Oil prices continue to soften, down to $80 a barrel. Surprisingly, OPEC+ considering raising production by half million per day.
There are so many moving parts here, it's difficult to understand. Over the last few weeks:
- Biden gained domestic strength by blunting the red wave - The G7 is set to cap Russian crude prices, potentially removing their oil from the market - Biden admin told a federal court that MSB has sovereign immunity from prosecution for the Khashoggi killing - Winter is coming, meaning higher demand
Strangely, after they announced the 2MM per day production cut, prices have moved down. Biden sought to blunt it by releasing more strategic reserve and it appears to have worked to some degree.
Hard to say where prices will be in six months though.
As long as Russia keeps Saber rattling prices will be on the higher side.
I'm not sure. That's the question here. The G7 will be capping the prices on Russian oil. It's interesting that Opec is looking to increase production, which means there may be a split growing between SA and Russia. The thought was that OPEC was protecting Russia when they cut production by 2 MM per day a few months ago, but they always said no, they were just getting ready for the recession. The other wild card is UAE. They are a major producer, up to 5 MM per day, and they are pushing to maximize production before the recession.
You have a good point.
UAE is part of OPEC though. They do what they want which is just wild to me.
Opec increasing productivity would cancel out Russias oil so I would expect Russia to lower their prices to mess with everyone else which could be good. Russia, during the pandemic flooded oil on the market to sell and crashed the prices. Maybe they can do that again? It disrupts the world for a bit and doesn't do them any favors but they do what they want it seems like also.
I do want to see lower prices soon as winters coming.
My point about UAE is that they are pressuring the other OPEC nations to increase production, offsetting Russian needs.
The other big question is what will the G7 set as the max Russian price? Some say $60 or even a little higher. Ukraine and Poland want it to be $20, just over production price. In theory that would cause Russia to shut down production, which might be counter productive.
Russia would undercut the whole thing and sell cheaper. They've done it before.
Russia is trying to keep prices up to fondant their war. If they flooded the market with oil before the mark the G7 is setting, then I think the west will celebrate. I don't think that's happening.
Oil prices continue to soften, down to $80 a barrel. Surprisingly, OPEC+ considering raising production by half million per day.
There are so many moving parts here, it's difficult to understand. Over the last few weeks:
- Biden gained domestic strength by blunting the red wave - The G7 is set to cap Russian crude prices, potentially removing their oil from the market - Biden admin told a federal court that MSB has sovereign immunity from prosecution for the Khashoggi killing - Winter is coming, meaning higher demand
Strangely, after they announced the 2MM per day production cut, prices have moved down. Biden sought to blunt it by releasing more strategic reserve and it appears to have worked to some degree.
Hard to say where prices will be in six months though.
As long as Russia keeps Saber rattling prices will be on the higher side.
I'm not sure. That's the question here. The G7 will be capping the prices on Russian oil. It's interesting that Opec is looking to increase production, which means there may be a split growing between SA and Russia. The thought was that OPEC was protecting Russia when they cut production by 2 MM per day a few months ago, but they always said no, they were just getting ready for the recession. The other wild card is UAE. They are a major producer, up to 5 MM per day, and they are pushing to maximize production before the recession.
You have a good point.
UAE is part of OPEC though. They do what they want which is just wild to me.
Opec increasing productivity would cancel out Russias oil so I would expect Russia to lower their prices to mess with everyone else which could be good. Russia, during the pandemic flooded oil on the market to sell and crashed the prices. Maybe they can do that again? It disrupts the world for a bit and doesn't do them any favors but they do what they want it seems like also.
I do want to see lower prices soon as winters coming.
My point about UAE is that they are pressuring the other OPEC nations to increase production, offsetting Russian needs.
The other big question is what will the G7 set as the max Russian price? Some say $60 or even a little higher. Ukraine and Poland want it to be $20, just over production price. In theory that would cause Russia to shut down production, which might be counter productive.
Russia would undercut the whole thing and sell cheaper. They've done it before.
Russia is trying to keep prices up to fondant their war. If they flooded the market with oil before the mark the G7 is setting, then I think the west will celebrate. I don't think that's happening.
Dropping the price would make people want to buy from them, again, they did it before.
Oil prices continue to soften, down to $80 a barrel. Surprisingly, OPEC+ considering raising production by half million per day.
There are so many moving parts here, it's difficult to understand. Over the last few weeks:
- Biden gained domestic strength by blunting the red wave - The G7 is set to cap Russian crude prices, potentially removing their oil from the market - Biden admin told a federal court that MSB has sovereign immunity from prosecution for the Khashoggi killing - Winter is coming, meaning higher demand
Strangely, after they announced the 2MM per day production cut, prices have moved down. Biden sought to blunt it by releasing more strategic reserve and it appears to have worked to some degree.
Hard to say where prices will be in six months though.
As long as Russia keeps Saber rattling prices will be on the higher side.
I'm not sure. That's the question here. The G7 will be capping the prices on Russian oil. It's interesting that Opec is looking to increase production, which means there may be a split growing between SA and Russia. The thought was that OPEC was protecting Russia when they cut production by 2 MM per day a few months ago, but they always said no, they were just getting ready for the recession. The other wild card is UAE. They are a major producer, up to 5 MM per day, and they are pushing to maximize production before the recession.
You have a good point.
UAE is part of OPEC though. They do what they want which is just wild to me.
Opec increasing productivity would cancel out Russias oil so I would expect Russia to lower their prices to mess with everyone else which could be good. Russia, during the pandemic flooded oil on the market to sell and crashed the prices. Maybe they can do that again? It disrupts the world for a bit and doesn't do them any favors but they do what they want it seems like also.
I do want to see lower prices soon as winters coming.
My point about UAE is that they are pressuring the other OPEC nations to increase production, offsetting Russian needs.
The other big question is what will the G7 set as the max Russian price? Some say $60 or even a little higher. Ukraine and Poland want it to be $20, just over production price. In theory that would cause Russia to shut down production, which might be counter productive.
Russia would undercut the whole thing and sell cheaper. They've done it before.
Russia is trying to keep prices up to fondant their war. If they flooded the market with oil before the mark the G7 is setting, then I think the west will celebrate. I don't think that's happening.
China would buy a shit ton more at lower prices. They’d make it up in volume.
Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
memories like fingerprints are slowly raising.................................... first niagara center buffalo '13
another man ..... moved by sleight of hand...................................... joe louis arena detroit '14
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mickeyrat
up my ass, like Chadwick was up his Posts: 35,761
Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
memories like fingerprints are slowly raising.................................... first niagara center buffalo '13
another man ..... moved by sleight of hand...................................... joe louis arena detroit '14
Yes refining was low in 2022, but that's because the shut downs coming out of COVID could not ramp up as quickly as the pumping capacity. So what we had in 2022 was an unsustainably large crack spread occurring. That is expected to moderate in early 23 as US refineries finish their seasonal maintenance and refineries around the world ramp up. Here is a recent EIA article on it.
U.S. gas prices plunge toward $3 a gallon as demand drops worldwide
The price of gas is back to where it was before Russia invaded Ukraine. It is putting real money back in Americans’ wallets.
The cost of gasoline is falling so fast that it is beginning to put real money back in the pockets of drivers, defying earlier projections and offering an unexpected gift for the holidays.
Filling up is now as cheap as it was in February, just before Russia’s invasion of Ukraine touched off a global energy crisis. AAA reported the average nationwide price of a gallon of regular Wednesday was $3.50, and gas price tracking company GasBuddy projected it could drop below $3 by Christmas. All of that relieflikely helped drive robust shopping over Thanksgiving weekend.
“People are realizing that they might be back to spending $50 to fill their tank instead of $80,” said Emma Rasiel, a professor of economics at Duke University. “It is the main signal consumers notice on inflation. It is the one thing they are likely to track how much it has gone up or down, because every week they need to fill up their car.”
But Rasiel cautioned cheaper gas can also give consumers the wrong idea. Prices of other goods and services are much less volatile, and there is no indication that this moment of more affordable fuel is pushing the cost of other things down.
Even as the plunge in prices at the pump helps fuel a national holiday shopping spree, it is a reflection of the financial strain consumers and businesses are confronting worldwide. Prices are going down because demand for oil and gas is falling as countries brace for recession, covid-19 outbreaksin China threaten major financial disruption, and drivers cut back on gas-guzzling as they try to save money to cover skyrocketing mortgage payments and stock market losses.
Earlier worries that sanctions on Russian oil would create a shortage in supply and send prices soaring toward the end of the year have, for now at least, given way to ailing economies and jittery financial markets.
“We’re heading into serious recession in Europe and further economic slowdown in the U.S. as people struggle with high interest rates and worry about their personal wealth and savings,” said Ben Cahill, an energy security analyst at the Center for Strategic and International Studies. “Add it all up and it creates a bleak picture for oil demand. Prices are reflecting that.”
Also helping keep prices low at the moment are some key United States oil refineries, which returned to churning out gasoline after months of being out of commission for maintenance and repairs
But just as big a factor is the current turmoil in China. As its leaders signal new covid lockdowns are imminent, touching off protests throughout the country, the expected economic fallout has turned oil traders bearish.
China alone accounted for 16 percent of global oil demand last year, according to the research firm Capital Economics, which projects its purchase of oil will drop by 1 million barrels per day in December as covid infections spread. The effect of such a drop on global oil markets is considerable, reducing the price of Brent crude by as much as $10 a barrel, or more than 10 percent.
“With COVID cases soaring to record highs in China and the threat of widespread lockdowns there increasing, the key question is how much demand could fall, freeing up supply for the rest of the world,” Edward Gardner, a commodities economist at the firm, wrote in a research note.
While the high cost of gasoline over much of the past year was a major factor in the crushing inflation that hit the United States and other countries, the current dip in fuel costs is doing little to return economic stability. Manufacturers that rely on large amounts of fuel need to see sustained low prices for a period of months before they adjust the costs of the products they sell, analysts say. Drivers in some parts of the country are benefiting significantly more than in others. Californians are still paying an average of almost $5 for a gallon of regular.
“This is a pretty delicately held-together price decline,” said Patrick De Haan, head of petroleum analysis at GasBuddy, noting that any number of geopolitical or economic events could send prices rebounding.
There are other big factors making the price outlook murky. The United States and Europe are in the process of negotiating a price cap on Russian oil, to take effect Monday. The plan is to allow Russian oil to continue to flow into global markets, but at prices that limit profits the Kremlin can use to sustain its war machine.
Such a price cap has never before been imposed on a major oil-producing nation, and it threatens to trigger further instability. If the cap is set very low, as some European nations are advocating, Moscow could retaliate by cutting off its supply, creating a surge in prices globally.
Another wild card is the OPEC Plus consortium of oil-producing nations, which meets next week to consider how much oil its members should continue to ship in the coming months. The group could decide to cut its output to drive prices up.
“The OPEC meeting could be the skunk at the picnic,” said Andrew Gross, a spokesman for AAA. “Trying to guess what they are going to do is tricky.”
Those are the kind of things that worry John Catsimatidis, who owns hundreds of gas stations and a refinery. But not because they could affect his fuel business. When the businessman talks about gas prices, he is more focused on what they could ultimately mean for another business in his multibillion-dollar empire, the one focused on developing real estate.
Spiraling borrowing costs have made that enterprise much more challenging. A six-month stretch of $3 gas, he said, could help ease inflation and signal that it’s safe for the Federal Reserve to reverse its recent rate hikes.
“If we get the price down and it stays there, we could fix the problem of inflation and the Fed can stop raising interest rates and putting everybody out of business,” Catsimatidis said.
One thing that is clear is that there is very little leaders in Washington can do to keep gas prices down. They are at the mercy of global markets.
The Biden administration is probably pressuring Saudi Arabia, which dominates OPEC Plus, not to cut its output. But the administration’s lack of influence over such things was clear the last time OPEC Plus met, in October, when the group snubbed Washington’s request that it boost output, instead cutting it by 2 million barrels per day.
The administration last week eased sanctions on Venezuela as part of a bid to get oil flowing from that country again. But it will be many months before Venezuelan petroleum is shipped, and only marginal amounts will be available initially.
Most drivers are paying little attention to the broader dynamics of the global oil market. But even they are taking a cautious approach, despite maybe splurging on holiday gifts.
Data collected by AAA suggests they are sticking with the conservation-minded driving habits embraced when gas soared past $5 a gallon, lumping more errands into single car trips, driving at slower speeds, only partially filling their gas tanks. Prices may have plunged, but drivers are not taking their foot off the brake.
That much is also clear in the outlook of consumers, which often improves when gas prices drop. But the University of Michigan Consumer Sentiment Index suggests this current stretch of cheaper gas is getting overshadowed by other financial challenges straining Americans. Even as gas prices dropped, the national survey shows, consumer anxiety grew in November.
“Even though prices of gas have come down, prices of other things are still high,” said Joanne Hsu, who directs the university’s surveys of consumers. “There is a feeling of tremendous uncertainty.”
So my grocery shopping is really taking a cut out of my spending. 30-60 more a week. It's a couple hundred more a month now. Then electric and gas up too. I'm out 5-600 a month extra now.
They want to charge 150-250 for concert tickets? I ain't going.
Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
memories like fingerprints are slowly raising.................................... first niagara center buffalo '13
another man ..... moved by sleight of hand...................................... joe louis arena detroit '14
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
It’s surprising electricity accounts for about 35% of heating in US. Until very recently, electric heat was crazy expensive, but the tech has come a long way of late. Although it’s not as effective when temps drop below freezing, it might be worthwhile investment when my central air needs to be replaced. Those split AC units can cut heat oil usage by about 70% in colder climates
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
It’s surprising electricity accounts for about 35% of heating in US. Until very recently, electric heat was crazy expensive, but the tech has come a long way of late. Although it’s not as effective when temps drop below freezing, it might be worthwhile investment when my central air needs to be replaced. Those split AC units can cut heat oil usage by about 70% in colder climates
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
The cold and the warm go through the same vents AKA central heating. We call it HVAC usually...
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
It’s surprising electricity accounts for about 35% of heating in US. Until very recently, electric heat was crazy expensive, but the tech has come a long way of late. Although it’s not as effective when temps drop below freezing, it might be worthwhile investment when my central air needs to be replaced. Those split AC units can cut heat oil usage by about 70% in colder climates
Can you do geothermal? I've been wanting to look into that more.
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
The cold and the warm go through the same vents AKA central heating. We call it HVAC usually...
Well yes, but heat pump is not a universal term. I have a separate AC unit for cooling and furnace for heating and they go through the same ducts and vents. But it's not a heat pump.
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
It’s surprising electricity accounts for about 35% of heating in US. Until very recently, electric heat was crazy expensive, but the tech has come a long way of late. Although it’s not as effective when temps drop below freezing, it might be worthwhile investment when my central air needs to be replaced. Those split AC units can cut heat oil usage by about 70% in colder climates
I guess you don't have natural gas in NY?
There is plenty of nat gas here, but they don’t run the pipes to houses free of charge. They expect us to go door to door selling their service, and then they’d run the pipes at a low cost. I think it runs a block away, but nobody ever wanted it that bad. At this point, with the electric heat pump tech improving, that’s the next step for us. Plus there are some pretty large nat gas prices embedded in storage. The utilities do a good job believe it or not deferring cost increases.
we buy an oil ceiling contract, but this year that was insane at $5.70 a gallon, two bucks more than before.
Heating oil was near six bucks a gallon recently, often overlooked by DC and the media. Gas is a cheap luxury comparatively.
Less than 5% of Americans use heating oil.
What is everybody else using? Natural gas and propane? Wood? That is an interesting concept that not everyone uses oil.
Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Is that what people call central heating out by you, a heat pump?
No, a heat pump is where you use the same unit to heat and cool, using electricity. You see those in FL where you don't do a lot of heating. By contrast, I have an AC unit to provide cooling and a natural gas furnace for heat in VA since we use a decent amount of heat.
It’s surprising electricity accounts for about 35% of heating in US. Until very recently, electric heat was crazy expensive, but the tech has come a long way of late. Although it’s not as effective when temps drop below freezing, it might be worthwhile investment when my central air needs to be replaced. Those split AC units can cut heat oil usage by about 70% in colder climates
I guess you don't have natural gas in NY?
There is plenty of nat gas here, but they don’t run the pipes to houses free of charge. They expect us to go door to door selling their service, and then they’d run the pipes at a low cost. I think it runs a block away, but nobody ever wanted it that bad. At this point, with the electric heat pump tech improving, that’s the next step for us. Plus there are some pretty large nat gas prices embedded in storage. The utilities do a good job believe it or not deferring cost increases.
we buy an oil ceiling contract, but this year that was insane at $5.70 a gallon, two bucks more than before.
When I was on oil I always did a contract, saved me money. I would also watch the markets and if it was trending down I would wait until it was a good price to sign the contract. They would want me to sign one during high pricing but I always waited.
As supply chains unclog, consumers enjoy (tentative) relief
By TOM KRISHER and PAUL WISEMAN
Today
Back in January, 109 container ships waited off the California coast to unload cargo in Los Angeles and Long Beach, the nation's two largest ports. Consumers, stuck at home amid the pandemic, had unleashed an avalanche of orders for goods that overwhelmed factories and ports.
Importers were paying $20,000 to send a single container from China to the United States — sometimes more than the goods inside were worth. Businesses had to backorder everything from bedroom furniture to kitchen fryers, if they could get them at all.
These days? No freighters are lingering off the Southern California coast. Containers from China go for just $2,000. Restaurants can order fryers and have them delivered in a couple of weeks.
The supply backlogs of the past two years — and the delays, shortages and outrageous prices that came with them — have improved dramatically since summer. The web of factories, railroads, ports, warehouses and freight yards that link goods to customers have nearly regained their pre-pandemic levels.
“We are in a very different place than we were,’’ said Phil Levy, chief economist at the supply chain consultancy Flexport. “If you ask, how long does it take to move stuff, there has been notable improvement. If you measure it by how long would it take to get a cargo from Asia to a destination port, dramatically better.”
The easing of supply bottlenecks has begun to provide some relief from the inflation that this year reached a four-decade peak, pummeling consumers and businesses. The progress has been modest and so far short-lived. Yet it's still provided a glimmer of good news in the holiday shopping season: Gift items are much likelier to be in stock, perhaps at lower prices. The government's latest inflation report showed that prices of toys, jewelry and girls' apparel all fell in October.
“Overall, the shelves are full,” said Zvi Schreiber, CEO of Freightos Group, a digital platform that books international shipping. “We’re not seeing significant shortages of items.”
“Supply chains are really not the problem anymore,’’ agreed Timothy Fiore, who leads the Institute for Supply Management’s manufacturing survey and is chief procurement officer at the transportation firm Ryder System. “We’ve had four or five months of supplies looking better. Prices have dropped, too.’’
The main factor behind the improvement has been diminished demand for manufactured goods. Spending on goods has fallen for three straight quarters, according to the Commerce Department. Higher borrowing rates, engineered by the Federal Reserve to try to tame inflation, have reduced Americans’ willingness to buy more physical things. Inflation itself has sapped their spending power.
And having splurged on everything from lawn furniture and sporting goods to appliances and electronic gear during the COVID shutdowns, consumers have increasingly shown a desire to venture out and spend on experiences rather than goods. Demand has shifted toward services — restaurant dinners and plane tickets, hotel rooms and entertainment. As orders for manufactured goods have slowed, so have the price pressures surrounding them.
At the sprawling Southern California ports, the shipping backup has eased, in part because companies have sent cargo to Gulf Coast and Atlantic ports to avoid delays. Port Houston says its cargo volume is up 18% from this time last year.
An index that measures demand for freight shipments had hit a high of 115 earlier this year; now, it’s below the five-year average of 53.
“We’re returning to the mean and the trend lines that existed pre-COVID,” said Chris Adderton, senior vice president for the Council of Supply Chain Management Professionals.
In addition to the reduced demand that has lightened the strain on supply chains, ports have become more efficient. Additional ships have increased the transportation options.
And in some industries, new producers stepped in once established manufacturers became too overwhelmed to deliver. The enhanced competition reduced shortages and helped moderate prices.
In the market for kitchen equipment, for instance, “new manufacturers were able to break into the business — unheard-of manufacturers,’’ said Kirby Mallon, president of Philadelphia-based Elmer Schultz Services, which maintains kitchen equipment for restaurants and cafeterias.
When inflation first began surging last year, economists had mostly blamed the snarled supply chains. Fed Chair Jerome Powell, echoing the views of many analysts, predicted that soaring prices would prove “transitory’’ and would ease once it became easier and cheaper to ship products.
Things didn’t prove so simple — especially after Russia invaded Ukraine in February, disrupting trade in energy and grains and sending oil, gas and food prices soaring around the world.
Other problems remain, too. A chronic shortage of computer chips, for example, will likely hamper auto production into 2024, Kristin Dziczek, an auto policy adviser at the Federal Reserve Bank of Chicago, wrote in a recent paper. Though the shortage has eased slightly, factories remain slowed by a lack of chips.
The average price of a new vehicle is still near a record high, nearly $46,000, and isn't expected to fall much, if at all, anytime soon. Used-vehicle prices, by contrast, have dropped since late summer. Analysts expect them to fall further, though not to pre-pandemic lows
Automakers are still struggling to acquire enough chips, largely because the number of semiconductors required per vehicle has multiplied. That is a consequence of more sophisticated auto equipment, from automated safety systems and internet connections to infotainment, Dziczek wrote.
What's more, computer chips used for vehicle production are harder to manufacture than chips for consumer electronics because they must be built to withstand heat, cold and vibration.
The coronavirus lockdowns in China, along with the scattered public protests against them, may still disrupt global production and shipping. The consultancy Resilinc has identified 13,800 Chinese sites — from factories to warehouses to testing facilities — that are at risk from protests, rising COVID cases and lockdowns. Potential problem spots exist in such key cities as Beijing, Chengdu, Nanjing and Shanghai.
“Parts from these regions make their way into just about every product our lives rely on day to day,’’ said Bindiya Vakil, CEO of Resilinc.
On Wednesday, in a move that offered potential relief from its draconian zero-COVID policies, China rolled back restrictions on isolating people with the virus. The move will boost hopes that Beijing is scrapping its “zero COVID” strategy, which could give a lift to manufacturing and global trade.
Julian di Giovanni, an economist at the Federal Reserve Bank of New York, has estimated that supply problems accounted for about 40% of U.S. inflation from 2019 through 2021.
“In the absence of any new energy or other shock," he said in August, “it is therefore possible that the ongoing easing of supply chain bottlenecks will cause a substantial drop in inflation in the near term.”
Inflation has eased from the dizzy heights it reached earlier this year. As measured by the Labor Department, consumer prices rose 7.7% in October from 12 months earlier. Though painfully high, that was the lowest year-over-year inflation since January and well below the recent peak of 9.1% in June.
The Fed wants to see annual inflation at 2%. There’s still a long way to go. And Flexport’s Levy cautions that inflation has spread from goods, which the Fed can partly control through its influence over loan rates, to services, which are more resistant to borrowing rates.
There's also the risk that Americans expect future high inflation and will behave in ways that can make their worries self-fulfilling: They could spend more now to avoid what they expect will be higher prices later and demand bigger wage gains to compensate for a higher cost of living. All of that tends to fuel inflation pressures.
“Once you get this stuff built in, once it sticks around for a while and everybody starts thinking about inflation as a 5 to 6% kind of thing, getting that back to 2 is tough,’’ Levy said.
For now, though, businesses find themselves facing a new problem, a consequence of reduced demand for goods: Rather than lacking enough products in stock to give customers what they want, they now often have too many.
“The inventory has arrived, warehouses are full and we’re scrambling to move the merchandise,” said Thomas Goldsby, logistics chairman in the Supply Chain Management Department at the University of Tennessee.
Some retailers, like Target, ordered too much, too fast and had to cut prices to draw consumers who were tightening their budgets in response to inflation. Target’s third-quarter profit fell 52%. CEO Brian Cornell told analysts that consumers were “shopping very carefully on a budget. I think they are looking at discretionary categories and saying ‘All right, if I’m going to buy, I’m looking for a great deal.’ ”
“We’re not in a position where suppliers have a ton of power and the buyers just have to accept whatever they get,’’ said Fiore of ISM. “That’s definitely been shifting since September. Is this a good time for buyers? Absolutely. Is it a good time for companies overall? Not so clear.’’
____
Krisher reported from Detroit, Wiseman from Washington.
Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
memories like fingerprints are slowly raising.................................... first niagara center buffalo '13
another man ..... moved by sleight of hand...................................... joe louis arena detroit '14
As supply chains unclog, consumers enjoy (tentative) relief
By TOM KRISHER and PAUL WISEMAN
Today
Back in January, 109 container ships waited off the California coast to unload cargo in Los Angeles and Long Beach, the nation's two largest ports. Consumers, stuck at home amid the pandemic, had unleashed an avalanche of orders for goods that overwhelmed factories and ports.
Importers were paying $20,000 to send a single container from China to the United States — sometimes more than the goods inside were worth. Businesses had to backorder everything from bedroom furniture to kitchen fryers, if they could get them at all.
These days? No freighters are lingering off the Southern California coast. Containers from China go for just $2,000. Restaurants can order fryers and have them delivered in a couple of weeks.
The supply backlogs of the past two years — and the delays, shortages and outrageous prices that came with them — have improved dramatically since summer. The web of factories, railroads, ports, warehouses and freight yards that link goods to customers have nearly regained their pre-pandemic levels.
“We are in a very different place than we were,’’ said Phil Levy, chief economist at the supply chain consultancy Flexport. “If you ask, how long does it take to move stuff, there has been notable improvement. If you measure it by how long would it take to get a cargo from Asia to a destination port, dramatically better.”
The easing of supply bottlenecks has begun to provide some relief from the inflation that this year reached a four-decade peak, pummeling consumers and businesses. The progress has been modest and so far short-lived. Yet it's still provided a glimmer of good news in the holiday shopping season: Gift items are much likelier to be in stock, perhaps at lower prices. The government's latest inflation report showed that prices of toys, jewelry and girls' apparel all fell in October.
“Overall, the shelves are full,” said Zvi Schreiber, CEO of Freightos Group, a digital platform that books international shipping. “We’re not seeing significant shortages of items.”
“Supply chains are really not the problem anymore,’’ agreed Timothy Fiore, who leads the Institute for Supply Management’s manufacturing survey and is chief procurement officer at the transportation firm Ryder System. “We’ve had four or five months of supplies looking better. Prices have dropped, too.’’
The main factor behind the improvement has been diminished demand for manufactured goods. Spending on goods has fallen for three straight quarters, according to the Commerce Department. Higher borrowing rates, engineered by the Federal Reserve to try to tame inflation, have reduced Americans’ willingness to buy more physical things. Inflation itself has sapped their spending power.
And having splurged on everything from lawn furniture and sporting goods to appliances and electronic gear during the COVID shutdowns, consumers have increasingly shown a desire to venture out and spend on experiences rather than goods. Demand has shifted toward services — restaurant dinners and plane tickets, hotel rooms and entertainment. As orders for manufactured goods have slowed, so have the price pressures surrounding them.
At the sprawling Southern California ports, the shipping backup has eased, in part because companies have sent cargo to Gulf Coast and Atlantic ports to avoid delays. Port Houston says its cargo volume is up 18% from this time last year.
An index that measures demand for freight shipments had hit a high of 115 earlier this year; now, it’s below the five-year average of 53.
“We’re returning to the mean and the trend lines that existed pre-COVID,” said Chris Adderton, senior vice president for the Council of Supply Chain Management Professionals.
In addition to the reduced demand that has lightened the strain on supply chains, ports have become more efficient. Additional ships have increased the transportation options.
And in some industries, new producers stepped in once established manufacturers became too overwhelmed to deliver. The enhanced competition reduced shortages and helped moderate prices.
In the market for kitchen equipment, for instance, “new manufacturers were able to break into the business — unheard-of manufacturers,’’ said Kirby Mallon, president of Philadelphia-based Elmer Schultz Services, which maintains kitchen equipment for restaurants and cafeterias.
When inflation first began surging last year, economists had mostly blamed the snarled supply chains. Fed Chair Jerome Powell, echoing the views of many analysts, predicted that soaring prices would prove “transitory’’ and would ease once it became easier and cheaper to ship products.
Things didn’t prove so simple — especially after Russia invaded Ukraine in February, disrupting trade in energy and grains and sending oil, gas and food prices soaring around the world.
Other problems remain, too. A chronic shortage of computer chips, for example, will likely hamper auto production into 2024, Kristin Dziczek, an auto policy adviser at the Federal Reserve Bank of Chicago, wrote in a recent paper. Though the shortage has eased slightly, factories remain slowed by a lack of chips.
The average price of a new vehicle is still near a record high, nearly $46,000, and isn't expected to fall much, if at all, anytime soon. Used-vehicle prices, by contrast, have dropped since late summer. Analysts expect them to fall further, though not to pre-pandemic lows
Automakers are still struggling to acquire enough chips, largely because the number of semiconductors required per vehicle has multiplied. That is a consequence of more sophisticated auto equipment, from automated safety systems and internet connections to infotainment, Dziczek wrote.
What's more, computer chips used for vehicle production are harder to manufacture than chips for consumer electronics because they must be built to withstand heat, cold and vibration.
The coronavirus lockdowns in China, along with the scattered public protests against them, may still disrupt global production and shipping. The consultancy Resilinc has identified 13,800 Chinese sites — from factories to warehouses to testing facilities — that are at risk from protests, rising COVID cases and lockdowns. Potential problem spots exist in such key cities as Beijing, Chengdu, Nanjing and Shanghai.
“Parts from these regions make their way into just about every product our lives rely on day to day,’’ said Bindiya Vakil, CEO of Resilinc.
On Wednesday, in a move that offered potential relief from its draconian zero-COVID policies, China rolled back restrictions on isolating people with the virus. The move will boost hopes that Beijing is scrapping its “zero COVID” strategy, which could give a lift to manufacturing and global trade.
Julian di Giovanni, an economist at the Federal Reserve Bank of New York, has estimated that supply problems accounted for about 40% of U.S. inflation from 2019 through 2021.
“In the absence of any new energy or other shock," he said in August, “it is therefore possible that the ongoing easing of supply chain bottlenecks will cause a substantial drop in inflation in the near term.”
Inflation has eased from the dizzy heights it reached earlier this year. As measured by the Labor Department, consumer prices rose 7.7% in October from 12 months earlier. Though painfully high, that was the lowest year-over-year inflation since January and well below the recent peak of 9.1% in June.
The Fed wants to see annual inflation at 2%. There’s still a long way to go. And Flexport’s Levy cautions that inflation has spread from goods, which the Fed can partly control through its influence over loan rates, to services, which are more resistant to borrowing rates.
There's also the risk that Americans expect future high inflation and will behave in ways that can make their worries self-fulfilling: They could spend more now to avoid what they expect will be higher prices later and demand bigger wage gains to compensate for a higher cost of living. All of that tends to fuel inflation pressures.
“Once you get this stuff built in, once it sticks around for a while and everybody starts thinking about inflation as a 5 to 6% kind of thing, getting that back to 2 is tough,’’ Levy said.
For now, though, businesses find themselves facing a new problem, a consequence of reduced demand for goods: Rather than lacking enough products in stock to give customers what they want, they now often have too many.
“The inventory has arrived, warehouses are full and we’re scrambling to move the merchandise,” said Thomas Goldsby, logistics chairman in the Supply Chain Management Department at the University of Tennessee.
Some retailers, like Target, ordered too much, too fast and had to cut prices to draw consumers who were tightening their budgets in response to inflation. Target’s third-quarter profit fell 52%. CEO Brian Cornell told analysts that consumers were “shopping very carefully on a budget. I think they are looking at discretionary categories and saying ‘All right, if I’m going to buy, I’m looking for a great deal.’ ”
“We’re not in a position where suppliers have a ton of power and the buyers just have to accept whatever they get,’’ said Fiore of ISM. “That’s definitely been shifting since September. Is this a good time for buyers? Absolutely. Is it a good time for companies overall? Not so clear.’’
____
Krisher reported from Detroit, Wiseman from Washington.
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Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
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https://www.forbes.com/sites/rrapier/2022/11/15/heres-why-the-us-has-lost-refining-capacity/
Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
memories like fingerprints are slowly raising.................................... first niagara center buffalo '13
another man ..... moved by sleight of hand...................................... joe louis arena detroit '14
https://www.eia.gov/outlooks/steo/report/petro_prod.php#:~:text=We forecast U.S. distillate refinery,with $1.34/gal in 2022.
U.S. gas prices plunge toward $3 a gallon as demand drops worldwide
The price of gas is back to where it was before Russia invaded Ukraine. It is putting real money back in Americans’ wallets.
The cost of gasoline is falling so fast that it is beginning to put real money back in the pockets of drivers, defying earlier projections and offering an unexpected gift for the holidays.
Filling up is now as cheap as it was in February, just before Russia’s invasion of Ukraine touched off a global energy crisis. AAA reported the average nationwide price of a gallon of regular Wednesday was $3.50, and gas price tracking company GasBuddy projected it could drop below $3 by Christmas. All of that relief likely helped drive robust shopping over Thanksgiving weekend.
“People are realizing that they might be back to spending $50 to fill their tank instead of $80,” said Emma Rasiel, a professor of economics at Duke University. “It is the main signal consumers notice on inflation. It is the one thing they are likely to track how much it has gone up or down, because every week they need to fill up their car.”
But Rasiel cautioned cheaper gas can also give consumers the wrong idea. Prices of other goods and services are much less volatile, and there is no indication that this moment of more affordable fuel is pushing the cost of other things down.
Even as the plunge in prices at the pump helps fuel a national holiday shopping spree, it is a reflection of the financial strain consumers and businesses are confronting worldwide. Prices are going down because demand for oil and gas is falling as countries brace for recession, covid-19 outbreaks in China threaten major financial disruption, and drivers cut back on gas-guzzling as they try to save money to cover skyrocketing mortgage payments and stock market losses.
Earlier worries that sanctions on Russian oil would create a shortage in supply and send prices soaring toward the end of the year have, for now at least, given way to ailing economies and jittery financial markets.
“We’re heading into serious recession in Europe and further economic slowdown in the U.S. as people struggle with high interest rates and worry about their personal wealth and savings,” said Ben Cahill, an energy security analyst at the Center for Strategic and International Studies. “Add it all up and it creates a bleak picture for oil demand. Prices are reflecting that.”
Also helping keep prices low at the moment are some key United States oil refineries, which returned to churning out gasoline after months of being out of commission for maintenance and repairs
But just as big a factor is the current turmoil in China. As its leaders signal new covid lockdowns are imminent, touching off protests throughout the country, the expected economic fallout has turned oil traders bearish.
Inside the Biden team’s fixation on gas prices
China alone accounted for 16 percent of global oil demand last year, according to the research firm Capital Economics, which projects its purchase of oil will drop by 1 million barrels per day in December as covid infections spread. The effect of such a drop on global oil markets is considerable, reducing the price of Brent crude by as much as $10 a barrel, or more than 10 percent.
“With COVID cases soaring to record highs in China and the threat of widespread lockdowns there increasing, the key question is how much demand could fall, freeing up supply for the rest of the world,” Edward Gardner, a commodities economist at the firm, wrote in a research note.
While the high cost of gasoline over much of the past year was a major factor in the crushing inflation that hit the United States and other countries, the current dip in fuel costs is doing little to return economic stability. Manufacturers that rely on large amounts of fuel need to see sustained low prices for a period of months before they adjust the costs of the products they sell, analysts say. Drivers in some parts of the country are benefiting significantly more than in others. Californians are still paying an average of almost $5 for a gallon of regular.
“This is a pretty delicately held-together price decline,” said Patrick De Haan, head of petroleum analysis at GasBuddy, noting that any number of geopolitical or economic events could send prices rebounding.
There are other big factors making the price outlook murky. The United States and Europe are in the process of negotiating a price cap on Russian oil, to take effect Monday. The plan is to allow Russian oil to continue to flow into global markets, but at prices that limit profits the Kremlin can use to sustain its war machine.
Such a price cap has never before been imposed on a major oil-producing nation, and it threatens to trigger further instability. If the cap is set very low, as some European nations are advocating, Moscow could retaliate by cutting off its supply, creating a surge in prices globally.
Another wild card is the OPEC Plus consortium of oil-producing nations, which meets next week to consider how much oil its members should continue to ship in the coming months. The group could decide to cut its output to drive prices up.
“The OPEC meeting could be the skunk at the picnic,” said Andrew Gross, a spokesman for AAA. “Trying to guess what they are going to do is tricky.”
How Joe Manchin’s change of heart could revive the U.S. solar industry
Those are the kind of things that worry John Catsimatidis, who owns hundreds of gas stations and a refinery. But not because they could affect his fuel business. When the businessman talks about gas prices, he is more focused on what they could ultimately mean for another business in his multibillion-dollar empire, the one focused on developing real estate.
Spiraling borrowing costs have made that enterprise much more challenging. A six-month stretch of $3 gas, he said, could help ease inflation and signal that it’s safe for the Federal Reserve to reverse its recent rate hikes.
“If we get the price down and it stays there, we could fix the problem of inflation and the Fed can stop raising interest rates and putting everybody out of business,” Catsimatidis said.
One thing that is clear is that there is very little leaders in Washington can do to keep gas prices down. They are at the mercy of global markets.
The Biden administration is probably pressuring Saudi Arabia, which dominates OPEC Plus, not to cut its output. But the administration’s lack of influence over such things was clear the last time OPEC Plus met, in October, when the group snubbed Washington’s request that it boost output, instead cutting it by 2 million barrels per day.
The administration last week eased sanctions on Venezuela as part of a bid to get oil flowing from that country again. But it will be many months before Venezuelan petroleum is shipped, and only marginal amounts will be available initially.
Most drivers are paying little attention to the broader dynamics of the global oil market. But even they are taking a cautious approach, despite maybe splurging on holiday gifts.
Data collected by AAA suggests they are sticking with the conservation-minded driving habits embraced when gas soared past $5 a gallon, lumping more errands into single car trips, driving at slower speeds, only partially filling their gas tanks. Prices may have plunged, but drivers are not taking their foot off the brake.
That much is also clear in the outlook of consumers, which often improves when gas prices drop. But the University of Michigan Consumer Sentiment Index suggests this current stretch of cheaper gas is getting overshadowed by other financial challenges straining Americans. Even as gas prices dropped, the national survey shows, consumer anxiety grew in November.
“Even though prices of gas have come down, prices of other things are still high,” said Joanne Hsu, who directs the university’s surveys of consumers. “There is a feeling of tremendous uncertainty.”
The cost of gas is dropping. Here's why -- and how long the lower prices might last. - The Washington Post
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They want to charge 150-250 for concert tickets? I ain't going.
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Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
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Mainly a heat pump, but we also have a natural gas fireplace as our backup heat source
Back in January, 109 container ships waited off the California coast to unload cargo in Los Angeles and Long Beach, the nation's two largest ports. Consumers, stuck at home amid the pandemic, had unleashed an avalanche of orders for goods that overwhelmed factories and ports.
Importers were paying $20,000 to send a single container from China to the United States — sometimes more than the goods inside were worth. Businesses had to backorder everything from bedroom furniture to kitchen fryers, if they could get them at all.
These days? No freighters are lingering off the Southern California coast. Containers from China go for just $2,000. Restaurants can order fryers and have them delivered in a couple of weeks.
The supply backlogs of the past two years — and the delays, shortages and outrageous prices that came with them — have improved dramatically since summer. The web of factories, railroads, ports, warehouses and freight yards that link goods to customers have nearly regained their pre-pandemic levels.
“We are in a very different place than we were,’’ said Phil Levy, chief economist at the supply chain consultancy Flexport. “If you ask, how long does it take to move stuff, there has been notable improvement. If you measure it by how long would it take to get a cargo from Asia to a destination port, dramatically better.”
INFLATION
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Stocks decline in Asia, extending losses on Wall Street
Walz touts opportunities from massive $17.6B budget surplus
The easing of supply bottlenecks has begun to provide some relief from the inflation that this year reached a four-decade peak, pummeling consumers and businesses. The progress has been modest and so far short-lived. Yet it's still provided a glimmer of good news in the holiday shopping season: Gift items are much likelier to be in stock, perhaps at lower prices. The government's latest inflation report showed that prices of toys, jewelry and girls' apparel all fell in October.
“Overall, the shelves are full,” said Zvi Schreiber, CEO of Freightos Group, a digital platform that books international shipping. “We’re not seeing significant shortages of items.”
“Supply chains are really not the problem anymore,’’ agreed Timothy Fiore, who leads the Institute for Supply Management’s manufacturing survey and is chief procurement officer at the transportation firm Ryder System. “We’ve had four or five months of supplies looking better. Prices have dropped, too.’’
The main factor behind the improvement has been diminished demand for manufactured goods. Spending on goods has fallen for three straight quarters, according to the Commerce Department. Higher borrowing rates, engineered by the Federal Reserve to try to tame inflation, have reduced Americans’ willingness to buy more physical things. Inflation itself has sapped their spending power.
And having splurged on everything from lawn furniture and sporting goods to appliances and electronic gear during the COVID shutdowns, consumers have increasingly shown a desire to venture out and spend on experiences rather than goods. Demand has shifted toward services — restaurant dinners and plane tickets, hotel rooms and entertainment. As orders for manufactured goods have slowed, so have the price pressures surrounding them.
At the sprawling Southern California ports, the shipping backup has eased, in part because companies have sent cargo to Gulf Coast and Atlantic ports to avoid delays. Port Houston says its cargo volume is up 18% from this time last year.
An index that measures demand for freight shipments had hit a high of 115 earlier this year; now, it’s below the five-year average of 53.
“We’re returning to the mean and the trend lines that existed pre-COVID,” said Chris Adderton, senior vice president for the Council of Supply Chain Management Professionals.
In addition to the reduced demand that has lightened the strain on supply chains, ports have become more efficient. Additional ships have increased the transportation options.
And in some industries, new producers stepped in once established manufacturers became too overwhelmed to deliver. The enhanced competition reduced shortages and helped moderate prices.
In the market for kitchen equipment, for instance, “new manufacturers were able to break into the business — unheard-of manufacturers,’’ said Kirby Mallon, president of Philadelphia-based Elmer Schultz Services, which maintains kitchen equipment for restaurants and cafeterias.
When inflation first began surging last year, economists had mostly blamed the snarled supply chains. Fed Chair Jerome Powell, echoing the views of many analysts, predicted that soaring prices would prove “transitory’’ and would ease once it became easier and cheaper to ship products.
Things didn’t prove so simple — especially after Russia invaded Ukraine in February, disrupting trade in energy and grains and sending oil, gas and food prices soaring around the world.
Other problems remain, too. A chronic shortage of computer chips, for example, will likely hamper auto production into 2024, Kristin Dziczek, an auto policy adviser at the Federal Reserve Bank of Chicago, wrote in a recent paper. Though the shortage has eased slightly, factories remain slowed by a lack of chips.
The average price of a new vehicle is still near a record high, nearly $46,000, and isn't expected to fall much, if at all, anytime soon. Used-vehicle prices, by contrast, have dropped since late summer. Analysts expect them to fall further, though not to pre-pandemic lows
Automakers are still struggling to acquire enough chips, largely because the number of semiconductors required per vehicle has multiplied. That is a consequence of more sophisticated auto equipment, from automated safety systems and internet connections to infotainment, Dziczek wrote.
What's more, computer chips used for vehicle production are harder to manufacture than chips for consumer electronics because they must be built to withstand heat, cold and vibration.
The coronavirus lockdowns in China, along with the scattered public protests against them, may still disrupt global production and shipping. The consultancy Resilinc has identified 13,800 Chinese sites — from factories to warehouses to testing facilities — that are at risk from protests, rising COVID cases and lockdowns. Potential problem spots exist in such key cities as Beijing, Chengdu, Nanjing and Shanghai.
“Parts from these regions make their way into just about every product our lives rely on day to day,’’ said Bindiya Vakil, CEO of Resilinc.
On Wednesday, in a move that offered potential relief from its draconian zero-COVID policies, China rolled back restrictions on isolating people with the virus. The move will boost hopes that Beijing is scrapping its “zero COVID” strategy, which could give a lift to manufacturing and global trade.
Julian di Giovanni, an economist at the Federal Reserve Bank of New York, has estimated that supply problems accounted for about 40% of U.S. inflation from 2019 through 2021.
“In the absence of any new energy or other shock," he said in August, “it is therefore possible that the ongoing easing of supply chain bottlenecks will cause a substantial drop in inflation in the near term.”
Inflation has eased from the dizzy heights it reached earlier this year. As measured by the Labor Department, consumer prices rose 7.7% in October from 12 months earlier. Though painfully high, that was the lowest year-over-year inflation since January and well below the recent peak of 9.1% in June.
A separate government inflation gauge that is favored by the Federal Reserve rose 6% in October from a year earlier. That was the mildest increase since November 2021.
The Fed wants to see annual inflation at 2%. There’s still a long way to go. And Flexport’s Levy cautions that inflation has spread from goods, which the Fed can partly control through its influence over loan rates, to services, which are more resistant to borrowing rates.
There's also the risk that Americans expect future high inflation and will behave in ways that can make their worries self-fulfilling: They could spend more now to avoid what they expect will be higher prices later and demand bigger wage gains to compensate for a higher cost of living. All of that tends to fuel inflation pressures.
“Once you get this stuff built in, once it sticks around for a while and everybody starts thinking about inflation as a 5 to 6% kind of thing, getting that back to 2 is tough,’’ Levy said.
For now, though, businesses find themselves facing a new problem, a consequence of reduced demand for goods: Rather than lacking enough products in stock to give customers what they want, they now often have too many.
“The inventory has arrived, warehouses are full and we’re scrambling to move the merchandise,” said Thomas Goldsby, logistics chairman in the Supply Chain Management Department at the University of Tennessee.
Some retailers, like Target, ordered too much, too fast and had to cut prices to draw consumers who were tightening their budgets in response to inflation. Target’s third-quarter profit fell 52%. CEO Brian Cornell told analysts that consumers were “shopping very carefully on a budget. I think they are looking at discretionary categories and saying ‘All right, if I’m going to buy, I’m looking for a great deal.’ ”
“We’re not in a position where suppliers have a ton of power and the buyers just have to accept whatever they get,’’ said Fiore of ISM. “That’s definitely been shifting since September. Is this a good time for buyers? Absolutely. Is it a good time for companies overall? Not so clear.’’
____
Krisher reported from Detroit, Wiseman from Washington.
Not today Sir, Probably not tomorrow.............................................. bayfront arena st. pete '94
you're finally here and I'm a mess................................................... nationwide arena columbus '10
memories like fingerprints are slowly raising.................................... first niagara center buffalo '13
another man ..... moved by sleight of hand...................................... joe louis arena detroit '14
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