by facilitating technical feasibility,” an EDF spokesperson told Reuters via email.

It’s the latest problem to hit SMR technology, which the federal Coalition wants to roll out in Australia – starting with reactors in South Australia and Western Australia – as part of its goal of keeping coal plants open, building more gas, stopping renewables and putting clean energy hopes on nuclear.

The federal Coalition says it can have the first SMR up and running by 2035, but no SMRs have been built in the western world, and none have even got a licence to be built.

The closest to reach that landmark, the US-based NuScale, abandoned its plans after massive cost overruns and push back from its customers, who refused to pay high prices.

The EdF plans appears to have run into similar problems. Its potential customers, the European energy companies Vattenfall, CEZ and Fortum, wanted guarantees that the SMRs would not have a levelised cost of energy of more than €100 a megawatt hour ($161/MWh) and EdF decided that that was not possible.

It is now not expected to produce its first SMR until the 2030s, at the earliest – even though France is desperate for new reactors to replace its ageing power plants. Because of the costs, it expects to significantly reduce the share of nuclear in its energy mix as it focuses more on large scale solar and offshore wind.

EdF has run into similar problems with its large scale technology. The Flammanville project in France was announced in 2004 with a budget of €3 billion and a deadline of 2012. It is still not in operation and its costs have soared at least four-fold to €13.2 billion.

The Hinkley C project in the UK has been an even bigger disaster. EdF had promised in 2007 that it would be “cooking Christmas turkeys” in England by 2017, at a cost of £9 billion, but is already delayed to 2031 with a spiralling cost of £48 billion when inflation is taken into account, or $A93 billion.

EdF announced another impairment charge of €12.9 billion ($A20.7 billion) from Hinkley earlier this year. It had to be bailed out by the government last year after suffering record losses in 2022 caused by outages at nearly half of its nuclear power plants due to maintenance at its reactors across France.

Tim Buckley, from Climate and Energy Finance, seized on the news and called on Opposition leader Peter Dutton and energy spokesman Ted O’Brien to provide more details of their nuclear plans beyond the one page press release they released last month.

“Come’on guys, how naive do you take the average Australian voter for?” Buckley wrote.

“In your alternate fact world, who do you think will pay for the permanent around 50% increase in Australian energy prices for consumers? Are you really intent on destroying the international competitiveness of Australian industry purely in the service of your fossil fuel funders?”

Numerous cost assessments, particularly by the CSIRO and the Australian Energy Market Operator, have put the cost of nuclear at more than double the cost of wind, solar and storage. But they also point out that first of their kind projects in Australia could cost double that amount, and SMR technology is likely to be even more expensive.

The Coalition has attacked those reports, and the reputation of the CSIRO and AEMO – in concert with a group of so-called “think tanks” and the Murdoch media – but the latest polling from Essential Media suggests that the public might not be buying it.

The poll found that votes believe renewables are the most desirable (59 per cent) and the best for the environment (55 per cent). Nuclear energy was regarded by more as the most expensive (38 per cent versus 35 per cent for renewables).

An overwhelming majority of people aged 18 to 54 thought Peter Dutton’s nuclear energy plan “is just an attempt to extend the life of gas and limit investment in large-scale renewables”, while a majority of those aged over 55 thought the nuclear plan is serious and should be part of the future energy mix, Essential Media’s Peter Lewis wrote.

The federal Coalition has argued that nuclear might be expensive to build, but will deliver cheaper power to consumers. It has not explained how, but it has said that its reactors would be government owned, suggesting that – like France and Ontario – the costs would be borne by taxpayers and the supply of power to customers would be heavily subsidised.

Source: Reneweconomy.com.au

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TAMPA, Fla. — The state of Florida currently has zero windmills operating on land or offshore, and some Republican legislators want to keep it that way.

In May, Gov. DeSantis signed HB 1645 into law, going into effect July 1.

According to the language of the law, it “Prohibits the construction or expansion of an offshore wind energy facility, including buildings, structures, vessels, and electrical transmission cables to the site. A wind turbine or wind energy facility within one mile of a coastline—defined as the mean high water line. A wind turbine or wind energy facility within one mile of the Atlantic Intracoastal Waterway or Gulf Intracoastal Waterway. A wind turbine or wind energy facility on state waters and submerged lands.”

Opponents of the new law tell ABC Action News reporter Michael Paluska they are wondering why it is necessary.

“I just am perplexed at the strategy here, when it could mean a lot to Florida beyond what people think of as well, just put a turbine up,” Henry Kelley, President and co-founder of BlueWind Technology, told ABC Action News reporter Michael Paluska.

Kelley’s Pensacola factory creates nacelles for wind turbines. A nacelle is the protective housing for a wind turbine, similar to the housing around the motor of a floor fan.

Kelley told Paluska the company produced their first nacelle in 2020, and business has been booming ever since.

“I’m very proud of this. We’ve gone from zero employees to nearly 150. We see tremendous growth across the United States. You have a lot of jobs in Florida producing wind, and my concern when this bill was passed, as I expressed to the committees hearing the bill, is what message it sends for future growth and future research opportunities when you are outlawing projects that aren’t even on the drawing books,” Kelley said. “Everyone in politics talks about bringing manufacturing jobs back to the US. And this is precisely what I’m trying to do. I have 150 employees in my factory alone here in Pensacola.”

In February, Kelley testified before the Florida Senate in front of the Appropriations Committee on Agriculture, Environment, and General Government.

We reached out multiple times toRepublican State Sen. Jay Collins in District 14, who sponsored the Senate version of the bill. But ABC Action News has yet to hear back.

At that same committee meeting, Collins said, “We’re doing this out of the belief that we need to protect our ecosystem animals and our tourism industry first.

Collins also posted a video on Instagram explaining why the law is necessary for Floridians.

The new law also aims to study small nuclear reactor technology, expand the use of hydrogen-powered vehicles, and enhance electric grid security.

But, it also removes several references to the word “climate change” and climate “friendly” products.

“There’s special interest in Tallahassee, they’re very powerful. And the oil and gas industry is one of those, you know, electric utilities are another one,” State Rep. Lindsay Cross, a Democrat in District 60, said.

“What does it tell Floridians about how the state feels about the environment, climate change, hurricanes, storms?” Paluska asked.

“I think, what it’s, what it signals is that we don’t believe in science,” Cross said. “Windmills are something that was put in here that probably got more attention than some of the things reversing some of the proactive climate legislation that we had, that in the long run, I think are gonna be more damaging for our state.”

Paluska reached out to Gov. DeSantis for comment. A spokesperson directed us to his social media posts.

Florida rejects the designs of the left to weaken our energy grid, pursue a radical climate agenda, and promote foreign adversaries. pic.twitter.com/Drydhd7XcH

— Ron DeSantis (@GovRonDeSantis) May 15, 2024

The left’s climate agenda is not about affordability and reliability, nor ensuring the middle class can keep the lights on—and the media is admitting it in advocacy pieces like this one.

The “green” push is about regulating how far you can drive, what you eat, what kind of stove… pic.twitter.com/Uqo95Om0ii

— Ron DeSantis (@GovRonDeSantis) June 17, 2024

Policy should focus on making energy affordable and reliable, not become captive to the ideological agenda of climate alarmism, which forces consumers to pay more for energy and increases the risks of blackouts. pic.twitter.com/h5NZd1q2nN

— Ron DeSantis (@GovRonDeSantis) June 15, 2024

In a post on X, DeSantis wrote, “We’re restoring sanity in our approach to energy and rejecting the agenda of the radical green zealots.”

“Well, the reality is that the prices for natural gas, which were our state is 75%, dependent on natural gas right now. So those prices are where the volatility is, in reality. So no, it doesn’t make sense,” Kim Ross, the co-executive director for ReThink Energy Florida, said.

“Does it make sense that green energy isn’t stable enough for us to carry into the future?” Paluska asked Ross.

“Our state is 75% dependent on natural gas right now. So those prices are where the volatility is. So, no, it doesn’t make sense. Because if we’re concerned about stability, we’re going to be investing in things other than what we’re very dependent on right now. The cost of natural gas gets passed on to the consumers when working families just can’t afford additional increases as we continue to move forward.”

Source: Abcactionnews.com

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The post New Florida windmill ban law goes into effect along with language removing “climate change” appeared first on Energy News Beat.

 

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Peru LNG’s liquefaction plant at Pampa Melchorita has shipped four liquefied natural gas cargoes to the Dutch Gate LNG import terminal in the port of Rotterdam in June, according to the shipment data by state-owned Perupetro.

The 174,000-cbm LNGShips Manhattan, which departed the 4.4 mtpa Peru LNG plant on May 31 and is one of the five tankers which left the facility last month, also recently delivered its cargo to the Gate terminal, its AIS data provided by VesselsValue shows.

As per the shipments in June, the 174,000-cbm Pan Americas, which departed the Peru LNG plant on June 10, is expected to arrive in Rotterdam on July 9, while the 173,400-cbm Valencia Knutsen, which left the Peru LNG plant on June 19, is expected to arrive in Rotterdam on July 13.

The 170,000-cbm Methane Becki Anne left the Peru LNG facility on June 21 and was located offshore Uruguay on Tuesday and heading north, while the 174,000-cbm Malaga Knutsen left the Peru LNG facility on June 29 and is expected to arrive in Rotterdam on July 24, their AIS data shows.

The final destinations of these vessels may change in the meantime.

If all of the shipments land at Gate, the LNG terminal would receive five cargoes shipped from the Peru LNG plant in a row.

Prior to these shipments, Gate received a cargo from Peru in September 2023 and has never received more than two cargoes shipped from the Peru LNG facility in a row, the Perupetro data shows.

LNG giant Shell holds 20 percent in Peru LNG and offtakes all the volumes. Shell also has long-term regasification capacity booked at the Gate facility owned by Gasunie and Vopak.

US-based Hunt Oil holds a 50 percent operating stake in the Pampa Melchorita LNG plant, while MidOcean Energy and Marubeni have 20 percent and 10 percent, respectively.

MidOcean Energy, the LNG unit of US-based energy investor EIG, completed in April its previously announced purchase of the 20 percent stake in Peru LNG from a unit of South Korean conglomerate SK.

The four Peru LNG shipments loaded onboard the LNG carriers in June equal about 292,526 tonnes.

These LNG cargoes compare to five cargoes (349,343 tonnes) in June last year and five cargoes (352,409 tonnes) in the prior month, while the plant shipped five cargoes in April, five LNG cargoes in March, four cargoes in February, and five cargoes in January.

The facility increased its exports last year, and it also expects to boost the number of shipments in 2024.

Peru LNG loaded 55 vessels in 2023, compared to 51 vessels in 2022.

The LNG terminal operator previously told LNG Prime it expects to load 60 vessels in 2024.

Source: Lngprime.com

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Glenfarne Group’s Texas LNG has signed a new heads of agreement to supply liquefied natural gas from its planned 4 mtpa LNG export terminal in the port of Brownsville.

According to a statement by Glenfarne, Texas LNG entered into the deal with a “top-tier credit-rated market participant” for a long-term LNG free-on-board sale and purchase agreement for 0.5 mtpa of LNG.

Glefane did not reveal the name of the buyer.

Texas LNG is in “advanced negotiations with several potential offtakers” for the remaining volume of the project, it said.

The company expects to begin construction in 2024.

Brendan Duval, Glenfarne’s CEO and founder and co-president of Texas LNG said, “this agreement positions Texas LNG on the verge of full sell out, and we look forward to finalizing our offtake partnerships in the near future.”

Glenfarne recently requested more time from the US FERC to build and place in service its Texas LNG export project.

Texas LNG seeks an additional five-year extension to complete construction and place the project in service until November 22, 2029.

In April, Texas LNG executed heads of agreements with EQT Corporation anticipating a definitive 15-year LNG tolling agreement, and with Gunvor for a 20-year LNG tolling agreement for part of the project’s capacity.

These two deals total 2.5 mtpa of LNG.

Besides these deals, Texas LNG also previously selected Swiss engineering group ABB and US energy services firm Baker Hughes to supply equipment for its LNG project. It also awarded a tugboat contract to Gulf LNG Tugs of Texas.

These partnerships total nearly one billion dollars of investment into the project, according to the firm.

Source: Lngprime.com

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Daily Standup Top Stories

ADNOC Moves Ahead With Huge LNG Export Project in UAE

Houston energy company to build largest new refinery in half a century

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– Get in Contact With The Show –

Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:14] What’s going on, everybody? Welcome into the Thursday, June 13th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up Adnoc moves ahead with huge LNG export project with the UAE. We will fly back to the United States then and cover U.S. LNG. That ship to Asia is still cleaner than cool coal. Who would have thought? I will stay in the U.S. Houston Energy Company to build largest new refinery in half a century. You love to see it. And bank Citibank now is saying oil could crash to sub 60 level. Interesting. Taking a little bit different approach than our friends over at Goldman Sachs. Stu, Then toss over to me. I will quickly cover what happened in the oil and gas markets. And really what we’re going to talk about is one fed deciding to keep interest rates the same that happened yesterday Wednesday afternoon. And then a pretty crazy EIA report, which we will cover in depth. And then we’ll wrap it up with Matador Resources going ahead and announcing a about a $1.9 billion all cash transition, to beef up some of their Delaware Basin acreage. It’s a pretty interesting deal. We will dive into all that and a bag of chips, guys. As always, I am Michael Tanner, joined by Stuart Turley. Where do you want to begin? [00:01:28][73.5]

Stuart Turley: [00:01:29] Hey, let’s start where everybody is over there. What Adnoc had, you know, see moves ahead with huge LNG export project in the UAE, Abu Dhabi’s national oil company. Add in. She’s taking the final investment decision to move forward with the rurales LNG project. It’s pretty darn cool. Listen to this, Michael. It will more than double the existing LNG production capacity in the UAE. Holy smokes Batman, listen to these numbers. They bought Adnoc, bought an 11.7 stake in phase one of next decade Rio Grand LNG export project in Texas. That is nuts. [00:02:13][44.2]

Michael Tanner: [00:02:13] Yeah. No, that’s down near Brownsville. It’s the first U.S. LNG project that’s quote unquote offering expected emissions reductions of more than 90% through an approved carbon capture and storage project. We know they’ve also signed a 20 year offtake LNG agreement with the Rio Grande LNG train for with next decade. So they’re also going to be the ones buying it as well. They’re going to own a little bit of the the export facility that they’re going to also be the one that’s that’s buying it. So love to get on that. I mean, these these, you know, these, these Middle Eastern countries are starting to make massive investments in LNG. They’re allowed to think 20, 30 years in the future because that’s the time frame in which they look at a little bit different than I think what happens here in the United States. But it’s pretty big. That project there over in UAE, stew, it’s going to be about $5.5 billion. And they awarded they also awarded a what they call an EPC contract, which is just all of the, engineering, procurement and construction stuff for nuts. [00:03:07][53.4]

Stuart Turley: [00:03:07] I’m very happy for them. Anytime we can see long term LNG contracts, I’m all excited. I think it’s fantastic. Yeah. [00:03:14][7.3]

Michael Tanner: [00:03:15] What’s next? [00:03:15][0.4]

Stuart Turley: [00:03:16] Let’s go to U.S. LNG shipped to Asia is still cleaner than coal. Michael, let’s go through these top bullet points and some numbers here. U.S LNG shipped to Asia has a new lower value chain emission footprint than other coal fired generation, even over longer distances. I was, I’m sure, reducing methane leakages in the LNG value chain can widen the emissions gap. Wow. Don’t pull my finger on the boat is what they just translates that to. Uncertainties regarding methane emissions and variations in emissions intensify between different sources and types of LNG and coal. Coal still not clean, I mean, but if you do it right, it can be. Greenhouse gas emissions from other energy sectors are high. And when you take a look at the lifecycle emission for LNG, for coal compared to coal generation, that little chart there in the center of it from right, everybody’s over there at Rystad. That’s pretty amazing. When you ship coal and then burn coal, it’s bad. [00:04:23][67.9]

Michael Tanner: [00:04:25] Yeah. I mean, this is kind of like a door, like if, if. [00:04:28][3.2]

Stuart Turley: [00:04:28] You some toy. [00:04:29][0.6]

Michael Tanner: [00:04:30] And so for all the people that are against LNG, aka the Biden administration with their LNG exports, this is the chapter you would be looking at because if the China can’t get their hands on LNG, well guess what, they’re going to keep burning coal because they don’t care. [00:04:42][12.1]

Stuart Turley: [00:04:42] Let’s help the planet and the planet needs LNG. [00:04:46][3.3]

Michael Tanner: [00:04:46] I’m I’m putting worried. The real for today’s episode has to be Stu. Let’s help the planet. You wouldn’t wouldn’t have thought I’d heard that. [00:04:53][6.9]

Stuart Turley: [00:04:54] No. You want to kill all the whales? I want to save the planet. I’m all about saving people and humanity. It’s pretty sad when the old guy in the room is the humanitarian. Okay, let’s go to the next one. [00:05:07][13.6]

Michael Tanner: [00:05:08] That I word I’d use to describe you. Stu is humanitarian. What’s next? [00:05:11][3.3]

Stuart Turley: [00:05:12] Human is what nobody calls. I mean a Houston energy company to build the largest refinery in half a century. Listen to this. It will process more than 160,000 barrels of gasoline, diesel and jet fuel from shale oil production. Pretty interesting. Element Fuel Holdings is spending between 3 and 4 billion on the project, which will produce more than 160,000 barrels per day of diesel jet fuel. And that’s pretty cool. [00:05:45][32.9]

Michael Tanner: [00:05:45] What’s also crazy is that Element Fuel Holdings is a relatively new company. They also say they intend to produce enough hydrogen and supply all the refineries power needs, which is going to, apparently, according to them, significantly reduce their emissions compared to the old refineries. Again, this is a Houston based firm. You know, I would have expected a bigger boy to get one of these. You know, this isn’t a shell. This isn’t an exxon. This isn’t a chevron. I mean, this is a smaller company. It’s good to see. I’m glad they went ahead and got this approved down there in Brownsville. But I it goes to show you how necessary new refineries are and how new you can make them, especially if you can produce enough hydrogen where you don’t have to. You can run itself to self-perpetuating refinery. [00:06:25][39.5]

Stuart Turley: [00:06:25] And and the fact that we got a new one since it 50 years that to me is out of the park huge. It’s pretty good to provide a thousand new jobs. We like jobs. [00:06:37][11.5]

Michael Tanner: [00:06:37] We love jobs. That’s the key. [00:06:38][1.0]

Stuart Turley: [00:06:39] All right, let’s go to Citibank. Here at Citi says oil could crash to sub 60 level. You know I don’t know how to price oil anymore. All I know is we got a trading desk now, and we’re getting requests for buying and selling crude, so might as well have a story about it here. Citi analysts have painted a bleak picture for the oil market. I disagree with them, but forecasting a significant price drop by 2025, according to the latest note, is $60 a barrel for Brant. I disagree, but then again, what do I know? [00:07:12][32.8]

Michael Tanner: [00:07:12] Well, I think I mean, let’s hear what they’re saying here. You know, their their their report and we’ve you dive into their report a little bit. They basically say the short term volatility may lead to some upside risks though that their longer term trend is bearish. You have to realize that 60% Brant as well. They’re not talking about WTI. You know I think what they’re doing is is they’re attempting to read the tea leaves on the opposite side and make the bearish case for an oversupplied market. It’s really the only way you can get to this number is is is really trying to figure out, okay. You know this is the I guess what am I trying to say. The way to make a bearish case has everything to do with we’re oversaturated on oil. I mean we’re about to see the EIA come out today. If you’re looking down that road, you know, and you’re looking at through that lens, I could see maybe how you get to this number. But that’s a pretty drastic cut I mean and and it would and maybe what they’re and maybe what they really do as an anticipating a Trump administration who’s going to who’s going to come in and encourage. And people are going to be more encouraged to drill. On the contrary, how more productive, how much, how much more money are you going to make at 55, $50 WTI drilling new wells than you are just producing your current production base at 75? Who knows. [00:08:23][71.5]

Stuart Turley: [00:08:24] Exactly. But also let me ask this. Contrastingly, as Citi’s outlook for copper is bullish with a projected price surge to 12,000 per ton. Are you watching copper prices, and do you think that that is a good number? Because if they’re calling for the bear in on oil, are they bullish on copper? And how does that number sound to you? [00:08:47][23.4]

Michael Tanner: [00:08:47] I ain’t I ain’t watching copper unfortunately. So I’m going to I’m going to have to take I’m going to have to read more research on that. I’m surely not going to take one bank’s perspective, but I find interesting that city is doing as you can. Everybody is bullish on oil. You’ve got we know where JP Morgan. We know where Goldman Sachs it’s cities kind of pasted the opposite one in. And again I’m not sure if this has much to do with where they see the US election going in terms of if. [00:09:11][23.6]

Stuart Turley: [00:09:11] You mentioned that starts. [00:09:12][0.8]

Michael Tanner: [00:09:12] Pumping a lot more oil. Well, price is only going to go down because the more supply, if we’re already oversupplied and you anticipate more oil coming online in a Trump administration versus a Biden administration last. [00:09:23][10.9]

Stuart Turley: [00:09:24] Time. [00:09:24][0.0]

Michael Tanner: [00:09:24] Last, maybe that’s what they’re thinking. [00:09:25][1.1]

Stuart Turley: [00:09:26] This time. President Trump had some really low oil prices, even though. [00:09:30][4.0]

Michael Tanner: [00:09:30] It was low even without Covid. [00:09:32][1.4]

Stuart Turley: [00:09:32] Oh, absolutely. [00:09:32][0.1]

Michael Tanner: [00:09:33] So why we’ll jump over here and cover a pretty crazy EIA crude oil inventory build. But before we do that guys, we got to pay the bills. As always, the news and analysis you just heard is brought to you by the world’s greatest website, EnergyNewsBeat.com the best place for all your energy and oil and gas news. Doing the team do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas business. You going to hit the description below? Check out all of the links to the articles that we talked about. Timestamps to all the different segments. They may be plus or minus 30s. And then you can also, as you mentioned, check out our aforementioned trading desk. Which have a link in the bio there. If you’re looking to buy, sell or source LNG, crude oil, jet fuel, any type of you know, what a, you know, refined product you can you know we are are are definitely in the market for that. So go ahead and hit that description below. Whether it’s U.S. or international, whether you’re buying or selling. We’ll get you connected and get you get that marketplace going. So again hit that. That’s energynewsBeat.Com/trading desk school. Pretty interesting Day [00:10:41][68.5]

Michael Tanner: [00:10:42] Overall market you know our you know we’re recording this Wednesday afternoon. Things are sort of in a little bit of a tumble. Mainly due to the fact that the Federal Reserve came out today about or came out on Wednesday at about 2 p.m.. And, and Jerome Powell announced that there is no rate cut. They’re going to stick at that guidance of a two 25.25 to 5 and a half percentage point. They he revised it down as well. The number of rate cuts. Remember at the beginning there was an expectation, as stated from the fed that they were going to do three rate cuts. He’s now said we may only expect one. This comes after a a scathing letter. And I say that is massive sarcasm from Elizabeth Warren and two other Senate, U.S. senators talking about how we need to lower interest rates because that’s what the UK is doing. And I’m like, great, we should all we should definitely be doing what the UK is doing. Absolutely. We should be doing what the UK is doing. And if you can’t smell the sarcasm dripping off my breath, then I’m sorry to hear that. I’ll probably move closer to the mic. So that’s really what’s driving markets. They were up about one and a half percentage points today. currently or on Wednesday currently going, you know, currently sitting here about a quarter, about three quarters of a percentage point and tumbling Nasdaq just up a little bit over one percentage point but again tumbling their US two and ten year yields down 1.6 percentage points and 1.8 percentage points there. So US interest rates taking two and ten year yields take a nice tumble there. with the ten year actually doing worse than the two year dollar index down half a percentage point. Bitcoin fairly stable. It’s up about 9A1 percentage point 67,809. But as as expected it will probably continue to rise in face of of no rate cuts crude oil up about a half percentage point after a pretty tumultuous day relative to relative to where obviously a interest rate cut would have been bullish for oil. Not seeing and seeing a revised down of cuts doesn’t necessarily help. It’s sitting at 7829 and Brant Oil 8224. You know, really what we saw was an inventory build from the EIA, which was unexpected. As I mentioned. You know, the AP yesterday hit about a 2 million barrel draw. Well, today we saw about a 3.7 million barrel build from the EIA. And that’s compared with a build of about 1.2 of last week. And then as I mentioned the API crude oil inventory. Guess. And we also did see a gasoline inventory build of about 2.6 million barrels, with production averaging about 10.1 million barrels a day in distillates. We showed an inventory increase about 900,000, then production averaging about 5 million barrels. That’s compared with, 3.2 million barrel increase in this with 5.1 million barrels per day of production. I mean, pretty, pretty substantial build here. It’s really kind of there was an interlocking moment there when the report came where oil was sitting just above $79 and took a tumble all the way to, you know, the mid 70, you know, the mid 77, 50 have since climbed its way back up to where it’s sitting now, 7830 as we record this. So, you know, movers and shakers there, you know, watching to see how Citibank comes out later this year and justifies their, justifies their prediction depending on where things go from here. The last thing I want to talk about is Matador Resources. They come out today and announce a, quote, strategic bolt on acquisition in the Delaware Basin. If you’re reading the press release, pretty interesting, a deb acquisition, they go ahead and swoop up for an all cash payment of $1.9 billion. Meredith is a portfolio company of the aforementioned end cap resources. This is the second time that Matador has come in and scooped up an end cap. Back to private equity company, back in 20 early 2023, they went ahead and scooped up Advanced and Advanced Energy, which is another end cap company. So they you know, maybe there’s something to to watch out for there in terms of any time in cup spend and cap spins up a portfolio company, it’ll be interesting to see where Matador comes down line again. Matador. You know, their strongest position there is in the Delaware Basin, which is on the New Mexico. And, you know, the western New Mexico or the western side of the Permian Basin, which encompasses eastern New Mexico and the Horn of Texas. Right there. That’s their largest position they want. They go ahead and with this acquisition, add about 190,000 net acres. Or excuse me, that’s their total acreage count. Excuse me. And their amount of locations that they go ahead and purchase is somewhere around 321, which brings their total net locations up to about 2000. To give you guys an idea, you know, on the American EV asset, they go ahead and scoop them up. PDP ten on that is about 1.46 billion. So you can see a little bit of a. Premium there. You know, what’s interesting is that they expect the adjusted Ebit of those assets was about 425 to 475 as of strip pricing. That’s a 4.2 multiple on EBITDA relative to the purchase price, which is a little bit crazy, and I think has a lot to do with the fact that a lot to do with the fact that they feel like there’s some upside relative to the develop, you know, resources or some of the duds. You know, it’s also a 47,000, which basically works out to a 47,000 per flowing BOE metric, which, I mean, those are two really, really big numbers. And there’s a lot that’s interesting about this deal. It’s a very nice consolidated piece of acreage down there in the Delaware Basin. It’s very contiguous. It’s extremely helpful. It’s 33,000 acres total, 99% of that operated. It’s about 300. And I mentioned 71 net locations, all with about 86% working interest. Obviously you’re talking you know, you’re you’re wolf camp in your Bone Springs. It’s it’s you know, they talk a lot about, you know, their methodology of estimating inventory. We could get into that, you know, pretty crazy. There also is a a 19% stake in the pinion midstream which kind of gathering and treatment facility which increases your ability for gas take away. It’s one of the big problems out there in the Delaware Basin. So you know Jeff Crimo we’ve talked with him before on the oil on the Deal Spotlight podcast, specifically Schlumberger Champ X. He wrote a really nice LinkedIn post on this. I’d recommend everybody go check him out on LinkedIn and check out his newsletter, where he talked about the interesting nature of the fact of this all cash deal in a world where the last seven deals that we’ve evaluated have all been heavily stock based. And so the real, you know, and what he points out is generally when you buy with all cash, you’re issuing new debt. So the real question is where do they see, you know from matadors perspective where, you know, and that’s exactly what they’re going to do. They’re going to increase their their their debt. Now they claim they’re they claim with the increase in EBITDA, they’re actually going to lower their, you know, their leverage ratio. They’ve they’ve got it right up here. Where was it I was reading here. Preserve magic strong Balaji pro forma leverage. Expect to be 1.3 a closing and backed by one point at 1.0 by the middle of 2025. So what they’re saying is, yes, we’re increasing our debt, but our leverage is going to stay the same because of the increase in EBITDA relative to these, you know, relative to these assets. I mean, if you’re adding revenue to your business, but you’re adding debt, it can be net neutral from a debt ratio standpoint, you just better hope there’s enough revenue. And that’s always the key. It’s always the key. It’s not is there revenue. It’s is there enough revenue to cover that leverage? It does look like they believe with by drilling those new locations and hopefully some net debt reductions, they can get that leverage back below what they claim their target is at a 1.0. But, you know, I had actually heard rumors of this deal a couple of weeks ago. You know, you know, Matador, as I mentioned, loves and cap stuff. So I wouldn’t be surprised if this same management team now breaks off, goes buys another six us, you know, consolidated acreage position out there in Delaware Basin this season. Two years. They can’t flip to Matador. It seems like you know end cap and Matador seem to have a great relationship going on there specifically from a value add. I think the interesting part we’ll see a year from now, we’re going to be able to have two full years of the advanced energy deal, and another and a full year and a full year with the Amara, and it’ll be interesting to see kind of how those have shaped out for them. But I think there’s there’s a clear strategy here for both Matador and Cap. [00:18:40][478.5]

Stuart Turley: [00:18:41] That’s right. Good numbers, good management, good numbers. [00:18:43][2.0]

Michael Tanner: [00:18:43] Yeah we like I matadors right down the street here for me right here in the Galleria here in Dallas. But they also you know, they’ve proven they’re one of the few companies that are still led by their CEO founder, chairman. It’s one of the few dictatorships that’s working in my opinion. [00:18:57][13.7]

Stuart Turley: [00:18:57] Well, like my household. Yeah. [00:18:59][1.5]

Michael Tanner: [00:18:59] Well. Well, yeah. Okay. I’ll leave it at that. We love you. Have you working on a. [00:19:04][4.3]

Stuart Turley: [00:19:04] Bunch a Berkshire a picking up another 2.57 million more shares, 2.57 million more shares from Occidental. Wow. [00:19:13][9.5]

Michael Tanner: [00:19:13] Hey, they’re eventually own. And at some point what Berkshire Oil. Is that what they’re going to rebrand to? [00:19:18][4.2]

Stuart Turley: [00:19:18] Yeah, I think so. It’s what they own 28.3%. [00:19:19][1.5]

Michael Tanner: [00:19:21] Now once Warren just kind of put himself as CEO. [00:19:24][3.0]

Stuart Turley: [00:19:25] I don’t know, maybe he’s getting ready to like do that. He’s going to retire from Berkshire and go run oxy. [00:19:30][5.4]

Michael Tanner: [00:19:31] Yeah I doubt that. So all right guys. Well with that we’ll let you get out of here. Finish up your Thursday. We will not be who we running tomorrow before we let him go. Who we running on Friday. The podcast. [00:19:41][10.1]

Stuart Turley: [00:19:42] We got four podcast getting ready to rumble out and let me get the list here real quick. We’ve got some good ones here. It figures it’s the system is a little slow here. We have coming around the corner. Ronald Stein is one of them. We have Troy Eckert finally out of production. Ronald Stein, we have Adam Goodman has just went out last week, but the transcript is going to be done. And then we have Prince Tiana Ford going out next week. Lots of good stuff. That was a fun one. [00:20:13][31.8]

Michael Tanner: [00:20:14] Yeah. No. Absolutely. Everybody check that out. You can hear the weekly recap on Friday, and then we will be back in the chair on Monday for you guys. We appreciate you sticking with us. Hope you guys have a great weekend. Don’t die of the heat. Best of you here in Texas. Watch out for air court. We know they’re coming for you. Stay cool, stay safe. And we will see you guys on Monday. [00:20:14][0.0][1178.1]

– Get in Contact With The Show –

The post Refineries are BACK! appeared first on Energy News Beat.

 

Energy News Beat

Services are big, and that one-month outlier was massive, and it drove down Core CPI and overall CPI.

By Wolf Richter for WOLF STREET.

The Consumer Price Index for May, on a month-to-month basis, was pushed down by the continued sharp drop in durable goods prices, a drop in energy prices, flat food prices, and “core services” prices that rose at the smallest pace since late 2021 in a stunning whiplash-inducing outlier move, according to data from the Bureau of Labor Statistics today. So, we’ll start with that outlier because it’s so big, and because core services are so big — they account for 65% of total CPI — and because that outlier drove everything else.

Stunning outlier: Core services CPI increased by 2.7% annualized in May from April (0.22% not annualized), the smallest increase since October 2021 (blue line). These kinds of outliers don’t make a trend; they’re soon reversed, as all other outliers in core services have shown. This massive one-month outlier drove down the six-month reading.

The six-month core services CPI rose by 5.5% annualized, the first deceleration since October 2023 (red).

Month-to-month core CPI driven down by outlier in services.

Core CPI rose by 2.0% annualized (0.163% not annualized) in May from April, the smallest increase since August 2021 (blue line in the chart below). The month-to-month squiggles can be wild, and this one was driven by the whiplash-inducing outlier in core services CPI.

The six-month core CPI, which irons out most of the month-to-month zigzags, rose by 3.7% annualized, the first deceleration, after five months of accelerations in a row.

Year-over-year CPI measures, summary:

Core services CPI increased by 5.2% year-over-year in May, roughly the same hot pace for the eighth month in a row (red line).

Durable goods CPI – after the spike during the pandemic – has been falling across the board since mid-2022, led by the plunge in used-vehicle prices. In May, durable goods CPI was down 3.8% year-over-year, the biggest drop in 20 years (green).

Core CPI, which excludes food and energy, rose by 3.4% year-over-year, continuing its deceleration, slowed by the sharp drop in durable goods (blue).

Overall CPI rose by 3.3% year-over-year. It has been in essentially the same narrow range since June 2023 when it hit the cycle-low of 3.0% (yellow):

The housing components of core services CPI.

Rent of Primary Residence CPI rose by 4.8% annualized in May from April, an acceleration from the prior month (blue).

The three-month reading rose by 4.7%, the smallest increase since October 2021.

The Rent CPI accounts for 7.6% of overall CPI. It is based on rents that tenants actually paid, not on asking rents of advertised units for rent. The survey follows the same large group of rental houses and apartments over time and tracks the rents that the current tenants actually paid in these units.

The Owners’ Equivalent of Rent CPI rose by 5.3% annualized in May from April, an acceleration from the prior month. It remains in the range of which August 2023 had been the low point (+5.1%).

The three-month OER CPI also rose by 5.3% annualized, roughly the same as in the prior month.

The OER index accounts for 26.6% of overall CPI. It is designed to estimate inflation of “shelter” as a service for homeowners – as a stand-in for the services that homeowners pay for, such as interest, homeowner’s insurance, HOA fees, maintenance, and property taxes. As an approximation, it is based on what a large group of homeowners estimates their home would rent for, the assumption being that a homeowner would want to recoup cost increases by raising the rent.

“Asking rents…” The Zillow Observed Rent Index (ZORI) and other private-sector rent indices track “asking rents,” which are advertised rents of vacant units on the market. Because rentals don’t turn over that much, the ZORI’s spike in 2021 through mid-2022 never fully translated into the CPI indices because not many people actually ended up paying those asking rents.

The ZORI rose by 0.2% in May from April, seasonally adjusted, and by 3.4% year-over-year.

The chart shows the CPI Rent of Primary Residence (blue, left scale) as index value, not percentage change; and the ZORI in dollars (red, right scale). The left and right axes are set so that they both increase each by 55% from January 2017. The ZORI was up by 49% from January 2017, and the CPI Rent was up by 38% over the same period.

Rent inflation vs. home-price inflation: The red line in the chart below represents the CPI for Rent of Primary Residence (actual rents paid by tenants) as index value. The purple line represents the Case-Shiller 20-Cities Home Price Index (see our “Most Splendid Housing Bubbles in America”). Both indexes are set to 100 for January 2000:

Services related to motor vehicles.

Motor-vehicle insurance costs have soared during the pandemic largely because used-vehicle prices have spiked, which translates into higher replacement costs. And motor-vehicle maintenance costs have surged because wages of auto-repair technicians have surged, and because prices of replacement parts have surged.

But that spike during the pandemic seems to be backing off at the moment.

Motor-vehicle insurance CPI:

In May from April annualized: -1.4%
Three-month annualized: +18.3%
Year-over-year: +20.3%
Since January 2022: +46%

Motor-vehicle maintenance CPI 

In May from April annualized: +3.3%
Three-month annualized: +8.3%
Year-over-year: +7.2%
Since January 2020: +35%

Food away from Home CPI – often called food services – includes full-service and limited-service meals and snacks served away from home, food at cafeterias in schools and work sites, food served at stalls, etc.

In May from April annualized: +4.3%
Year-over-year: +4.0%
Since January 2020: +27%

Major Services ex. Energy Services
Weight in CPI
MoM
YoY
Core Services
64%
0.2%
5.2%
Owner’s equivalent of rent
26.6%
0.4%
5.7%
Rent of primary residence
7.6%
0.4%
5.3%
Medical care services & insurance
6.5%
0.3%
3.1%
Food services (food away from home)
5.3%
0.4%
4.0%
Education and communication services
5.0%
0.4%
2.9%
Motor vehicle insurance
2.9%
-0.1%
20.3%
Admission, movies, concerts, sports events, club memberships
1.8%
0.3%
4.7%
Other personal services (dry-cleaning, haircuts, legal services…)
1.5%
-0.3%
4.1%
Lodging away from home, incl Hotels, motels
1.5%
-0.1%
-1.4%
Motor vehicle maintenance & repair
1.2%
0.3%
7.2%
Public transportation (airline fares, etc.)
1.1%
-3.1%
-4.7%
Water, sewer, trash collection services
1.1%
0.1%
4.8%
Video and audio services, cable, streaming
0.9%
-1.3%
2.8%
Pet services, including veterinary
0.4%
0.4%
5.9%
Tenants’ & Household insurance
0.4%
0.5%
4.3%
Car and truck rental
0.1%
-1.2%
-8.8%
Postage & delivery services
0.1%
0.3%
3.8%

Core services price level. Since January 2020, the core services CPI has increased by 21%. The steepness of the curve indicates the rate of inflation.

Durable goods CPI.

The durable goods CPI fell by 5.6% annualized (-0.48% not annualized) in May from April, and by 3.8% year-over-year, as overall price declines accelerated, except in used vehicles.

New and used vehicles dominate this index, which also includes information technology products (computers, smartphones, home network equipment, etc.), appliances, furniture, fixtures, etc. All categories have been experiencing price declines starting in late 2022, after the ridiculous price spike during the pandemic.

From January 2020 to the peak in August 2022, durable goods prices spiked by 23%. Since then, they have dropped by 5%, having unwound only one-quarter of the pandemic spike. Compared to January 2020, the index is still up 18%.

Major durable goods categories
MoM
YoY
Durable goods overall
-0.5%
-3.8%
New vehicles
-0.5%
-0.8%
Used vehicles
0.6%
-9.3%
Information technology (computers, smartphones, etc.)
-1.9%
-8.1%
Sporting goods (bicycles, equipment, etc.)
-0.3%
-0.3%
Household furnishings (furniture, appliances, floor coverings, tools)
0.0%
-2.5%

New vehicles CPI fell 5.8% annualized in May from April (-0.49% not annualized), the fifth month-to-month decline in a row, and the steepest yet. Year-over-year, the index fell by 0.8%.

After a long plateau, prices are now finally heading south, as inventories of new vehicles have built up into what amounts to a glut at many dealers, and automakers are having to offer big incentives and discounts to sell the vehicles.

In the years before the pandemic, the new vehicle CPI zigzagged along a flat line, though vehicles were getting more expensive. This is the effect of “hedonic quality adjustments” applied to the CPIs for new and used vehicles and other products (detailed explanation of hedonic quality adjustments in the CPI).

Used vehicle CPI rose by 7.5% annualized in May from April (+0.60% not annualized), seasonally adjusted (red); not seasonally adjusted (blue), the index rose by 5.8% annualized (+0.47% no annualized).

These price increases in May diverge from wholesale prices that continued to drop in May.

Used vehicle CPI has now given up a big portion of the 53% spike from January 2020 through January 2022, but is still 30% higher than in January 2020.

Food Inflation.

Inflation of “Food at home” – food purchased at stores and markets and eaten off premises – has cooled, with no increase in May from April, and a 1.0% increase year-over-year, after the massive spike during the pandemic.

MoM
YoY
Food at home
0.0%
1.0%
Cereals, breads, bakery products
0.2%
0.7%
Beef and veal
-0.3%
5.7%
Pork
0.9%
2.6%
Poultry
0.4%
1.2%
Fish and seafood
-0.5%
-1.0%
Eggs
-0.4%
3.0%
Dairy and related products
-0.5%
-1.0%
Fresh fruits
0.4%
-0.2%
Fresh vegetables
-0.4%
0.8%
Juices and nonalcoholic drinks
-0.5%
2.0%
Coffee, tea, etc.
-0.6%
-2.5%
Fats and oils
-0.3%
2.2%
Baby food & formula
-1.3%
2.5%
Alcoholic beverages at home
0.2%
1.4%

The CPI for food at home, after the pandemic spike, is up 25% from January 2020. Prices have flattened out, but have not come down.

Energy.

The CPI for energy covers energy products and services that consumers buy and pay for directly:

CPI for Energy, by Category
MoM
YoY
Overall Energy CPI
-2.0%
3.7%
Gasoline
-3.6%
2.2%
Electricity service
-0.2%
4.7%
Utility natural gas to home
-0.8%
0.2%
Heating oil, propane, kerosene, firewood
-1.0%
2.8%

Gasoline prices (account for about half of the energy price index) are very seasonal, with the lowest prices in December or January and the highest prices during driving-season in the summer. Seasonally adjusted prices (red) and not seasonally adjusted prices (blue) declined in May from April:

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The post Beneath the Skin of CPI Inflation: A Stunning Outlier Services CPI Drove Down Everything Else appeared first on Energy News Beat.

 

Energy News Beat

Higher for longer becomes formalized one meeting at a time, as projections for “longer-run” federal funds rate keep getting raised.

By Wolf Richter for WOLF STREET.

FOMC members voted unanimously today to maintain the Fed’s policy rates unchanged, as Fed governors have uniformly telegraphed in their speeches:

Federal funds rate target range: 5.25% – 5.5%.
Interest it pays the banks on reserves: 5.4%.
Interest it pays on overnight Reverse Repos (ON RRPs): 5.3%.
Interest it charges on overnight Repos: 5.5%.
Primary credit rate: 5.5% (banks’ costs to borrow at the “Discount Window”).

To douse Rate-Cut Mania, starting at the January meeting, the Fed had added new language to its statement. At today’s meeting, it repeated that language for the fourth time:

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

And it repeated what it had said since the rate hikes started: “The Committee is strongly committed to returning inflation to its 2 percent objective” – with which the Fed whacks back at folks that are pushing it to raise its inflation target to 4% or whatever.

The FOMC statement maintained the new language on the labor market being in “better balance” that it had introduced in May:

“The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.”

The “dot plot,” Oh MY! Rate Cuts dialed down to just 1 cut in 2024.

In its updated “Summary of Economic Projections” (SEP) today, which includes the infamous “dot plot,” each of the FOMC’s 19 participants jots down where they see various economic metrics – the Fed’s policy rates, unemployment rates, GDP growth, PCE inflation, etc. – by the end of 2024, by the end of 2025, etc. The median value of these projections (the value in the middle) becomes the headline projection for that metric. These median projections are not a decision by the Fed, nor a commitment. They’re a summary of how the 19 participants are seeing the economy evolve.

The median projection for the federal funds rate at the end of 2024 was 5.125%: only 1 rate cut of 25 basis points in 2024 — down from the three cuts envisioned since the December meeting — bringing the Fed’s target to a range between 5.0% and 5.25%.

Four of the 19 participants saw no rate cuts in 2024, seven saw 1 rate cut, and 8 saw 2 cuts. None (zero) of the 19 participants saw 3 cuts or more in 2024. This is a hawkish dial-down from the last dot plot in March, when 10 participants saw 3 or more cuts.

The mid-point has been 5.375% since the July 2023 meeting. Here is how the 19 participants saw the rate scenario for 2024:

4 see 5.375%: No cuts (up from 2 participants in March)7 see 5.125%: 1 cut (up from 2 participants in March)8 see 4.875%: 2 cuts (up from 5 in March)0 see 4.625%: 3 cuts (down from 9 in March)0 see 4.375%: 4 cuts (down from 1 in March).

Higher-for-longer: The median projection for the “longer-run” federal funds rate rose to 2.8% from 2.6% in the March SEP, slowly but steadily advancing with every meeting along the higher-for-longer theme.

GDP growth projections: The median projection for GDP growth for 2024 remained at 2.1% (from 2.1% in the March SEP, and from 1.4% in the December SEP).

Higher inflation projections: The median projection for “core PCE” inflation by the end of 2024 rose to 2.8% (from 2.6% in March and from 2.4% in December).

Unemployment rate projections: The median projection for the unemployment rate remained at 4.0% by the end of 2024.

QT continues at the slower pace announced in May, to avoid the kind of mess the Fed experienced with the repo market blowout in September 2019 after QT-1.  “By going slower, you can get farther,” Powell had said at the press conference after the last meeting. The Fed has already shed over $1.7 trillion in assets since it started QT in July 2022. It will continue to shed assets but at a slower pace.

The slower pace of QT starts this month. The Treasury roll-off was reduced from $60 billion a month to $25 billion. On the other hand, the Fed removed the $35-billion cap from the MBS roll-off.

MBS come off the balance sheet via passthrough principal payments that result from mortgage payoffs, but mortgage payoffs have collapsed as refis have collapsed and homes sales have plunged, and these passthrough principal payments have become a trickle of around $17 billion a month. If the mortgage business ever picks up again so that more than $35 billion a month in MBS come off, these MBS will just come, and goodbye, but the excess over $35 billion will be replaced with Treasury securities.

Here is the whole statement:

Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller.

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The post Fed Sees Only 1 Rate Cut in 2024, Holds Rates at 5.50% Top of Range, QT Continues at Slower Pace as Announced in May appeared first on Energy News Beat.