Monday situation summary 3/9/20

The CDC basically urged people 60 and over to become hermits at home to avoid infection with SARS-CoV-2. High blood pressure appears to be the one thing most who die of the virus have in common.

The COVID-19 outbreak in Italy is killing off parents and grandparents at an alarming level because the healthcare system, though quite advanced up north, is overwhelmed by the disease outbreak. Reports say many patients die in hospital untreated, just as in China in the early days of the epidemic there, because of inadequate infrastructure and doctors for so many patients. The quarantine has been extended now to the entire country. That is not being done to make Donald Trump look bad. 

Stock market losses today were sizable. The decline in the S&P 500 made the top 20 list for daily percentage losses. The stock market is a confidence game, and valuation has grown to outrageous levels and stayed there for a couple of years already, so it has been vulnerable to a confidence shock. People just didn't believe it was. The virus hysteria is undercutting that confidence. 

The price of oil plunged as OPEC failed to agree to production cuts. Expect big trouble for the economy as a result, which was already in decline, which is why OPEC wanted the cuts. Declining demand. Max von Sydow died to mark the occasion. Hint: He played Joubert.

People are afraid to fly and some flights are nearly empty. It's a good thing, too, because a study from China is out indicating infected persons can infect others in enclosed, air conditioned spaces like buses, even after they've disembarked. One person infected 11 this way. This also happened in Japan you will recall, where a bus driver was infected by tourists from Wuhan on his bus.

US cases of COVID-19 soared to 654 from the 15 President Trump said back in February were headed to zero. Can't make this go away with the Power of Positive Thinking.

US crude oil production in 2019 is at record high levels never before experienced in the post-war

all time high of 12162 BBL/D/1K in April of 2019

U.S. Oil Production Hits 12 Million Barrels a Day for First Time

US on its way to becoming a net exporter of oil, dominating global oil market and securing the dollar as global reserve currency

Note to Chris Irons: This is not bullish for gold.

The US is about to send a lot more oil into an already oversupplied world market: 

“It will be 4 million barrels a day by six or eight months. Four million barrels a day is a lot bigger than the North Sea as a whole. That crude oil is going to go everywhere. It goes to Asia, Europe, to India,” said Edward Morse, Citigroup global head of commodities research. “If the U.S. gets to 6 million barrels a day in three years, it will be hands-down the world benchmark.” ... 

“Add on the amount of petroleum products that are exported and add on the amount of natural gas that is exported. The U.S. becomes the biggest hub for energy trading in the world,” said Morse. “It has dramatic implications for the U.S. dollar.”Morse notes there are those who doubt the dollar’s future as the global reserve currency. But in a scenario where the U.S. grows into an energy powerhouse, “the dollar becomes more entrenched.”The U.S. had been the world’s dominant oil producer, prior to World War II. “This will be back to the future for the Gulf Coast,” said Daniel Yergin, IHS Markit Vice Chairman. Yergin said the U.S. would not have had the opportunity to increase production as much, were the law not changed in 2015 to allow for U.S. oil exports.

50 years after a drunk Ted Kennedy killed Mary Jo Kopechne, AP still can't tell the truth about it

The car did it.

Trump asks for more oil, OPEC delivers

Story here.

A favor to save the Republicans' November election bacon.

Trump request for 1 million barrel per day oil production boost from Saudis and others debated in Kuwait over the weekend

What's this? Trump has to ask the Arabs to do what American producers cannot?

The story is here.

You know, we could make a LOT of money if we took our "allies'" oil "off the market", so to speak

Reuters/CNBC oil headline says Russian production cuts stall, when the truth is Russia is cheating

So who's working in sympathy with the Russians now, huh?

"US oil settles at $52.61 a barrel, down $1.22 after Russian output cuts stall" says the headline.

"Russia's February oil output was unchanged from January at 11.11 million barrels per day (bpd), energy ministry data showed, with cuts remaining at 100,000 bpd or just a third of the levels pledged by Moscow under the agreement with the Organization of the Petroleum Exporting Countries" says the story, here.

Headline should have read: "Russian oil output cuts fall 66% short of those promised two months in a row".

Rush Limbaugh justifies Ted Cruz' failure to endorse Trump by comparing it to Ted Kennedy's failure to endorse Jimmy Carter in 1980!

Rush's theatre of the absurd marches on.

I'm sure Republicans and Cruz-bots are just THRILLED that a so-called conservative plumbs the depths for acceptable in the party of scoundrels.

Rush better be careful. If he goes too deep he might bump in to Mary Jo Kopechne.

Dumb shit Senate absentee Marco Rubio doesn't realize decades-old oil export ban was already rescinded last December

Noted here:

Rubio told supporters he would lift the ban as president at a private fundraiser in Texas Friday, and his campaign website has an entire page devoted to the need to lift the ban. “I would also allow American oil producers to be able to export,” Rubio said, when asked what he would do about poor oil prices as president. “Right now we’re not allowed to export.”

Congress lifted the ban in December as part of the $1.1 trillion omnibus spending bill it passed. “Oil companies rush to exploit end of U.S. crude export ban,” reported Reuters in the wake of the vote that ended a 40-year ban on crude oil exports. ...

Rubio missed the omnibus vote, opting to campaign for president instead. He later chalked up his absence to a vote against a bill full of “garbage.” “The outcome is already predetermined,” he told Greta Van Susteren on Fox News in December.

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Rubio is so out of touch he doesn't even realize Republicans gave away the store just to get the export ban lifted.

WaPo Gen Xer drinks climate Kool-Aid, attacks Baby Boomers for causing global warming and running up the $18 trillion debt

spotted headed to Mt. Rushmore

Here:

"Boomers soaked up a lot of economic opportunity without bothering to preserve much for the generations to come. They burned a lot of cheap fossil fuels, filled the atmosphere with heat-trapping gases, and will probably never pay the costs of averting catastrophic climate change or helping their grandchildren adapt to a warmer world. They took control of Washington at the turn of the millennium, and they used it to rack up a lot of federal debt, even before the Great Recession hit."

Substitute "liberals" everytime you see "boomers" in the essay and it makes a lot more sense than attacking your parents per se. Instead the author prefers to commit Maoism in "Baby boomers are what’s wrong with America’s economy". 

Meanwhile, exporting good jobs and importing cheap labor were artifacts of the 1960s revolution, advanced by people who were fellow travelers under FDR. The height of the baby boom generation was what, aged 10 in 1967? 

In the end, Jim Tankersley can't add and subtract, but what his father gave him for Christmas in 2012 for his patricidal thesis says it all:

"After I first outlined this argument to my father in 2012, he gifted me an actual lump of coal for Christmas."

Well done, Dad! The earth remains full of coal, especially American earth, ensuring energy independence as far as the eye can see, as well as oil and natural gas and . . . thorium! If only we'll use it. 

It makes more sense to rely on these going forward because they remain so plentiful, employing technologies to make them harmless to human health, invented by smart people from every generation.

But if a Maunder Minimum ensues in 2030, we might not care as much about the health as the warmth.

Investor's Business Daily comes out for abiotic crude oil and natural gas

Here.

You can take your Hubbert's Peak and shove it up your hind end.

Politico lies about what John Boehner and Barack Obama accomplished together

Here:

"But [Boehner's] tenure will also be remembered for his complicated relationship with President Barack Obama. He and Obama tried — but repeatedly failed — to cut a deal on a sweeping fiscal agreement."

Boehner got the Bush tax cuts made permanent, and under a Democrat president no less, something Bush couldn't do while he himself was president. If I were Politico I wouldn't mention it, either.

Boehner also got the fix to the Alternative Minimum Tax made permanent, something which eluded Republicans for decades, again under a Democrat president.

Passed at the very opening to 2013, the stock market boomed as a result, tax revenues recovered and the dollar soared from 80 to 95ish today, helping to tank oil prices, for which each and every American should be grateful everytime he fills the gas tank.

"Repeatedly failed"?

Utter nonsense.

Something down is up in Russia

Normally traffic from Russia represents over 10% of my blog audience, going back years, but in the last week that has dropped off the cliff to zero.

It's like somebody turned off the spigot.

Reuters provides clues here:

"The large Moscow street protests of 2011 and 2012 illustrated the connection between economic growth and demands for greater political participation by the chief beneficiaries of Russia’s then-prosperity. Now, as the collapse in oil prices and Western sanctions undermine the economy, the mood inside Russia could hardly be more different. The creative class in big cities like Moscow is depressed and increasingly disengaged from political life. Some have given up and are just leaving the country. The combination of economic crisis, heavy propaganda, patriotic mobilization and hybrid war inside Ukraine have produced conformism, passivity and insensitivity."

New US oil swap with Mexico gives them light sweet crude, us heavier grades bypassing refinery mismatch

According to the story here, perhaps as many as 100,000 barrels a day of light sweet US crude oil will head south to Mexican refineries in exchange for heavier grades for which US Gulf refineries are a better match.

Analyst says oil price plummet primarily driven by OPEC abandoning swing producer role

Dirk Leach, who also credits the rising dollar but not to the extent others have, here:

"Now that OPEC has abdicated their role as swing producer, the only mechanism to stabilize oil prices is the market itself based on supply and demand. As we are now seeing, the supply side of that balance has a lot of inertia. Despite some analysts' view that shale production can be turned on and off rather quickly, the time it takes to decrease production is measured in months or quarters while the crude oil price response is essentially immediate. Going forward, we appear to have a crude oil market pricing system with a very fast response time and a very slow feedback mechanism (supply adjustments). Generally, this type of system is not very stable and results in frequent large swings in market pricing. Going forward, it might be a more bumpy oil market than we have been used to."

John Tamny of Forbes spends four pages trying to convince us falling oil prices are always due to a rising dollar

Here, in Forbes:

"Falling crude prices ... were a function of a rising dollar that revealed itself in a major decline in the price of gold that is and was priced in dollars."

I don't know. Maybe he's trying to convince himself, not us. Reminds me of listening to a religious fanatic who can't stop talking. You know the kind. They usually get older and eventually think the better of it and move on. But not John Tamny.

The idea that a falling dollar produces higher oil prices is a nice theory occasionally supported by the data. The trouble is, there are too many examples of the correlation breaking down.

Crude oil prices from the mid-1980s to 2004 were remarkably range-bound between $12 and $35 a barrel despite the huge drop in the dollar from 1985 and its subsequent rise through the early 2000s. The dollar's rise in the late 1990s did nothing to change this. In fact, oil rose in tandem with the dollar then, as it did marginally after 1995 and as it did at the end of the late recession.

The sheer scale of the moves in oil prices is not commensurate with the relatively small moves in the dollar since 2005, nor is the relative tranquility of oil prices before that explained by the out-sized moves in the dollar.

The case is similar with gold, which at the current price of the dollar is still much, much higher than a dollar at this level in the past would indicate is called for. Gold was quiescent for 20 years and a lot lower than now all the while the dollar moved dramatically down and up again and down, off the 85 level. Contrary to Tamny, the recent decline in the price of gold has hardly been major, and hardly enough to convince that it is hewing to the performance of the dollar.

To illustrate how little gold has cared for the dollar's level, just look at how long it took for gold to peak after the 2008 all-time low in the dollar: over three years. And there is also that roughly 13 point rise in the dollar during the late recession when gold also began its long and biggest leg up.

That's not supposed to happen.

Sorry!

Collapsing oil prices will blow a $1.4 billion hole in Canada's tax revenues, wiping out the projected surplus

So says Garth Turner, here, at The Greater Fool:

Fully 30% of the pump price is federal and provincial tax, of which 12% goes to Ottawa. It’s now clear that with buck-a-litre gasoline that Canadians will spend about $12 billion less filling up in 2015 than last year. There alone is $1.4 billion Joe Owe won’t have to play around with – and he was forecasting [a] surplus of less than a billion.

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Nice nuts on the truck, Garth.

The global oil war just got even more interesting: Dept. of Commerce relaxes export ban

With a tip o' the hat to Andrew Critchlow at the UK Telegraph, Reuters reported just a couple of hours ago that the US Dept. of Commerce has announced relaxation of some parts of the 1974 US oil export ban, here:

(Reuters) - The Obama administration has opened a new front in the global battle for oil market share, effectively clearing the way for the shipment of as much as a million barrels per day of ultra-light U.S. crude to the rest of the world.

The Department of Commerce on Tuesday ended a year-long silence on a contentious, four-decade ban on oil exports, saying it had begun approving a backlog of requests to sell processed light oil abroad. It also issued a long-awaited document outlining exactly what kinds of oil other would-be exporters can ship. ...

... the impending swell of U.S. petroleum into global markets may intensify what many analysts say is a pivotal oil market war, with Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) unwilling to yield ground. Now they will face even greater competition beyond U.S. shores.

Norway whacks GDP projection by over 50% amidst plunging oil prices

Seen here:

According to Statistics Norway, lower investment in the oil sector, Norway's primary growth engine, will likely slow the country's overall GDP growth to 1% next year from 2.1% anticipated in September.

The Conservative-led government has not proposed modifications to the current tax levels imposed on the oil and gas sector, where an additional 51 percent income tax rate applies to make the effective rate 78 percent.

Instead, in order to compensate for declining oil revenues, the current right-wing government, made up of the Conservative and Progress parties, has proposed tax reform measures that would significantly alter the distribution of Norway's tax revenues. 

The measure, that would see the tax burden moved from corporate and personal income toward taxes on consumption and property, has been criticized by left-leaning opposition parties.