News roundup for Fri, Jul 15, 2022

In short:
  • US inflation rose to new 41-year highs in June—but gas prices have already started falling
  • The UK could reach 40 C this weekend—the highest temperature ever recorded
  • There’s a chance an agreement to free up grain exports in Ukraine will be reached next week
Economy, food security, supply chain

US inflation rose to 9.1% in June, a new 41-year high. High rents, gas, and food prices were the main culprits. The Fed should continue to raise interest rates unless inflation decreases soon, which could slow the economy and put the US at risk of recession:

Via AP

Because of June’s higher-than-expected jump, seniors will likely receive a 10.5% adjustment to their Social Security checks in early 2023.

Since their peak in June, gas prices have fallen sharply. Gas prices have fallen 28 days in a row, the longest decline since energy demand collapsed in early 2020. The trend could quickly reverse, especially if a hurricane knocks out a refinery on the Gulf Coast since global oil supplies remain relatively tight. The nation’s inventories are slowly growing, partly because the government keeps releasing oil from its strategic reserves, and consumption is down.

GPU prices and shipping container rates are also falling:

Some observers think that our current situation is bizarre:

Explainer: Why is the US selling stockpiled oil to China? In short: the US government sells assets at the highest price possible, and sometimes US companies can’t handle more oil when the sale is held, so foreign companies buy it. The oil market operates on a global level. Lower prices are the results of changes to supply and demand on a global basis, not just in the US.

The US might get 24% of its energy from renewables in 2023:

Sales of electric cars in the US are rising sharply despite shortages. From April through June, electric vehicles accounted for 5.6% of new-car sales, a 2x increase from the previous year.

The UN says talks to free up grain exports from Ukraine are moving forward. There’s a chance they might have an agreement signed up next week.

Climate change, environment, extreme weather

The UK could experience temperatures as high as 40 C (104 F)—peaking Mon-Tue. If temps break 40 C, it will be the hottest it has ever been recorded in the UK. Temperatures will keep as high as 20 C (68 F) overnight, especially in urban areas. Water, electricity, and travel disruptions are expected, and officials warn of heat exhaustion or the potential for a wet bulb effect. The UK is more likely to see prolonged periods of hot weather due to climate change.

France, Portugal, and Spain are battling wildfires:

Temperature forecasts in China also exceeded 40 C (104 F). During the heat wave, people sought cool air in air-raid shelters underground as roofs melted and roads buckled. Health workers conducting outdoor Covid tests strapped packets of frozen snacks to their hazmat suits.

Flash floods in Virginia damaged and destroyed 100 houses, collapsed one bridge, created mudslides that blocked roads, knocked out power, and left people without phone service. In some places, the flood left 1-2 ft of mud. There are no reports of death and the only reported injury was from a snake bite (!). Virginia’s governor has declared a state of emergency.

Deforestation in the Brazilian Amazon hit a tragic record in 2022. Satellite images taken between January and June show 4,000 sq km (1,500 sq m) of forest destroyed, about four times the size of New York City. The area is 80% larger than the same period in 2018, the year before Bolsonaro took office, according to an analysis from the Amazon Environmental Research Institute (IPAM).

Climate change is forcing massive wildlife migrations toward the poles. Every organism has been affected. Life on Earth is moving away from the equator by 16 feet a day. Land-dwelling organisms retreat by 10 miles a decade, while ocean-dwelling ones migrate 45 miles. One of the consequences could be an increase in virus swapping between species (i.e., new diseases for us humans and the animals we raise for food).

Companies face climate opposition from farmers. Companies like PepsiCo, Cargill, Walmart, and General Mills are trying to convince farmers to adopt climate-friendly farming techniques. Together, these companies have committed to regenerative agriculture on at least 70 million acres or roughly 18% of the country’s cropland. Farmers are skeptical of the initiatives, saying the incentives aren’t enough to cover the additional costs these new techniques will incur. According to a scientist, the current agricultural system isn’t flexible enough to reduce greenhouse gas emissions rapidly.

Opinion: A case for retreat in the age of fire. Wildfires are getting bigger, more frequent, and more severe in the American West. Although fire-adapted communities are being developed, some communities will need to start planning retreats. According to the authors, there’s no way to design our way out of wildfires.

The rest

Some interesting stats from the 2022 UN Population Prospects:

  • The world population will pass 8 billion at the end of 2022 (although global fertility rates are declining). The global population is projected to peak at around 10.4 billion in 2086.
  • The UN estimates around 15 million excess deaths in 2020 and 2021 from the Covid pandemic (and, in another study, 1 in 8 US deaths from 2020 to 2021 were caused by Covid).
  • Next year India is expected to take over from China as the world’s most populous country.

Heathrow will be limiting passenger traffic to just 100,000 departures per day until September 11 due to staff shortages and a surge in travel.

The Odessa water outage underscores a growing problem: Aging pipes in Texas cities are getting more fragile.

Expert on civil wars says the US is heading toward insurgency — the 21st-century version of civil war.

Meta: What the controversial 1972 ‘Limits to Growth’ report got right: Our choices today shape future conditions for life on Earth.


    • Pops

      Thank you Carlotta!

      The inflation and gas price stories are 2 sides of the same coin. It is typical that after a few months of significantly higher fuel price people start conserving a bit. That’s what’s happening now, demand is down, lowering the price some. Turns out this really isn’t a good sign, it signals a slowing economy. And that is typical too, like 9 or the last 10 recessions was preceded by a large oil price spike. 

      Oil and refined products in storage are waaay below the 5 year average – 2015-19 that is. Usually that signals oil prices will stay high. No surprise with RU under sanction, along with Iran and Venezuela, all countries in the top 5 of oil reserves. Likewise, US tight (fracked) oil is not responding as it did in the free money days of the early teens. Only the part of the “Permian” formation in NM is showing much growth. I’ll just point out that production from old fashioned “gusher” type formations peaked in the oughties and only US fracking and CA tar sand washing enabled by record high price for record length of time enabled oil production to grow these last 12 years.

      In other words, plan for high oil prices from here out. Maybe not consistently high, the odd recession will provide occasional relief.


      US EIA produces weekly oil market reports: 

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      • Captain Peanut Pops

        In a previous news roundup, it was said that they were going to get rid of the federal tax on gasoline to help prices out for a while. Maybe that also has something to do with lowering prices?

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      • Pops Captain Peanut

        Most of the price of gas is oil. Somewhere from 50-70%.

        Oil is a globally traded commodity, the price is based on global demand for the marginal barrel plus whatever shipping costs. IOW the market price is like an auction where the people bidding over the last barrel set the price for all barrels that period. IO-OW, If there are plenty of barrels available that last barrel isn’t worth as much so all barrels are cheaper, but if there aren’t enough barrels to go around, everyone pays more.

        Tax is very local. Federal tax is 18¢ / gal, here in MO I’m paying additional 20¢ /gal state tax, but elsewhere it is much higher, PA pays almost 60¢ on top of fed excise tax. Average state gasoline tax tho is 31¢ so taxes are only about 50¢ a gallon.

        But refinery margins go up and down because gasoline itself is a traded commodity. Wholesale price depends on what “kind” of crude is available, what kind of fuel is in demand locally, even the price of corn because a certain percentage of ethanol must be blended with gas to add oxygen and help it burn cleaner. For example, much of the “fracked” oil produced in the US during the much ballyhooed “resurgence” in US oil, gets exported or mixed with imported tar sand effluent because it is too light for US refineries. 

        There really is no such thing as “US oil independence” That was a marketing gimmick to help kill the oil export ban to make a market for light, tight oil that we couldn’t use.

        Sorry that took longer than I planned, LOL


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      • Captain Peanut Pops

        That makes so much sense. I never knew about the fracked oil and how there is no such thing as US oil independence. 

        If I was a leader of this country, I would realize this and recognize that although our money is very appealing and is a strong source of constant oil, that it isn’t full-proof and one day the world might all agree to not give the US any more oil for whatever reason. In that case we need to work on becoming more energy sufficient with renewables like sun and wind. Those are solutions that can’t be stopped or taken away. 

        There are seriously so many things to think about though and it’s easy for me to just type “make more solar panels” without knowledge of how things truly work. Let’s just say I’m grateful that I’m not in charge.

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      • Pops Captain Peanut

        There was much talk in the 00’s, 70’s, 1920’s even about imminent decline in oil flows, i.e.: peak oil. But just like Ehrlich’s Population Bomb prediction being postponed due to fossil-based fertilizers and genetic manipulation, we’ve always found another oil field, invented a newer and better technology, even found oil in places geologists didn’t expect.

        So far…

        Peak oil is thus a political third rail because it directly affronts the pervasive normalcy bias. Any politician hinting at limits to growth is instantly a loser: google Malaise speech.

        But the fact remains, oil is finite—just as food production has an upper bound. Not coincidentally the two are one. I’m optimistic we can settle down to a lower energy state and lower population using renewables, but right now they are wholly subsidized by fossils. Energyskeptic is a great site to expand one’s knowledge about the difficulties of renewables. Here is a recent post.

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      • TraceContributor Pops

        Great summary/analysis Pops! I think you’re exactly right. Supply and demand is a thing. Lower gas prices— because we’re driving less and conserving more—may be good for the individual wallet but, like you say, signals a slowing economy likely tumbling into a full recession.

        And to announce the price of gas has come down is sort of silly when you raise it, say, $1.50 in a very short time and then reduce it by $.50.

        Also thanks for your insights/links on oil production and the difficulties of renewables — I knew most of that but some was new to me. 

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    • Karl Winterling

      I think it can take 12-18 months before higher interest rates start to work, unless (of course) Jerome Powell suddenly becomes much more aggressive after developing an unhealthy cigar habit.

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    • Captain Peanut

      Can I share some news I saw this week that might relate?

      The National Suicide Prevention Hotline is getting a three digit speed dial number of 988 starting tomorrow. Currently you have to call 1800-273-8255 but hopefully this speed dial number will be a quick number that people can memorize like 911 for the police and get help sooner.

      And while many places up north are experiencing record highs, down south in Australia they are in the middle of their winter and it seems like some of the houses there are not built for such cold temperatures. Australian homes are so cold that some are falling below the WHO’s recommended ‘safe’ temperature

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      • Most people dial 911 when they’re having a severe mental health crisis even though you were supposed to call 1-800-273-TALK/8255. Counselors should also help people find local mental health and substance abuse resources.

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      • GB Captain Peanut

        Having lived in two different states in Australia, my experience is that most Australian houses aren’t set-up for extreme weather conditions, that is, summer or winter. In Sydney, rain or high heat/low cold temps weren’t factored in in places I’ve lived, and in Brisbane, cold is not always a factor.

        Things may be changing now with local council/state by-laws, but there’s noting I’ve heard about to help address the problem.

        In our house, we either open windows and turn on fans in the heat, or close windows and don jumpers (sweaters) in the cold, but it’s necessarily not that simple for others with greater extremes of temperature.

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    • Captain Peanut

      That article on a possible insurgency was interesting. It says that there isn’t going to be a north vs south type of civil war like the last one the US had, but instead extremist groups will target infrastructure and civilians using domestic terror and guerrilla warfare. All the more need to prepare if roads get blocked, water treatment plants get infected, or power companies have to shut down. Hope it doesn’t come down to that.

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    • Eric

      General Mattis (USA) and General Guillaud (France) discuss military challenges regarding Ukraine, Russia, and nuclear deterrence. Ignore the click bait title. This is two very knowledgeable and intelligent generals explaining difficult situations very clearly.

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