- Moscow Outraged After German Defense Minister Advocates 'First Use' Nuke Policy Against Russia
Moscow Outraged After German Defense Minister Advocates ‘First Use’ Nuke Policy Against Russia
Huge controversy has erupted in Germany over the country’s nuclear deterrence posture towards Russia after provocative words by the country’s Christian Democrat caretaker defense minister Annegret Kramp-Karrenbauer. She said NATO is “prepared” and ready to activate its nuclear arsenal against Russia if it attacks a member of the military alliance. It appears she was advocating for a “first use” policy when it comes to Russia, in order to dissuade any potential future aggression.
She said in an interview early this week: “We have to make it very clear to Russia that in the end – and that is also the deterrent doctrine – we are prepared to use such means so that it has a deterrent effect beforehand and no one gets the idea, for example, the areas over the Baltic States or in the Black Sea to attack NATO partners.”
Russian Defense Ministry building, Moscow. Source: RIA Novosti “That is the core idea of NATO, this alliance, and it will be adapted to the current behavior of Russia. In particular, we see violations of the airspace over the Baltic states, but also increasing attacks around the Black Sea,” she added.
The comments were made in the wake of this month’s rapid deterioration in Russia-NATO relations. After NATO expelled eight Russians on accusations that they were spies from Russia’s diplomatic mission to NATO HQ, last week the Kremlin declared it would withdraw from the diplomatic mission altogether, severing contacts completely. And more recently as Reuters reported, “NATO defense ministers agreed a new master plan on Thursday to defend against any potential Russian attack on multiple fronts, reaffirming the alliance’s core goal of deterring Moscow despite a growing focus on China.”
The German defense minister’s comments were made in reference to the breakdown in communications with Russia and the implementation of this so-called master plan.
With relations deteriorating, despite ongoing cooperation on other key fronts – most notably the Russia-to-Germany Nord Stream 2 pipeline which is still awaiting final approval from German regulators before it sends Russian natural gas into Europe – an incensed Russian Defense Ministry summoned the German Embassy’s military attaché in Moscow to account for Kramp-Karrenbauer’s words on nuclear strikes.
The Russian ministry said in a Monday statement that Berlin’s envoy “was asked to appear before the Main Directorate for Military Co-Operation.” The statement described that in the meeting “attention was drawn to the remarks made by German Defense Minister Annegret Kramp-Karrenbauer on nuclear deterrence against Russia, and a diplomatic note was handed over.”
German Defense Minister Annegret Kramp-Karrenbauer (R), via Anadolu Agency As for the provocative remarks on nuclear deterrence options within Germany, some corners of German parliament also reacted angrily to the “irresponsible” words, with head of the Social Democrats Rolf Mützenich mocking: “It is a mystery to me whether the minister also thought of the nuclear weapons still stored in Germany.”
Here’s what Mützenich said according to European reports:
Mützenich is especially known for his pacifist views, having written his 1991 doctoral thesis on nuclear-free regions and regularly argues to exclude the stationing of US nuclear weapons on German soil.
“It is a mystery to me whether the minister also thought of the nuclear weapons still stored in Germany,” said Mützenich.
It is understood that there are about 20 nuclear bombs of varying sizes lying in wait on German soil at an airbase in Rhineland-Palatinate as a result of NATO nuclear sharing.
Lately German and other officials in the EU have expressed deep frustration over being too beholden to Washington’s foreign policy and military adventurism abroad, particularly after the failed Afghan debacle and NATO’s inability to conduct a safe and efficient evacuation of Kabul airport in August.
Tyler Durden
Wed, 10/27/2021 – 02:45 - France: Can Éric Zemmour Be The Next President?
France: Can Éric Zemmour Be The Next President?
Authored by Yves Mamou via The Gatestone Institute,
The Financial Times calls him “the extreme right-winger“. For the New York Times he is the “right wing pundit“. For Die Zeit, he is “the man who divides France“… Eric Zemmour, journalist and essayist, is not (yet) an official candidate for the French presidency, but because of his popularity, France is already living at election time.
The presidential elections will take place in about 200 days, but not a week goes by without a poll propelling Éric Zemmour higher and higher in the voter projections for 2022. A Harris Interactive poll published by Challenges magazine on October 6 puts him at 17%, ahead of Marine Le Pen, the candidate of the National Rally party (at 15%, having slipped by 13 points since the summer). Zemmour still remains behind incumbent President Emmanuel Macron, projected at 24%. But for how long?
Seen from abroad, a projected vote tally of 17% for Zemmour may seem low. But in France, the presidential election is a two round competition. The polls quoted here concern the first round only, where there may be 25 candidates in the race. Consequently, first round voting intentions are necessarily fragmented. If the elections were held next week, the only two candidates at the second round would be Marcon and Zemmour.
“Never before have we seen such a meteoric rise in such a short time, insists Jean-Daniel Lévy, deputy director of the poll company Harris Interactive. “We are witnessing the collapse of the very heart of the electorate” of Marine Le Pen.
Who is Eric Zemmour? He is the man who broke through the glass ceiling to insert into the media discussion topics such as “immigration” and “jihad” — which no one had ever dared to talk about publicly. He is a man who embodies the fear of seeing traditional France — the one of church steeples and the “baguette” — disappear under the blows of jihad and political correctness.
A book published by Zemmour on September 16 and entitled La France n’a pas dit son dernier mot (France Has Not Yet Said Her Last Word) is about national identity; 100,000 copies were sold the first week. Zemmour represents the France of yesteryear: the France of Napoleon, Notre Dame de Paris and General Charles de Gaulle, a France that does not want to become an Islamic Republic. “The danger for France is to become a second Lebanon,” Zemmour often says, meaning a country fragmented between sectarian communities that hate and fear one another.
Zemmour is not a professional politician. He started as a political reporter at the daily newspaper Le Figaro in the 1990s, but because he was brilliant and had sweeping judgments about French politicians, and deeply understood political and historical culture, he began to be invited on radio and television. Le Figaro gave him a regular column, and in 2006 he became an authentic television star. His participation for five years on “On n’est pas couché,” (“We Are Not Asleep”), a Saturday night talk show, made him known to all of France. In 2015, the host of the show, Laurent Ruquier, regretted having teamed up with Zemmour. “We didn’t think a monster was going to appear” Ruquier said.
Why is Zemmour “a monster”? Because he claims that “French people from immigrant backgrounds are more controlled than others because most of the traffickers are Black and Arabs…. That is a fact.” Zemmour was convicted in court for saying that, not because it was a lie, but because such an assertion is impossible to prove. French law has refused to use the ethnic statistics as they exist in Great Britain or the United States.
Zemmour appears to be shocking because he states that France ceased to be France the day it allowed parents from foreign origin to give African or Muslim first names to their children (Mohammed is the most prevalent name in the Parisian suburbs). Zemmour says he would like to restore a law from the 19th century that obligated all French citizens “to give French first names” to their children. Zemmour also demands that France cease to be subject to the authority of the judges of the European Court of Justice and the European Court of Human Rights. They are the ones, Zemmour says, who prevent foreign criminals from being deported.
He is also uncompromising on societal issues: against assisted reproduction (“I want children to have a father and a mother”), transgender propaganda in schools, same-sex marriage, and LGBT militancy at school. Zemmour is not anti-homosexual, he is just saying that “LGBT lobbies” and “minorities” are at war with France just as Islamists are at war with all Western countries.
Zemmour is popular not because he makes provocative remarks about immigration or LGBT rights. He is popular because he brings to the media concerns that were previously expressed only in the family or among friends. Zemmour’s popularity is growing in the polls today because he is now exporting the debate from the media sphere to the political sphere.
Does Zemmour actually have a chance of becoming president? Zemmour is not yet even an official candidate for the presidential election. He is also the man who said that he would “disappoint many people if he did not run”.
For many reasons, yes, Zemmour has a chance to be the next president. First, because Macron has proven that an individual who does not belong to any political party can win. The irregularity is therefore reproducible.
Also, the Constitution of the Fifth Republic in France is entirely built to organize an exceptional personality meeting with the French people. This system was carved out for General de Gaulle and directly voted for by the French people. From that vantage point, the meeting between Zemmour and French people is already a reality. When Zemmour organized the promotion of his latest book, thousands of people rushed to shake his hand.
There are other reasons as well that explain Zemmour’s exceptional popularity. First, the French population nowadays is segmented into different “audiences” or centers of interest. In France, in the political field, the main characteristic of all of these “audiences” is a feeling of “anguish” and “anger” against the elites who promoted mass immigration without consulting the native population. The Confidence Barometer, a poll published every year in France by Cevipof, the research center of the Paris Institute of Political Studies, is a good indicator of the “lassitude, moroseness, distrust” that the majority of the French population apparently feel toward the political class.
Getting out of the current electoral trap
The meteoric rise of Zemmour has had a second effect: he has broken a degrading electoral trap in which the French people are stuck. This electoral trap was thought up in the mid-1980s by France’s socialist President François Mitterrand: dividing the right to prevent them from returning to power. Mitterrand promoted in the state-owned radio and television a microscopic far-right party, the National Front, the first that dared to speak out against immigration.
From the middle of the 80s until now, the media and the left together manufactured an industrial-strength shame machine to stigmatize as “racist” and “Nazi” anyone who dared to raise his voice on issues of immigration.
This policy of shame was so strong that recently even Marine Le Pen, leader of the National Rally (as the National Front is now branded), tried to escape the stigma of being called a “Nazi” by saying positive things about Muslim immigration and not excluding the use of immigration to fill an alleged labor shortage.
With Zemmour, however, the anti-racist media are now working in a vacuum. The more the media try to stigmatize Zemmour as a “Nazi”, the greater his popularity with voters has grown.
Moreover, the leaders of the right-wing party Les Républicains, who did not dare to utter the word “immigration”, are now proposing to “put an end to migration laxity” and to stop “uncontrolled immigration”. Even Macron has privately acknowledged that Zemmour “was right” about immigration.
The Zemmour fight is just beginning. One thing, however, is certain: Zemmour is restoring an authentic democratic debate about topics — security, Islam, immigration — that really matter to the French. For many, Zemmour is the last chance for France not to become an Islamic nation or a “Lebanon in Europe.”
Tyler Durden
Wed, 10/27/2021 – 02:00 - If Terry McAuliffe Wins Virginia's Governor Race, Kiss The 2nd Amendment Goodbye
If Terry McAuliffe Wins Virginia’s Governor Race, Kiss The 2nd Amendment Goodbye
Op-Ed via The Machine Gun Nest (TMGN).
We’re from Maryland, born and raised. But Virginia is our neighbor to the south, and since we’ve been in business, they’ve always been the friendlier state when it comes to firearms.
In 2013 Gov. Martin O’Malley and the Democrat-controlled Maryland legislature enacted SB281, also known as the Firearm Safety Act of 2013. This act combined a laundry list of anti-gun ideas in one package. It established a licensing, training, tax, and registry scheme for handguns and lower receivers, banned “assault rifles” (yet exempted certain ones), regulated where handguns could be transported and worn, magazine capacity limits, and more.
After all of this anti-gun legislation in Maryland, you’d think it would be a utopian paradise. Well, if you look to Baltimore city, the restrictions seem to have had little to no effect on crime whatsoever.
In 2019, the Virginia governor and legislature tried their hand at a similar amount of gun control. While their Assault Weapons Ban failed, they managed to pass restrictions on the sale of handguns and a few other gun control bills.
The reaction to this legislation in the firearms industry was enormous. Many large companies supported efforts in Virginia to get Virginians involved in the fight for their rights. Many sheriffs in Virginia threatened not to enforce the law if passed. The gun lobby was out in full force with representatives from national groups like Gun Owners of America, Firearms Policy Coalition, and the NRA, accompanying local organizations like VCDL and others. There was a rally in Richmond outside the governor’s mansion where it was later revealed a few of the “March for our Lives” organizers had staged a bizarre “Sleep-In.” I’ll let you draw your own conclusions on that one.
Well, since the end of 2019, the political landscape of the country has changed drastically. It’s now time again for the VA Governor election. Political think tanks like to look at the VA Governor election as a sign of the electorate’s approval of the new presidency. It typically happens during the same year as a new president’s first term. And while Biden carried VA by ten percentage points in the 2020 election, the Governor race between Democratic nominee and previous VA Gov. Terry McAuliffe and Republican Greg Youngkin has been neck-and-neck with polls narrowing since August.
Let me speak from experience as a native Marylander. If Virginia elects McAuliffe this November and Virginia Democrats pass an assault weapon ban, it’s unlikely that ban will be reversed at the state level. Maryland has not gotten its right to bear arms back since SB281 in 2013. It’ll be an uphill battle for Virginians if they don’t get involved and get out to vote for their 2nd amendment right this November.
There are many reasons besides the 2nd amendment to vote against McAuliffe, especially if you’ve been following the horrific scandal that has been the Loudon County school board. (Loudon County is a leisurely and beautiful 20-minute drive from where TMGN is located.)
But the reason I’m writing this article is that gun owners need to ditch the apathy that obscures their political activism and get out to vote. I understand the “they can take the guns if they pry them from my cold dead hands” mentality. I’m 100% with it. The problem is if my children’s rights get legislated away, there will be nothing left to defend, and “they” won’t need to fire a shot to take my firearms. The fantastic thing about this country is that we can get out to vote and change policy. 96% of Virginia counties opposed the gun laws passed by a government representing NoVA, the DC suburbs, and little else. Speaking as someone who never understood the importance of getting up and voting– and now living in MD and experiencing the consequences–I beg you, please vote if you’re in VA!
We saw the effect of making our collective voices heard last month when what the Biden administration thought was a shoo-in for ATF director backfired because of grassroots activism! Do you think David Chipman or the Biden admin thought that would happen? No way! But gun owners made their voices heard and collectively pressured senators to keep a gun control activist out of the ATF. If that isn’t a detailed case study of why gun owners need to express themselves and make their voices heard, I don’t know what is!
Lastly, it is essential to note that Virginia is the 3rd most armed state per capita in the country, and the 3rd most armed by the number of registered weapons, coming in behind Florida and Texas. Suppose Virginia can come that close to a complete reversal of its values because of one election and some demographic changes. In that case, we should expect that Texas and Florida won’t be far behind.
Tyler Durden
Wed, 10/27/2021 – 00:10 - These Are The Most (And Least) Trusted People In The World
These Are The Most (And Least) Trusted People In The World
Trust me, I’m a doctor. So goes the well-worn phrase, and as survey by Ipsos reveals, medical professionals are indeed the most trusted group in the world.
A total 64 percent said they think doctors are trustworthy, while just 10 percent said they rather didn’t trust them – making for a net trust level of 54 percent. As Statista’s Martin Armstrong notes, scientists were close behind with a net trustworthiness of 51 percent while teachers rounded off the top three with 43 percent.
You will find more infographics at Statista
At the other end of the scale, politicians have come out as the least trustworthy group of people with a net score of -52 percent.
Malaysia and India displayed the highest levels of trust in politicians – 18 and 19 percent, respectively, said they trusted them there. Argentina and Columbia had the least trust – 3 and 4 percent.
Malaysia and India were in fact the most trusting nations in the survey when taking responses to all categories into consideration. Colombia and Chile were the least trusting.
Tyler Durden
Tue, 10/26/2021 – 23:50 - Defining The State Is No Secret
Defining The State Is No Secret
Authored by Patrick Macfarlane via The Libertarian Institute,
A large part of becoming a libertarian is learning the true—objective—definition of terms that are used in common parlance. Just as most people have not reflected on their role in relation to the state, most people have likewise never reflected upon fundamental concepts or asked the objective question, what is government?
For example, we all learned the “Schoolhouse Rock” version of what a government does. We learned how a bill becomes a law and how the different branches function. If you asked the average American on the street “what is government,” you would probably get a similar, cartoonish description.
Getty Images That is because the truth about government is a bit more sinister than just “the human family coming together to solve mutual problems.”1 Even more surprising, the sinister truth is widely accepted in the mainstream—it is not just a libertarian fever-dream. The state is desperate to bury this truth behind a hypnotic façade.
In 2008, Barack Obama gave an interview to Military Times about the rise of private contractors. In doing so, he defined the state in frank and certain terms:
I am not arguing that there are never going to be uses for private contractors in some circumstances. What I am saying is if you start building a military premised on the use of private contractors and you start making decisions on armed engagement based on the availability of private contractors to fill holes and gaps that over time you are, I believe, eroding the core of our military’s relationship to the nation and how accountability is structured. I think you are privatizing something that is what essentially sets a nation-state apart, which is a monopoly on violence. And to set those kinds of precedents, I think, will lead us over the long term into some troubled waters.2 (Emphasis Added)
Obama’s definition did not come out of thin air. Consider this passage from a mainstream legal publication, the Connecticut Law Review:
…Let us call this conclusion “the monopoly thesis.” It is hard to exaggerate the pedigree and influence of this idea. For four centuries, it has been widely accepted and articulated in one form or another, by philosophers, political scientists, sociologists, historians, and economists—both liberal and non-liberal alike. Today it is typically treated as a truism, a self-evident definition or principle of government, a natural and necessary fact of life. And not just by scholars: Judges, lawyers, politicians, and pundits also routinely remind us that the powers of “law enforcement” and “homeland defense” are among the most traditional, essential and exclusive projects of government. 3
Indeed, the “monopoly thesis” is the cornerstone of modern political theory. French jurist and philosopher Jean Bodin was one of the first modern scholars to make this connection. But even Bodin traced the concept back to antiquity. In 1576, he wrote in The Six Books of the Commonwealth:
Reason and common sense alike point to the conclusion that the origin and foundation of commonwealths was in force and violence. If this is not enough, it can be shown on the testimony of such historians as Thucydides, Plutarch, Caesar, and even by the laws of Solon, that the first generations of men were unacquainted with the sentiments of honor, and their highest endeavor was to kill, torture, rob, and enslave their fellows. So says Plutarch…4
Thomas Hobbes also concluded the genealogy of the state was rooted in violence. In 1651 in wrote in Leviathan:
And from this difference of one another, there is no way for any man to secure himself so reasonable as anticipation; that is by force, or wiles, to master the persons of all men he can so long till he see no other power great enough to endanger him: and this is no more than his own conservation requireth and is generally allowed. Also, because there be some that, taking pleasure in contemplating their own power in the acts of conquest, which they pursue farther than their security requires, if others, that otherwise would be glad to be at ease within modest bounds, should not by invasion increase their power, they would not be able, long time, by standing only on their defense, to subsist. And by consequence, such augmentation of dominion over men being necessary to a man’s conservation, it ought to be allowed him. 5
After Hobbes, the next most influential figure to cement “the Monopoly Thesis” as the foundation of modern political theory was German sociologist Max Weber. In 1919, Weber delivered a famous speech in Munich, Germany, to the “Free Students Union of Bavaria.” This speech, entitled Politics as a Vocation is now widely considered to be a classic work of political science and sociology:
“Every state is founded on force,” said Trotsky at Brest-Litovsk. That is indeed right. If no social institutions existed which knew the use of violence, then the concept of “state” would be eliminated, and a condition would emerge that could be designated as “anarchy,” in the specific sense of this word. Of course, force is certainly not the normal, or the only means of the state—nobody says that—but force is a means specific to the state. Today the relation between the state and violence is an especially intimate one. In the past, the most varied institutions have known the use of physical force as quite normal. Today, however, we have to say that a state is a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory. Note that “territory” is one of the characteristics of the state. Specifically, at the present time, the right to use physical force is ascribed to other institutions or to individuals only to the extent to which the state permits it. The state is considered the sole source of the “right” to use violence. Hence, “politics” for us means striving to share power or striving to influence the distribution of power, either among states or among groups within the state.6 (Emphasis Added)
Indeed, this version of the state is not the version of the state we came to be taught in…state-run schools. Go figure.
If academia widely accepts the monopoly thesis, why is it that the public is so hopelessly ensnared by the Disney version of government?
In the developed world, the public is largely sheltered from the bleakness of pre-modern life. Death, violence, instability, and want are things that happen “over there” or “back then.” Through “softness,” indoctrination, social pressure, and inevitability, the state can govern without even the threat of violence.
When confronted with the truth about the state, most will become angry, or deny it as hyperbole. Others accept the nature of the state and deem it necessary. The best of these types will deem the state a “necessary evil.” Some, such as yours truly, will assert that the state is an unnecessary evil.
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Tyler Durden
Tue, 10/26/2021 – 23:30 - Is $1 Million Enough For Retirement In America?
Is $1 Million Enough For Retirement In America?
The average American needs their retirement savings to last them 14 to 17 years. With this in mind, Visual Capitalist’s Carmen Ang asks (and answers below), is $1 million in savings enough for the average retiree?
Ultimately, it depends on where you live, since the average cost of living varies across the country. This graphic, using data compiled by GOBankingRates.com shows how many years $1 million in retirement savings lasts in the top 50 most populated U.S. cities.
Editor’s note: As one user rightly pointed out, this analysis doesn’t take into account interest earned on the $1 million. With that in consideration, the above calculations could be seen as very conservative figures.
How Long $1 Million Would Last in 50 Cities
To compile this data, GOBankingRates calculated the average expenditures of people aged 65 or older in each city, using data from the Bureau of Labor Statistics and cost-of-living indices from Sperling’s Best Places.
That figure was then reduced to account for average Social Security income. Then, GOBankingRates divided the one million by each city’s final figure to calculate how many years $1 million would last in each place.
Perhaps unsurprisingly, San Francisco, California came in as the most expensive city on the list. $1 million in retirement savings lasts approximately eight years in San Francisco, which is about half the time that the typical American needs their retirement funds to last.
A big factor in San Francisco’s high cost of living is its housing costs. According to Sperlings Best Places, housing in San Francisco is almost 6x more expensive than the national average and 3.6x more expensive than in the overall state of California.
Four of the top five most expensive cities on the list are in California, with New York City being the only outlier. NYC is the third most expensive city on the ranking, with $1 million expected to last a retiree about 12.7 years.
On the other end of the spectrum, $1 million in retirement would last 45.3 years in Memphis, Tennessee. That’s about 37 years longer than it would last in San Francisco. In Memphis, housing costs are about 2.7x lower than the national average, with other expenses like groceries, health, and utilities well below the national average as well.
Retirement, Who?
Regardless of where you live, it’s helpful to start planning for retirement sooner rather than later. But according to a recent survey, only 41% of women and 58% of men are actively saving for retirement.
However, for some, COVID-19 has been the financial wake-up call they needed to start planning for the future. In fact, in the same survey, 70% of respondents claimed the pandemic has “caused them to pay more attention to their long-term finances.”
This is good news, considering that people are living longer than they used to, meaning their funds need to last longer in general (or people need to retire later in life). Although, as the data in this graphic suggests, where you live will greatly influence how much you actually need.
Tyler Durden
Tue, 10/26/2021 – 23:10 - Miller: The Slippery Semantics Of Anthony Fauci
Miller: The Slippery Semantics Of Anthony Fauci
Authored by Stephen L. Miller via Spectator World (emphasis ours),
I do not have any accounting of what the Chinese may have done, and I’m fully in favor of any further investigation of what went on in China. However, I will repeat again: the NIH and NIAID categorically has not funded ‘gain-of-function’ research to be conducted in the Wuhan Institute of Virology.”
That was Dr Anthony Fauci during a May 2021 congressional hearing. It kicked off a months-long national media effort to frame questions around gain-of-function research and US-taxpayer-funded virus manipulation as a Royal Rumble between Fauci and Senator Rand Paul.
When he testifies or sits for friendly network interviews, Fauci depends on semantics. He relies on the naivety of the interviewer and the audience, employing terminology and definitions he believes only he understands.
But like the ponytailed Chad in Good Will Hunting attempting to flex his big brain, Fauci’s arguments fall apart in front of the initiated.
Last week, Lawrence Tabak, the principal deputy director of the NIH, sent a letter to Congress saying that EcoHealth Alliance failed to report certain aspects of the experimental work it had been conducting in China on bats and bat-borne viruses. Tabak pledged that the NIH and Fauci’s NIAID would take administrative action, but not much more than that.
So Fauci’s absolutist answer from May has proven to be false. At the very least, the doctor needs to answer directly why he chose to deflect questions on gain-of-function research, something his own agency is claiming it had no idea was happening. How could have Fauci have denied back in May something so “categorically” if EcoHealth Alliance, run by Fauci ally Peter Daszak, had failed to report the full extent of their experiments?
When Fauci sat for a cozy Sunday interview with ABC’s George Stephanopoulos, he once again deployed his semantic game on the interviewer. Stephanopoulos framed the revealing letter from Tabak as “critics pouncing”:
“Some critics and analysts have seized on that to say you and others have misled the public about US funding of this so-called gain-of-function research. The NIH says that’s false.”
Fauci addressed Senator Rand Paul directly by responding, “The framework under which we have guidance about the conduct of research that we fund, the funding at the Wuhan Institute was to be able to determine what is out there in the environment, in bat viruses in China. And the research was very strictly under what we call a framework of oversight of the type of research.”
Fauci then went on to say “And under those conditions which we have explained very, very clearly, does not constitute research of gain-of-function of concern.” In his answer, Fauci hedges by admitting that there was US funding directed to the Wuhan Institute, but, now, that funding did not directly fund “gain-of-function of concern.”
“Of concern” is the new caveat Fauci has added to get around answering the question. He had never used the terminology “gain-of-function of concern” in prior interviews or testimony. He just slipped it in there because hardly anyone notices. Furthermore he knows that the general public and most of the press has no idea what “of concern” means.
We know that gain-of-function research was happening in Wuhan and we know Fauci categorically denied US involvement in it. So now he’s attempting to sneak one by the audience and change the terminology, on what the definition of “gain-of-function of concern” means. So what does it mean?
It all comes down to intent. “Of concern” is the term used to differentiate studying and manipulating viruses in the scientific environments as a purposeful method to produce bioweapons. Fauci said as much in 2012 when he testified that his department worked with the Defense Department on such experiments. What Fauci is seeking to do is tweak the argument with semantics and write off his critics and the critics of gain-of-function as people accusing Fauci and the Wuhan Institute of developing bioweapons. No one has done so. It’s a game: “Sure we funded gain-of-function, but how dare you insinuate we funded bioweapon research, you kook!”
These are not the actions of a medical professional, with a serious interest in a transparent inquiry into the origins of the virus that has led to the deaths of 16 million people worldwide, including 750,000 Americans. These are the games a bureaucrat plays when they are attempting to cover their own ass, their career and their life’s work. Pulling this thread leads to one place: more discovery, more leaks and more gleam off Fauci’s armor in the media. How much more damning information needs to come out before he retires?
* * *
Stephen L. Miller is a contributing editor to The Spectator.
Tyler Durden
Tue, 10/26/2021 – 22:50 - Walmart Recalls Aromatherapy Spray Due To Presence Of Rare And Deadly Bacteria
Walmart Recalls Aromatherapy Spray Due To Presence Of Rare And Deadly Bacteria
The next time a new pandemic is needed to trigger trillions more in QE, a perfect delivery mechanism is already available.
Walmart has voluntarily recalled 3,900 bottles of an aromatherapy spray sold in 55 stores across 18 states after it identified a “rare and dangerous” bacteria in the product that has now been linked to four illnesses and two deaths, abc news reports.
The Centers for Disease Control and Prevention announced Friday that it had identified the bacteria Burkholderia pseudomallei in the aromatherapy spray. The bacteria in question is a soil-dwelling bacterium endemic in tropical and subtropical regions worldwide, particularly in Thailand and northern Australia, which infects humans and other animals and causes the disease melioidosis.
According to Nature, “the high associated mortality rate, wide availability in the environment in endemic areas, intrinsic resistance to many antibiotics and the potential for aerosol spread has made this organism a potential bioterror agent.”
The spray, “Better Homes & Gardens Lavender & Chamomile Essential Oil Infused Aromatherapy Room Spray with Gemstones,” and manufactured by Flora Classique, was found Oct. 6 in the home of a Georgia resident who became ill with melioidosis in late July, according to the CDC.
Walmart has recalled its Better Homes & Gardens Lavender & Chamomile Essential Oil Infused Aromatherapy Room Spray with Gemstones after two people died from a bacterial infection The CDC said it will continue to test the bacteria in the bottle to potentially match the bacteria identified in the four patients. The symptoms of melioidosis are similar to that of a cold or flu, according to the CDC. In other words, similar to those of covid.
The contaminated spray was sold at about 55 Walmart stores and on Walmart’s websites between February and Oct. 21. Walmart has pulled the remaining bottles of this spray and related products from the shelves and its websites.
“Our hearts go out to the families that have been impacted by this situation,” Inger Damon, director of the CDC’s Division of High-Consequence Pathogens and Pathology, said in a statement. “We at CDC have been very concerned to see these serious related illness spread across time and geography. That is why our scientists have continued to work tirelessly to try to find the potential source for the melioidosis infections in these patients. We hope this work can help protect other people who may have used this spray.”
The Consumer Product Safety Commission and Walmart issued a recall for the lavender and chamomile room spray along with five other scents in the same product line.
In addition to emailing customers who purchased the product online, emailed more than 2,000 customers who purchased the product at one of its stores; sending letters to another 263 customers with no email address on record and placing calls to a number of others with no available email or physical address.
The CDC will continue to investigate whether other related aromatherapy scents and brands may pose a risk.
Tyler Durden
Tue, 10/26/2021 – 22:45 - This Year's Thanksgiving Dinner Will Be The Most Expensive In History
This Year’s Thanksgiving Dinner Will Be The Most Expensive In History
Thanksgiving Day, an annual national holiday in the US, began as a way to celebrate the harvest and other blessings of the past year. Nowadays people celebrate the holiday with massive feasts and watch football. But one thing consumers won’t be giving thanks to this year is soaring food inflation that could make Thanksgiving 2021 one of the most expensive on record.
“When you go to the grocery store and it feels more expensive, that’s because it is,” Veronica Nigh, senior economist at the American Farm Bureau Federation, told CBS News. She said food prices in 2021 jumped 3.7% versus a 20-year average of 2.4%. Turkeys and all the trimmings will cost 4% to 5% more this year than a year ago.
Rising food prices have been an ongoing issue since the beginning of the pandemic, as disrupted supply chains and adverse weather conditions around the world have made supplies of crops dwindle. Global food prices are at fresh decade highs and have begun to hit the wallets of consumers.
September’s Consumer Price Index for food was up 4.6% from a year ago. Prices for meat, poultry, fish, and eggs were up the most, soaring more than 10%. The rise in food prices has spooked the Biden administration.
Several factors contribute to food inflation, including supply chain snarls, higher transportation costs, and labor shortages. Next year, food inflation may rise further as fertilizer prices jump.
“Agriculture is like everybody else — it’s impacted by the supply restraints we’ve seen,” Nigh said. She said 10% of food costs only come from farming, while the rest (90%) are trucking, wages, distribution, and warehousing.
Besides soaring food costs, consumers may experience widespread supply chain challenges that could make certain food items critical for Turkey Day harder or impossible to find because of shortages. Dr. Krishnakumar S. Davey, president of IRI Client Engagement, published a note explaining IRI’s basket of availability, demand, price, and promotion for Thanksgiving is “recording significant out-of-stock rates on several Thanksgiving-related grocery categories at this time.”
According to Consumer Reports, there is some good news: “turkeys in all sizes will be in abundance.”
But there’s a dark side to Thanksgiving this year, that is, an income-inequality story which means the top 10% of Americans will be spending more while the working-poor might skip the holiday entirely due to affordability issues.
Tyler Durden
Tue, 10/26/2021 – 22:30 - The True Feasibility Of Moving Away From Fossil Fuels
The True Feasibility Of Moving Away From Fossil Fuels
Authored by Gail Tverberg via Our Finite World blog,
One of the great misconceptions of our time is the belief that we can move away from fossil fuels if we make suitable choices on fuels. In one view, we can make the transition to a low-energy economy powered by wind, water, and solar. In other versions, we might include some other energy sources, such as biofuels or nuclear, but the story is not very different.
The problem is the same regardless of what lower bound a person chooses: our economy is way too dependent on consuming an amount of energy that grows with each added human participant in the economy. This added energy is necessary because each person needs food, transportation, housing, and clothing, all of which are dependent upon energy consumption. The economy operates under the laws of physics, and history shows disturbing outcomes if energy consumption per capita declines.
There are a number of issues:
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The impact of alternative energy sources is smaller than commonly believed.
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When countries have reduced their energy consumption per capita by significant amounts, the results have been very unsatisfactory.
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Energy consumption plays a bigger role in our lives than most of us imagine.
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It seems likely that fossil fuels will leave us before we can leave them.
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The timing of when fossil fuels will leave us seems to depend on when central banks lose their ability to stimulate the economy through lower interest rates.
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If fossil fuels leave us, the result could be the collapse of financial systems and governments.
[1] Wind, water and solar provide only a small share of energy consumption today; any transition to the use of renewables alone would have huge repercussions.
According to BP 2018 Statistical Review of World Energy data, wind, water and solar only accounted for 9.4% 0f total energy consumption in 2017.
Figure 1. Wind, Water and Solar as a percentage of total energy consumption, based on BP 2018 Statistical Review of World Energy.
Even if we make the assumption that these types of energy consumption will continue to achieve the same percentage increases as they have achieved in the last 10 years, it will still take 20 more years for wind, water, and solar to reach 20% of total energy consumption.
Thus, even in 20 years, the world would need to reduce energy consumption by 80% in order to operate the economy on wind, water and solar alone. To get down to today’s level of energy production provided by wind, water and solar, we would need to reduce energy consumption by 90%.
[2] Venezuela’s example (Figure 1, above) illustrates that even if a country has an above average contribution of renewables, plus significant oil reserves, it can still have major problems.
One point people miss is that having a large share of renewables doesn’t necessarily mean that the lights will stay on. A major issue is the need for long distance transmission lines to transport the renewable electricity from where it is generated to where it is to be used. These lines must constantly be maintained. Maintenance of electrical transmission lines has been an issue in both Venezuela’s electrical outages and in California’s recent fires attributed to the utility PG&E.
There is also the issue of variability of wind, water and solar energy. (Note the year-to-year variability indicated in the Venezuela line in Figure 1.) A country cannot really depend on its full amount of wind, water, and solar unless it has a truly huge amount of electrical storage: enough to last from season-to-season and year-to-year. Alternatively, an extraordinarily large quantity of long-distance transmission lines, plus the ability to maintain these lines for the long term, would seem to be required.
[3] When individual countries have experienced cutbacks in their energy consumption per capita, the effects have generally been extremely disruptive, even with cutbacks far more modest than the target level of 80% to 90% that we would need to get off fossil fuels.
Notice that in these analyses, we are looking at “energy consumption per capita.” This calculation takes the total consumption of all kinds of energy (including oil, coal, natural gas, biofuels, nuclear, hydroelectric, and renewables) and divides it by the population.
Energy consumption per capita depends to a significant extent on what citizens within a given economy can afford. It also depends on the extent of industrialization of an economy. If a major portion of industrial jobs are sent to China and India and only service jobs are retained, energy consumption per capita can be expected to fall. This happens partly because local companies no longer need to use as many energy products. Additionally, workers find mostly service jobs available; these jobs pay enough less that workers must cut back on buying goods such as homes and cars, reducing their energy consumption.
Example 1. Spain and Greece Between 2007-2014
Figure 2. Greece and Spain energy consumption per capita. Energy data is from BP 2018 Statistical Review of World Energy; population estimates are UN 2017 population estimates.
The period between 2007 and 2014 was a period when oil prices tended to be very high. Both Greece and Spain are very dependent on oil because of their sizable tourist industries. Higher oil prices made the tourism services these countries sold more expensive for their consumers. In both countries, energy consumption per capita started falling in 2008 and continued to fall until 2014, when oil prices began falling. Spain’s energy consumption per capita fell by 18% between 2007 and 2014; Greece’s fell by 24% over the same period.
Both Greece and Spain experienced high unemployment rates, and both have needed debt bailouts to keep their financial systems operating. Austerity measures were forced on Greece. The effects on the economies of these countries were severe. Regarding Spain, Wikipedia has a section called, “2008 to 2014 Spanish financial crisis,” suggesting that the loss of energy consumption per capita was highly correlated with the country’s financial crisis.
Example 2: France and the UK, 2004 – 2017
Both France and the UK have experienced falling energy consumption per capita since 2004, as oil production dropped (UK) and as industrialization was shifted to countries with a cheaper total cost of labor and fuel. Immigrant labor was added, as well, to better compete with the cost structures of the countries that France and the UK were competing against. With the new mix of workers and jobs, the quantity of goods and services that these workers could afford (per capita) has been falling.
Figure 3. France and UK energy consumption per capita. Energy data is from BP 2018 Statistical Review of World Energy; population estimates are UN 2017 population estimates.
Comparing 2017 to 2004, energy consumption per capita is down 16% for France and 25% in the UK. Many UK citizens have been very unhappy, wanting to leave the European Union.
France recently has been experiencing “Yellow Vest” protests, at least partly related to an increase in carbon taxes. Higher carbon taxes would make energy-based goods and services less affordable. This would likely reduce France’s energy consumption per capita even further. French citizens with their protests are clearly not happy about how they are being affected by these changes.
Example 3: Syria (2006-2016) and Yemen (2009-2016)
Both Syria and Yemen are examples of formerly oil-exporting countries that are far past their peak production. Declining energy consumption per capita has been forced on both countries because, with their oil exports falling, the countries can no longer afford to use as much energy as they did in the past for previous uses, such as irrigation. If less irrigation is used, food production and jobs are lost. (Syria and Yemen)
Figure 4. Syria and Yemen energy consumption per capita. Energy consumption data from US Energy Information Administration; population estimates are UN 2017 estimates.
Between Yemen’s peak year in energy consumption per capita (2009) and the last year shown (2016), its energy consumption per capita dropped by 66%. Yemen has been named by the United Nations as the country with the “world’s worst humanitarian crisis.” Yemen cannot provide adequate food and water for its citizens. Yemen is involved in a civil war that others have entered into as well. I would describe the war as being at least partly a resource war.
The situation with Syria is similar. Syria’s energy consumption per capita declined 55% between its peak year (2006) and the last year available (2016). Syria is also involved in a civil war that has been entered into by others. Here again, the issue seems to be inadequate resources per capita; war participants are to some extent fighting over the limited resources that are available.
Example 4: Venezuela (2008-2017)
Figure 5. Energy consumption per capita for Venezuela, based on BP 2018 Statistical Review of World Energy data and UN 2017 population estimates.
Between 2008 and 2017, energy consumption per capita in Venezuela declined by 23%. This is a little less than the decreases experienced by the UK and Greece during their periods of decline.
Even with this level of decline, Venezuela has been having difficulty providing adequate services to its citizens. There have been reports of empty supermarket shelves. Venezuela has not been able to maintain its electrical system properly, leading to many outages.
[4] Most people are surprised to learn that energy is required for every part of the economy. When adequate energy is not available, an economy is likely to first shrink back in recession; eventually, it may collapse entirely.
Physics tells us that energy consumption in a thermodynamically open system enables all kinds of “complexity.” Energy consumption enables specialization and hierarchical organizations. For example, growing energy consumption enables the organizations and supply lines needed to manufacture computers and other high-tech goods. Of course, energy consumption also enables what we think of as typical energy uses: the transportation of goods, the smelting of metals, the heating and air-conditioning of buildings, and the construction of roads. Energy is even required to allow pixels to appear on a computer screen.
Pre-humans learned to control fire over one million years ago. The burning of biomass was a tool that could be used for many purposes, including keeping warm in colder climates, frightening away predators, and creating better tools. Perhaps its most important use was to permit food to be cooked, because cooking increases food’s nutritional availability. Cooked food seems to have been important in allowing the brains of humans to grow bigger at the same time that teeth, jaws and guts could shrink compared to those of ancestors. Humans today need to be able to continue to cook part of their food to have a reasonable chance of survival.
Any kind of governmental organization requires energy. Having a single leader takes the least energy, especially if the leader can continue to perform his non-leadership duties. Any kind of added governmental service (such as roads or schools) requires energy. Having elected leaders who vote on decisions takes more energy than having a king with a few high-level aides. Having multiple layers of government takes energy. Each new intergovernmental organization requires energy to fly its officials around and implement its programs.
International trade clearly requires energy consumption. In fact, pretty much every activity of businesses requires energy consumption.
Needless to say, the study of science or of medicine requires energy consumption, because without significant energy consumption to leverage human energy, nearly every person must be a subsistence level farmer, with little time to study or to take time off from farming to write (or even read) books. Of course, manufacturing medicines and test tubes requires energy, as does creating sterile environments.
We think of the many parts of the economy as requiring money, but it is really the physical goods and services that money can buy, and the energy that makes these goods and services possible, that are important. These goods and services depend to a very large extent on the supply of energy being consumed at a given point in time–for example, the amount of electricity being delivered to customers and the amount of gasoline and diesel being sold. Supply chains are very dependent on each part of the system being available when needed. If one part is missing, long delays and eventually collapse can occur.
[5] If the supply of energy to an economy is reduced for any reason, the result tends to be very disruptive, as shown in the examples given in Section [3], above.
When an economy doesn’t have enough energy, its self-organizing feature starts eliminating pieces of the economic system that it cannot support. The financial system tends to be very vulnerable because without adequate economic growth, it becomes very difficult for borrowers to repay debt with interest. This was part of the problem that Greece and Spain had in the period when their energy consumption per capita declined. A person wonders what would have happened to these countries without bailouts from the European Union and others.
Another part that is very vulnerable is governmental organizations, especially the higher layers of government that were added last. In 1991, the Soviet Union’s central government was lost, leaving the governments of the 15 republics that were part of the Soviet Union. As energy consumption per capita declines, the European Union would seem to be very vulnerable. Other international organizations, such as the World Trade Organization and the International Monetary Fund, would seem to be vulnerable, as well.
The electrical system is very complex. It seems to be easily disrupted if there is a material decrease in energy consumption per capita because maintenance of the system becomes difficult.
If energy consumption per capita falls dramatically, many changes that don’t seem directly energy-related can be expected. For example, the roles of men and women are likely to change. Without modern medical care, women will likely need to become the mothers of several children in order that an average of two can survive long enough to raise their own children. Men will be valued for the heavy manual labor that they can perform. Today’s view of the equality of the sexes is likely to disappear because sex differences will become much more important in a low-energy world.
Needless to say, other aspects of a low-energy economy might be very different as well. For example, one very low-energy type of economic system is a “gift economy.” In such an economy, the status of each individual is determined by the amount that that person can give away. Anything a person obtains must automatically be shared with the local group or the individual will be expelled from the group. In an economy with very low complexity, this kind of economy seems to work. A gift economy doesn’t require money or debt!
[6] Most people assume that moving away from fossil fuels is something we can choose to do with whatever timing we would like. I would argue that we are not in charge of the process. Instead, fossil fuels will leave us when we lose the ability to reduce interest rates sufficiently to keep oil and other fossil fuel prices high enough for energy producers.
Something that may seem strange to those who do not follow the issue is the fact that oil (and other energy prices) seem to be very much influenced by interest rates and the level of debt. In general, the lower the interest rate, the more affordable high-priced goods such as factories, homes, and automobiles become, and the higher commodity prices of all kinds can be. “Demand” increases with falling interest rates, causing energy prices of all types to rise.
Figure 6.
The cost of extracting oil is less important in determining oil prices than a person might expect. Instead, prices seem to be determined by what end products consumers (in the aggregate) can afford. In general, the more debt that individual citizens, businesses and governments can obtain, the higher that oil and other energy prices can rise. Of course, if interest rates start rising (instead of falling), there is a significant chance of a debt bubble popping, as defaults rise and asset prices decline.
Interest rates have been generally falling since 1981 (Figure 7). This is the direction needed to support ever-higher energy prices.
Figure 7. Chart of 3-month and 10-year interest rates, prepared by the FRED, using data through March 27, 2019.
The danger now is that interest rates are approaching the lowest level that they can possibly reach. We need lower interest rates to support the higher prices that oil producers require, as their costs rise because of depletion. In fact, if we compare Figures 7 and 8, the Federal Reserve has been supporting higher oil and other energy prices with falling interest rates practically the whole time since oil prices rose above the inflation adjusted level of $20 per barrel!
Figure 8. Historical inflation adjusted prices oil, based on data from 2018 BP Statistical Review of World Energy, with the low price period for oil highlighted.
Once the Federal Reserve and other central banks lose their ability to cut interest rates further to support the need for ever-rising oil prices, the danger is that oil and other commodity prices will fall too low for producers. The situation is likely to look like the second half of 2008 in Figure 6. The difference, as we reach limits on how low interest rates can fall, is that it will no longer be possible to stimulate the economy to get energy and other commodity prices back up to an acceptable level for producers.
[7] Once we hit the “no more stimulus impasse,” fossil fuels will begin leaving us because prices will fall too low for companies extracting these fuels. They will be forced to leave because they cannot make an adequate profit.
One example of an oil producer whose production was affected by an extended period of low prices is the Soviet Union (or USSR).
Figure 9. Oil production of the former Soviet Union together with oil prices in 2017 US$. All amounts from 2018 BP Statistical Review of World Energy.
The US substantially raised interest rates in 1980-1981 (Figure 7). This led to a sharp reduction in oil prices, as the higher interest rates cut back investment of many kinds, around the world. Given the low price of oil, the Soviet Union reduced new investment in new fields. This slowdown in investment first reduced the rate of growth in oil production, and eventually led to a decline in production in 1988 (Figure 9). When oil prices rose again, production did also.
Figure 10. Energy consumption per capita for the former Soviet Union, based on BP 2018 Statistical Review of World Energy data and UN 2017 population estimates.
The Soviet Union’s energy consumption per capita reached its highest level in 1988 and began declining in 1989. The central government of the Soviet Union did not collapse until late 1991, as the economy was increasingly affected by falling oil export revenue.
Some of the changes that occurred as the economy simplified itself were the loss of the central government, the loss of a large share of industry, and a great deal of job loss. Energy consumption per capita dropped by 36% between 1988 and 1998. It has never regained its former level.
Venezuela is another example of an oil exporter that, in theory, could export more oil, if oil prices were higher. It is interesting to note that Venezuela’s highest energy consumption per capita occurred in 2008, when oil prices were high.
We are now getting a chance to observe what the collapse in Venezuela looks like on a day- by-day basis. Figure 5, above, shows Venezuela’s energy consumption per capita pattern through 2017. Low oil prices since 2014 have particularly adversely affected the country.
[8] Conclusion: We can’t know exactly what is ahead, but it is clear that moving away from fossil fuels will be far more destructive of our current economy than nearly everyone expects.
It is very easy to make optimistic forecasts about the future if a person doesn’t carefully examine what the data and the science seem to be telling us. Most researchers come from narrow academic backgrounds that do not seek out insights from other fields, so they tend not to understand the background story.
A second issue is the desire for a “happy ever after” ending to our current energy predicament. If a researcher is creating an economic model without understanding the underlying principles, why not offer an outcome that citizens will like? Such a solution can help politicians get re-elected and can help researchers get grants for more research.
We should be examining the situation more closely than most people have considered. The fact that interest rates cannot drop much further is particularly concerning.
Tyler Durden
Tue, 10/26/2021 – 22:10 -
- Why Supply Chain Disruptions Will Persist
Why Supply Chain Disruptions Will Persist
Just-in-time (JIT) is a production model used by companies to create items for immediate demand. The point of JIT is to avoid the waste associated with overproduction. But when supply chain snarls appear, JIT has become a significant headache for US companies such as Ford who has had to shutter multiple vehicle plants because of their inability to source semiconductor chips.
Companies are rethinking their production model to just-in-case inventory (JICI), a more suitable model in today’s challenging environment that allows more inventory to be stored and will help ensure future orders are filled.
JIT still dominates the corporate world, but JICI could make a strong comeback due to global uncertainties. Bloomberg has provided an in-depth view of various US industries and their potential disruptions in foreign supplies.
Source: Bloomberg Foreign supply-chain production is the largest in textiles, basic metals, electrical equipment, motor vehicles, and electronics. Many of these industries are entirely reliant on production from China. The problem with that is Beijing has ordered energy-intensive factories to shutter operations to conserve electricity amid a massive energy crunch. This will complicate the picture for firms that source a majority of their goods from the country. On top of this all, port congestion on either side of the Pacific continues to increase to record levels.
JIT is a flawed production model when supply chains break. Maybe companies will learn to transition to JICI and hold inventory in case of a rainy day.
For more insight on when global supply chain bottlenecks will subside, Dubai’s DP World, one of the biggest international port operators, Chairman and CEO Sultan Ahmed Bin Sulayem told Bloomberg earlier this month that disruptions could last for another two years.
“The global supply chain was in crisis at the beginning of the pandemic,” Bin Sulayem said. “Maybe in 2023 we’ll see an easing.”
So the complex, interconnectedness of the global supply chain combined with JIT is a recipe for disaster in today’s brave new world. This suggests that more US corporates could embrace JICI and diversify their supply chains away from China to mitigate risk.
Tyler Durden
Tue, 10/26/2021 – 21:50 - Oil Prices Will Remain High For Years To Come
Oil Prices Will Remain High For Years To Come
By Tsvetana Paraskova of OilPrice.com,
Six years after former BP chief executive Bob Dudley said that “the industry needs to prepare for lower for longer,” a growing number of major investment banks now expect “higher for longer” oil prices.
Rebounding global oil consumption amid tight supply—contrary to some forecasts last year that indicate demand may have peaked or was close to its peak—as well as years of underinvestment in new supply following the 2015 crash, have prompted Wall Street banks to raise significantly their projections for oil prices in the short and medium term.
Oil prices have hit multi-year highs in recent days, with WTI Crude at its highest since 2014 and Brent Crude at the highest level since October 2018.
Even after the latest rally, prices still have headroom to rise further, many major investment banks believe.
Goldman Sachs, for example, sees Brent hitting $90 per barrel at the end of this year, up from $80 expected earlier. The key driver of Goldman’s higher forecast is global oil demand recovery amid still a weaker supply response from non-OPEC+ oil producers.
The investment bank also sees sustained higher oil prices in the coming years.
Fundamentals warrant higher oil prices, and the bank’s forecast for the next several years is $85 a barrel, Damien Courvalin, Head of Energy Research & Senior Commodity Strategist at Goldman Sachs, told CNBC earlier this month.
Oil demand will set record highs next year and the year after that, and we need to see a ramp-up in investment, he said.
“We’re facing potential multi-year deficits and the risk of significantly higher prices,” Courvalin told CNBC.
RBC Capital Markets is also bullish on oil prices in the medium term.
“We maintain the view that we have held all year – that the oil market remains in the early days of a multi-year, structurally strong cycle,” RBC analyst Michael Tran said in a note in mid-October carried by Reuters.
Last week, Morgan Stanley raised its long-term oil price outlook up by $10 per barrel to $70. BNP Paribas expects oil prices at nearly $80 a barrel in 2023, Bloomberg notes.
UBS expects oil prices “to remain well supported into next year,” with the market staying tight at least until the first quarter of 2022, due to the lowest inventories in OECD since 2015, only gradual easing of the OPEC+ cuts, and oil demand hitting 100 million barrels per day (bpd) in December 2021.
“While demand is expected to increase as well next year, additional OPEC+ and US production should result in a balanced oil market. With more OPEC+ members struggling to increase production in line with the group’s plans, its additions in 2022 will likely be only a fraction of the currently intended 3.76mbpd increase, which should prevent an oversupplied market, in our view,” Giovanni Staunovo, Dominic Schnider, and Wayne Gordon wrote on Friday.
“So bearing all of this in mind, we now expect Brent to trade at USD 90/bbl in December and March, before leveling off to USD 85/bbl for the rest of 2022,” UBS’s analysts added.
Beyond 2022, oil prices are likely to remain structurally higher as oil demand will continue to rise while new supply would lag consumption growth, primarily due to five years of underinvestment and the pressure on oil majors to cut emissions and investments in new supply, analysts say.
Global annual upstream spending needs to increase by as much as 54 percent to $542 billion if the oil market is to avert the next supply shortage shock, Moody’s said earlier this month.
“Our analysis demonstrates that upstream companies will need to increase their spending considerably for the medium term to fully replace reserves and avoid declines in future production,” Moody’s Vice President Sajjad Alam said.
The oil industry is “massively underinvesting” in supply to meet growing demand, which is set to return to pre-COVID levels as soon as the end of 2021 or early 2022, Greg Hill, president of U.S. oil producer Hess Corp, said at the end of September.
Last year, global upstream investment sank to a 15-year low of $350 billion, according to estimates by Wood Mackenzie from earlier this year.
Tyler Durden
Tue, 10/26/2021 – 21:30 - Fragile Fertility & Human Extinction
Fragile Fertility & Human Extinction
There has been an alarming decrease in the average sperm count of Western men over the last few decades.
As Statista’s Martin Armstring shows in the infographic below, from their ‘Then & Now’ series, research has revealed a 59 percent fall between 1973 and 2011 – from 337.5 million to just 137.5 million.
You will find more infographics at Statista
Commenting on the decline, lead author of the study, Hagai Levine, said “the results are quite shocking…this is a classic under the radar huge public health problem that is really neglected”.
Going further, Levine warned that “eventually we may have a problem and with reproduction in general. It may be the extinction of the human species.” As noted in the research paper, the economic and societal burden of male infertility is high and increasing. The researchers advise that “because of the significant public health implications of these results, research on the causes of this continuing decline is urgently needed.“
Fertility research has in the past been criticised for not taking into account the potentially biased sampling methods of earlier studies, citing also the variable of changing laboratory methods. The researchers in this case though say that such issues have been taken into account – only considering samples where the same count method was used, were of an acceptable size and did not include men known to have fertility problems.
Tyler Durden
Tue, 10/26/2021 – 21:10 - Florida Jobs Grow At Three Times US Rate, Report Shows
Florida Jobs Grow At Three Times US Rate, Report Shows
Authored by Jannis Flakenstern via The Epoch Times,
Jobs in Florida are growing much faster than the national rate, according to a September employment report.
The office of Gov. Ron DeSantis (R) estimated the job growth at three times that of the nation. Florida has recorded 17 months of continued private-sector job growth.
The Sunshine State gained 84,500 jobs in September, with 73,000 of those in the private sector, according to the governor’s office.
The figures showed an increase of 5.6 percent compared to the same time last year.
In a press release, the governor’s office said: “Florida’s labor force increased by 540,000 over the year, with 423,000 of that increase occurring in the last six months.”
Most jobs were created in the leisure and hospitality industry, adding 26,600 positions. Trade, transportation, and utilities gained 19,200 jobs; professional and business services added 10,400; construction went up 6,900, and education and health services increased by 6,300 jobs.
Figures from the Florida Department of Economic Opportunity (FDEO) show there are more than 520,000 jobs listed online, giving Floridians a wide choice of work opportunities.
The FDEO secretary Dane Eagle said these figures demonstrate the success of the state’s “Return to Work” initiative, as Florida’s unemployment rate has “lowered over the year, decreasing by 2.3 percentage points.”
“Florida continues to provide meaningful job opportunities for individuals moving to our state and entering our labor force,” Eagle said in a written statement.
“With our unemployment rate decreasing and labor force increasing, we will work to further this great success by making investments that continue to strengthen our economy and increase our state’s resiliency.”
Gov. Ron DeSantis said he is pleased with what he is seeing with growth and added it was not an easy task to achieve considering the national economic climate and inflation.
“Despite tremendous national headwinds and economic uncertainty, Florida has reached a level of job growth only seen on four other occasions in the past 30 years,” DeSantis said in a press release.
“We will continue to work hard to keep Florida open, free, and built for opportunity.”
The department reports that “Florida’s unemployment rate of 4.9 percent for September 2021, dropped 0.1 percentage point from August 2021.”
While Florida has seen consistent gains in the labor force, the nation saw a drop in job-growth rates.
Tyler Durden
Tue, 10/26/2021 – 20:50 - Robusta Coffee Prices Hit Decade-High As Supply Woes Mount Ahead Of Peak-Demand Season
Robusta Coffee Prices Hit Decade-High As Supply Woes Mount Ahead Of Peak-Demand Season
Robusta coffee prices soared to decade highs Tuesday spurred by dwindling stockpiles ahead of peak coffee season.
January futures in London rose more than 5% to $2,325 per ton, the highest price level since September 2011. Arabica coffee prices also rose 2.4% in New York.
The tightening supply of robusta, coffee beans generally used for instant coffee, is “making it difficult to get hold of immediate-delivery coffee,” Kona Haque, head of research at commodity trader ED&F Man in London, told Bloomberg.
“Winter is coming in Europe, which is peak coffee drinking season – that is the time when the roasters want to be sure their warehouses are suitably supplied with coffee,” Haque said. In South America, “you’re also finding that much of the robusta crop is being consumed internally, which is inevitable when you have a shortage” of arabica beans.
Dwindling supplies of the beans have been due to devastating drought and frosts in Brazil this year. The South American country is the world’s largest coffee producer. As for the world’s second-largest coffee producer, Vietnam, sky-high container costs and congestion at ports hinder stockpiles’ drawdown.
“Cheaper robusta-coffee beans, used widely in instant-coffee beverages such as Nestle SA’s Nescafe brands, are sold out in Brazil. After drought and frost ruined crops of the higher-end arabica variety favored by cafes like Starbucks Corp., local roasters are racing for robusta replacements and driving prices to new records each day,” Bloomberg recently wrote.
Last month, Nestle SA’s CFO Francois-Xavier Roger revealed the company is bracing for cost inflation to worsen into 2022. Spiking commodity prices like robusta and arabica, plus soaring transportation, labor, and packaging costs, will be pushed along to consumers in the form of higher coffee prices.
“If we look at 2021, it was certainly much more about dairy and meat and grains. Next year, it will be more about coffee as well. But once again, the large part cannot be hedged, which has to do with transportation, which has to do with packaging material,” Roger told Barclays Global Consumer Staples Conference.
Earlier this year, we warned readers that cheap coffee is no more, and a global deficit is coming. Coffee prices may still have higher to climb.
Tyler Durden
Tue, 10/26/2021 – 20:30 - This Is What It Looks Like When Bears Cry…
This Is What It Looks Like When Bears Cry…
Authored by Sven Henrich via NorthmanTrader.com,
Bears are crying as markets are again making new highs following the September trend breaks. Yet perhaps they should be rejoicing for crying bears and a backtest of a broken trend is a classic bear set up. That is if the backtest fails and the new highs get rejected.
For context: In early October I shared the ‘make bears cry’ scenario:
You can see the context of the discussion here:
Here now is the updated chart:
Go figure. So I submit that this rally so far has really not been a surprise although one could argue it is again all gap, ramp & camp-driven with little organic 2 way price discovery:
Which makes the action again very suspect frankly as too many open gaps are begging for filling.
Why is the backtest scenario potentially bearish? Because it’s still a broken trend and we’ve seen these type of retests before. Q4 of 2018 on $NDX was such an example:
Broken trend, then a back test that produced new highs and everyone got bullish again just before a 20% drawdown in $SPX into December 2018.
Back then of course the Fed was tightening and its balance sheet roll off on autopilot, this time around the Fed hasn’t even started yet, although expectations are the Fed will at least finally announce a taper next week.
Sell offs in the final quarter of the year are extremely rare, the years 2000 and 2018 really the only examples in recent decades, hence it’s no wonder that everyone again has embraced the bullish narratives no matter how absurd the trading action may be. Fairy tale market cap appreciations out of thin air after all:
Today $TSLA has gained $100B in market cap on a $4B revenue order while Elon Musk has added $29B to his personal wealth as a result.
Alexa: What part of the cycle are we in?
— Sven Henrich (@NorthmanTrader) October 25, 2021
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But as long as markets don’t mind valuations don’t matter.
For participants have caught on by now that the only time markets truly correct on a quarterly time frame is when QE ends somewhere:
Only to start QE again on a quarterly red candle. That is the well established track record. And even if the Fed tapers it’s still running QE into at least the middle of next year. So based on that one could argue the party will keep going no matter the valuations disconnect between fantasy and reality:
Highest market valuation ever: $47.23 trillion.
Widest disconnect from the economy ever: 207.7% market cap vs GDP. pic.twitter.com/r3CWma5BoA— Sven Henrich (@NorthmanTrader) October 21, 2021
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For the only thing that matters at the end of the day is Fed liquidity which again drove the latest rally:
Yet the charts keep raising concerns as to the veracity and durability of the latest set of new highs.
Consider how weak the data prints are on the MACD histogram on new highs:
Usually new highs bring about some positive readings even if these highs are divergent and indicative of a potential intermittent top. These readings here are pitifully weak & negative compared to prior highs.
Also of note is the $VIX. Crushed to a pulp in recent days to the lowest levels since February 2020 it nevertheless has been defending its up trend so far:
$VIX defending its uptrend while $SPX is backtesting its broken trend? Could make for a powerful rejection story. But for this to be evident we would need to see $SPX show a confirmed and sustained drop below 4550, the September highs, and then evaluate how the price action evolves.
On that note, some of you may have noticed I’ve been publishing less public market analysis in recent weeks. This is because I’ve moved my public charts and public commentary to my news letter which you can subscribe to via Twitter for free here:
This is where I keep highlighting charts of various asset classes and discuss observations of note.
Bears are currently crying, but then they always cry when new highs are made, but many times new highs, in the right circumstances, have set up for some of the best selling opportunities. Time will tell.
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For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.
Tyler Durden
Tue, 10/26/2021 – 20:10 - Pediatric COVID Hospitalizations Plunge As Schools Reopen, Baffling Experts
Pediatric COVID Hospitalizations Plunge As Schools Reopen, Baffling Experts
All summer long, Dr. Anthony Fauci, CDC Director Rochelle Walensky and other unelected federal bureaucrats have been warning that COVID cases will explode as soon as teachers and students return to classrooms in person this fall, which is why Dr. Fauci has been one of the loudest voices cheering on politicians like NYC’s de Blasio and others who have imposed such mandates on teachers and school employees (which has since been expanded to cover most, if not all, city employees). But just as Pfizer, Moderna and their allies in the federal bureaucracy prepare to declare mRNA vaccines safe for all students between the age of 5 and 11, Bloomberg has just pointed out a remarkable shift: hospitalizations involving US children (already extremely rare compared with the adult population) have fallen sharply as schools reopen.
The number of children who have been hospitalized or died in the US due to COVID has remained extremely small: while the number of US minors who have been confirmed positive with COVID has numbered about 5MM since the start of the pandemic, fewer of 700 of those people have died. When it comes to hospitalizations, the difference between infected adults and children is pretty dramatic.
Source: USA Today
Despite this, many are pushing for children to also be required to get the vaccine as soon as it’s approved for their age group (or face the same kind of alienation that their parents are currently being subjected to). The disagreements have turned communities against one another.
But while the Big Pharma machine gears up to shove vaccines down the throats of children and their parents, the phenomenon of falling hospital positions simply can’t be ignored, even by the MSM, which is quite practiced at that particular skill.
Daily pediatric admissions with confirmed Covid have fallen 56% since the end of August to an average of about 0.2 per 100,000, according to Department of Health and Human Services data. Among adults, new admissions fell 54% to 2.1 per 100,000 in the same period, the data show.
Here’s a visualization for those who prefer to be shown, not told.
(Source: Bloomberg)
It’s no secret that America’s school board meetings have transformed into battle grounds used by people either demanding masks be worn by students, and concerned parents who worry the masks will impact that education. Battles over vaccine mandates and whether CRT should be taught in school have also set off battles in communities across the country.
In some GOP-led states, schools have dropped their school-related mandates, sometimes under pressure from the governor. The Delta variant and its new sub-variant were supposed to trigger the worst phase of the outbreak yet. Instead, it looks like COVID numbers truly are moving down and staying down, especially in states like Florida, which were once heavily criticized for their lack of mandatory precaution.
Alarm bells went off during the spring when tthe CDC saw the percentage of children being hospitalized with COVID rise slightly. However, they eventually figured out that it was merely a factor of falling hospitalization numbers among adults as more Americans became “fully vaccinated”.
Source: Bloomberg
Kid between 12 and 15 didn’t have access to the jab until May. But Dr. Fauci has promised to vaccine all children as young as six months old as the end of the year. The question here, however, is who’s really benefiting from this vaccine overkill? Big Pharma – certainly. But is America really benefiting? How about the developing world?
However, if you think this is the end of the push to vaccine every American with a pulse, there’s already a big new scary variant on the horizon to help convince parents to change their minds.
Tyler Durden
Tue, 10/26/2021 – 19:50 - Green Energy: A Bubble In Unrealistic Expectations
Green Energy: A Bubble In Unrealistic Expectations
Authored by David Hay via Everegreen Gavekal blog,
“You see what is happening in Europe. There is hysteria and some confusion in the markets. Why?…Some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back on investments in the extractive industries. There needs to be a smooth transition.”
– Vladimir Putin (someone with whom this author rarely agrees)
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of its citizens.”
– John Maynard Keynes (an interesting observation for all the modern day Keynesians to consider given their support of current inflationary US policies, including energy-related)
Introduction
This week’s EVA provides another sneak preview into David Hay’s book-in-process, “Bubble 3.0” discussing what he thinks is the crucial topic of “greenflation.” This is a term he coined referring to the rising price for metals and minerals that are essential for solar and wind power, electric cars, and other renewable technologies.
It also centers on the reality that as global policymakers have turned against the fossil fuel industry, energy producers are for the first time in history not responding to dramatically higher prices by increasing production. Consequently, there is a difficult tradeoff that arises as the world pushes harder to combat climate change, driving up energy costs to painful levels, especially for lower income individuals.
What we are currently seeing in Europe is a vivid example of this dilemma. While it may be the case that governments welcome higher oil and natural gas prices to discourage their use, energy consumers are likely to have a much different reaction.
Summary
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BlackRock’s CEO recently admitted that, despite what many are opining, the green energy transition is nearly certain to be inflationary.
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Even though it’s early in the year, energy prices are already experiencing unprecedented spikes in Europe and Asia, but most Americans are unaware of the severity.
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To that point, many British residents being faced with the fact that they may need to ration heat and could be faced with the chilling reality that lives could be lost if this winter is as cold as forecasters are predicting.
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Because of the huge increase in energy prices, inflation in the eurozone recently hit a 13-year high, heavily driven by natural gas prices on the Continent that are the equivalent of $200 oil.
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It used to be that the cure for extreme prices was extreme prices, but these days I’m not so sure. Oil and gas producers are very wary of making long-term investments to develop new resources given the hostility to their industry and shareholder pressure to minimize outlays.
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I expect global supply to peak sometime next year and a major supply deficit looks inevitable as global demand returns to normal.
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In Norway, almost 2/3 of all new vehicle sales are of the electric variety (EVs) – a huge increase in just over a decade. Meanwhile, in the US, it’s only about 2%. Still, given Norway’s penchant for the plug-in auto, the demand for oil has not declined.
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China, despite being the largest market by far for electric vehicles, is still projected to consume an enormous and rising amount of oil in the future.
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About 70% of China’s electricity is generated by coal, which has major environmental ramifications in regards to electric vehicles.
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Because of enormous energy demand in China this year, coal prices have experienced a massive boom. Its usage was up 15% in the first half of this year, and the Chinese government has instructed power providers to obtain all baseload energy sources, regardless of cost.
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The massive migration to electric vehicles – and the fact that they use six times the amount of critical minerals as their gasoline-powered counterparts –means demand for these precious resources is expected to skyrocket.
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This extreme need for rare minerals, combined with rapid demand growth, is a recipe for a major spike in prices.
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Massively expanding the US electrical grid has several daunting challenges– chief among them the fact that the American public is extremely reluctant to have new transmission lines installed in their area.
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The state of California continues to blaze the trail for green energy in terms of both scope and speed. How the rest of the country responds to their aggressive take on renewables remains to be seen.
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It appears we are entering a very odd reality: governments are expending resources they do not have on weakly concentrated energy. And the result may be very detrimental for today’s modern economy.
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If the trend in energy continues, what looks nearly certain to be the Third Energy crisis of the last half-century may linger for years.
Green energy: A bubble in unrealistic expectations?
As I have written in past EVAs, it amazes me how little of the intense inflation debate in 2021 centered on the inflationary implications of the Green Energy transition. Perhaps it is because there is a built-in assumption that using more renewables should lower energy costs since the sun and the wind provide “free power”.
However, we will soon see that’s not the case, at least not anytime soon; in fact, it’s my contention that it will likely be the opposite for years to come and I’ve got some powerful company. Larry Fink, CEO of BlackRock, a very pro-ESG* organization, is one of the few members of Wall Street’s elite who admitted this in the summer of 2021. The story, however, received minimal press coverage and was quickly forgotten (though, obviously, not be me!).
This EVA will outline myriad reasons why I think Mr. Fink was telling it like it is…despite the political heat that could bring down upon him. First, though, I will avoid any discussion of whether humanity is the leading cause of global warming. For purposes of this analysis, let’s make the high-odds assumption that for now a high-speed green energy transition will continue to occur. (For those who would like a well-researched and clearly articulated overview of the climate debate, I highly recommend the book “Unsettled”; it’s by a former top energy expert and scientist from the Obama administration, Dr. Steven Koonin.)
The reason I italicized “for now” is that in my view it’s extremely probable that voters in many Western countries are going to become highly retaliatory toward energy policies that are already creating extreme hardship. Even though it’s only early autumn as I write these words, energy prices are experiencing unprecedented increases in Europe. Because it’s “over there”, most Americans are only vaguely aware of the severity of the situation. But the facts are shocking…
Presently, natural gas is going for $29 per million British Thermal Units (BTUs) in Europe, a quadruple compared to the same time in 2020, versus “just” $5 in the US, which is a mere doubling. As a consequence, wholesale energy cost in Great Britain rose an unheard of 60% even before summer ended. Reportedly, nine UK energy companies are on the brink of failure at this time due to their inability to fully pass on the enormous cost increases. As a result, the British government is reportedly on the verge of nationalizing some of these entities—supposedly, temporarily—to prevent them from collapsing. (CNBC reported on Wednesday that UK natural gas prices are now up 800% this year; in the US, nat gas rose 20% on Tuesday alone, before giving back a bit more than half of that the next day.)
Serious food shortages are expected after exorbitant natural gas costs forced most of England’s commercial production of CO2 to shut down. (CO2 is used both for stunning animals prior to slaughter and also in food packaging.) Additionally, ballistic natural gas prices have forced the closure of two big US fertilizer plants due to a potential shortfall of ammonium nitrate of which “nat gas” is a key feedstock.
*ESG stands for Environmental, Social, Governance; in 2021, Blackrock’s assets under management approximated $9 ½ trillion, about one-third of the total US federal debt.
With the winter of 2021 approaching, British households are being told they may need to ration heat. There are even growing concerns about the widespread loss of life if this winter turns out to be a cold one, as 2020 was in Europe. Weather forecasters are indicating that’s a distinct possibility.
In Spain, consumers are paying 40% more for electricity compared to the prior year. The Spanish government has begun resorting to price controls to soften the impact of these rapidly escalating costs. (The history of price controls is that they often exacerbate shortages.) Naturally, spiking power prices hit the poorest hardest, which is typical of inflation whether it is of the energy variety or of generalized price increases.
Due to these massive energy price increases, eurozone inflation recently hit a 13-year high, heavily driven by natural gas prices that are the equivalent of $200 per barrel oil. This is consistent with what I warned about in several EVAs earlier this year and I think there is much more of this looming in the years to come.
In Asia, which also had a brutally cold winter in 2020 – 2021, there are severe energy shortages being disclosed, as well. China has instructed its power providers to secure all the coal they can in preparation for a repeat of frigid conditions and acute deficits even before winter arrives. The government has also instructed its energy distributors to acquire all the liquified natural gas (LNG) they can, regardless of cost. LNG recently hit $35 per million British Thermal Units in Asia, up sevenfold in the past year. China is also rationing power to its heavy industries, further exacerbating the worldwide shortages of almost everything, with notable inflationary implications.
In India, where burning coal provides about 70% of electricity generation (as it does in China), utilities are being urged to import coal even though that country has the world’s fourth largest coal reserves. Several Indian power plants are close to exhausting their coal supplies as power usage rips higher.
Normally, I’d say that the cure for such extreme prices, was extreme prices—to slightly paraphrase the old axiom. But these days, I’m not so sure; in fact, I’m downright dubious. After all, the enormously influential International Energy Agency has recommended no new fossil fuel development after 2021—“no new”, as in zero.
It’s because of pressure such as this that, even though US natural gas prices have done a Virgin Galactic to $5 this year, the natural gas drilling rig count has stayed flat. The last time prices were this high there were three times as many working rigs.
It is the same story with oil production. Most Americans don’t seem to realize it but the US has provided 90% of the planet’s petroleum output growth over the past decade. In other words, without America’s extraordinary shale oil production boom—which raised total oil output from around 5 million barrels per day in 2008 to 13 million barrels per day in 2019—the world long ago would have had an acute shortage. (Excluding the Covid-wracked year of 2020, oil demand grows every year—strictly as a function of the developing world, including China, by the way.)
Unquestionably, US oil companies could substantially increase output, particularly in the Permian Basin, arguably (but not much) the most prolific oil-producing region in the world. However, with the Fed being pressured by Congress to punish banks that lend to any fossil fuel operator, and the overall extreme hostility toward domestic energy producers, why would they?
There is also tremendous pressure from Wall Street on these companies to be ESG compliant. This means reducing their carbon footprint. That’s tough to do while expanding their volume of oil and gas.
Further, investors, whether on Wall Street or on London’s equivalent, Lombard Street, or in pretty much any Western financial center, are against US energy companies increasing production. They would much rather see them buy back stock and pay out lush dividends. The companies are embracing that message. One leading oil and gas company CEO publicly mused to the effect that buying back his own shares at the prevailing extremely depressed valuations was a much better use of capital than drilling for oil—even at $75 a barrel.
As reported by Morgan Stanley, in the summer of 2021, an US institutional broker conceded that of his 400 clients, only one would consider investing in an energy company! Consequently, the fact that the industry is so detested means that its shares are stunningly undervalued. How stunningly? A myriad of US oil and gas producers are trading at free cash flow* yields of 10% to 15% and, in some cases, as high as 25%.
In Europe, where the same pressures apply, one of its biggest energy companies is generating a 16% free cash flow yield. Moreover, that is based up an estimate of $60 per barrel oil, not the prevailing price of $80 on the Continent.
*Free cash flow is the excess of gross cash flow over and above the capital spending needed to sustain a business. Many market professionals consider it more meaningful than earnings.
Therefore, due to the intense antipathy toward Western energy producers they aren’t very inclined to explore for new resources. Another much overlooked fact about the ultra-critical US shale industry that, as noted, has been nearly the only source of worldwide output growth for the past 13 years, is its rapid decline nature.
Most oil wells see their production taper off at just 4% or 5% per year. But with shale, that decline rate is 80% after only two years. (Because of the collapse in exploration activities in 2020 due to Covid, there are far fewer new wells coming on-line; thus, the production base is made up of older wells with slower decline rates but it is still a much steeper cliff than with traditional wells.)
As a result, the US, the world’s most important swing producer, has to come up with about 1.5 million barrels per day (bpd) of new output just to stay even. (This was formerly about a 3 million bpd number due to both the factor mentioned above and the 2 million bpd drop in total US oil production, from 13 million bpd to around 11 million bpd since 2019). Please recall that total US oil production in 2008 was only around 5 million bpd. Thus, 1.5 million barrels per day is a lot of oil and requires considerable drilling and exploration activities. Again, this is merely to stay steady-state, much less grow.
The foregoing is why I wrote on multiple occasions in EVAs during 2020, when the futures price for oil went below zero*, that crude would have a spectacular price recovery later that year and, especially, in 2021. In my view, to go out on my familiar creaky limb, you ain’t seen nothin’ yet! With supply extremely challenged for the above reasons and demand marching back, I believe 2022 could see $100 crude, possibly even higher.
*Physical oil, or real vs paper traded, bottomed in the upper teens when the futures contract for delivery in April, 2020, went deeply negative.
Mike Rothman of Cornerstone Analytics has one of the best oil price forecasting records on Wall Street. Like me, he was vehemently bullish on oil after the Covid crash in the spring of 2020 (admittedly, his well-reasoned optimism was a key factor in my up-beat outlook). Here’s what he wrote late this summer: “Our forecast for ’22 looks to see global oil production capacity exhausted late in the year and our balance suggests OPEC (and OPEC + participants) will face pressures to completely remove any quotas.”
My expectation is that global supply will likely max out sometime next year, barring a powerful negative growth shock (like a Covid variant even more vaccine resistant than Delta). A significant supply deficit looks inevitable as global demand recovers and exceeds its pre-Covid level. This is a view also shared by Goldman Sachs and Raymond James, among others; hence, my forecast of triple-digit prices next year. Raymond James pointed out that in June the oil market was undersupplied by 2.5 mill bpd. Meanwhile, global petroleum demand was rapidly rising with expectations of nearly pre-Covid consumption by year-end. Mike Rothman ran this chart in a webcast on 9/10/2021 revealing how far below the seven-year average oil inventories had fallen. This supply deficit is very likely to become more acute as the calendar flips to 2022.
In fact, despite oil prices pushing toward $80, total US crude output now projected to actually decline this year. This is an unprecedented development. However, as the very pro-renewables Financial Times (the UK’s equivalent of the Wall Street Journal) explained in an August 11th, 2021, article: “Energy companies are in a bind. The old solution would be to invest more in raising gas production. But with most developed countries adopting plans to be ‘net zero’ on carbon emissions by 2050 or earlier, the appetite for throwing billions at long-term gas projects is diminished.”
The author, David Sheppard, went on to opine: “In the oil industry there are those who think a period of plus $100-a-barrel oil is on the horizon, as companies scale back investments in future supplies, while demand is expected to keep rising for most of this decade at a minimum.” (Emphasis mine) To which I say, precisely!
Thus, if he’s right about rising demand, as I believe he is, there is quite a collision looming between that reality and the high probability of long-term constrained supplies. One of the most relevant and fascinating Wall Street research reports I read as I was researching the topic of what I have been referring to as “Greenflation” is from Morgan Stanley. Its title asked the provocative question: “With 64% of New Cars Now Electric, Why is Norway Still Using so Much Oil?”
While almost two-thirds of Norway’s new vehicle sales are EVs, a remarkable market share gain in just over a decade, the number in the US is an ultra-modest 2%. Yet, per the Morgan Stanley piece, despite this extraordinary push into EVs, oil consumption in Norway has been stubbornly stable.
Coincidentally, that’s been the experience of the overall developed world over the past 10 years, as well; petroleum consumption has largely flatlined. Where demand hasn’t gone horizontal is in the developing world which includes China. As you can see from the following Cornerstone Analytics chart, China’s oil demand has vaulted by about 6 million barrels per day (bpd) since 2010 while its domestic crude output has, if anything, slightly contracted.
Another coincidence is that this 6 million bpd surge in China’s appetite for oil, almost exactly matched the increase in US oil production. Once again, think where oil prices would be today without America’s shale oil boom.
This is unlikely to change over the next decade. By 2031, there are an estimated one billion Asian consumers moving up into the middle class. History is clear that more income means more energy consumption. Unquestionably, renewables will provide much of that power but oil and natural gas are just as unquestionably going to play a critical role. Underscoring that point, despite the exponential growth of renewables over the last 10 years, every fossil fuel category has seen increased usage.
Thus, even if China gets up to Norway’s 64% EV market share of new car sales over the next decade, its oil usage is likely to continue to swell. Please be aware that China has become the world’s largest market for EVs—by far. Despite that, the above chart vividly displays an immense increase in oil demand.
Here’s a similar factoid that I ran in our December 4th EVA, “Totally Toxic”, in which I made a strong bullish case for energy stocks (the main energy ETF is up 35% from then, by the way):
“(There was) a study by the UN and the US government based on the Model for the Assessment of Greenhouse Gasses Induced Climate Change (MAGICC). The model predicted that ‘the complete elimination of all fossil fuels in the US immediately would only restrict any increase in world temperature by less than one tenth of one degree Celsius by 2050, and by less than one fifth of one degree Celsius by 2100.’ Say again? If the world’s biggest carbon emitter on a per capita basis causes minimal improvement by going cold turkey on fossil fuels, are we making the right moves by allocating tens of trillions of dollars that we don’t have toward the currently in-vogue green energy solutions?”
China’s voracious power appetite increase has been true with all of its energy sources.
On the environmentally-friendly front, that includes renewables; on the environmentally-unfriendly side, it also includes coal. In 2020, China added three times more coal-based power generation than all other countries combined. This was the equivalent of an additional coal planet each week. Globally, there was a reduction last year of 17 gigawatts in coal-fired power output; in China, the increase was 29.8 gigawatts, far more than offsetting the rest of the world’s progress in reducing the dirtiest energy source. (A gigawatt can power a city with a population of roughly 700,000.)
Overall, 70% of China’s electricity is coal-generated. This has significant environmental implications as far as electric vehicles (EVs) are concerned. Because EVs are charged off a grid that is primarily coal- powered, carbon emissions actually rise as the number of such vehicles proliferate. As you can see in the following charts from Reuters’ energy expert John Kemp, Asia’s coal-fired generation has risen drastically in the last 20 years, even as it has receded in the rest of the world. (The flattening recently is almost certainly due to Covid, with a sharp upward resumption nearly a given.)
The worst part is that burning coal not only emits CO2—which is not a pollutant and is essential for life—it also releases vast quantities of nitrous oxide (N20), especially on the scale of coal usage seen in Asia today. N20 is unquestionably a pollutant and a greenhouse gas that is hundreds of times more potent than CO2. (An interesting footnote is that over the last 550 million years, there have been very few times when the CO2 level has been as low, or lower, than it is today.)
Some scientists believe that one reason for the shrinkage of Arctic sea ice in recent decades is due to the prevailing winds blowing black carbon soot over from Asia. This is a separate issue from N20 which is a colorless gas. As the black soot covers the snow and ice fields in Northern Canada, they become more absorbent of the sun’s radiation, thus causing increased melting. (Source: “Weathering Climate Change” by Hugh Ross)
Due to exploding energy needs in China this year, coal prices have experienced an unprecedented surge. Despite this stunning rise, Chinese authorities have instructed its power providers to obtain coal, and other baseload energy sources, such as liquified natural gas (LNG), regardless of cost. Notwithstanding how pricey coal has become, its usage in China was up 15% in the first half of this year vs the first half of 2019 (which was obviously not Covid impacted).
Despite the polluting impact of heavy coal utilization, China is unlikely to turn away from it due to its high energy density (unlike renewables), its low cost (usually) and its abundance within its own borders (though its demand is so great that it still needs to import vast amounts).
Regarding oil, as we saw in last week’s final image, it is currently importing roughly 11 million barrels per day (bpd) to satisfy its 15 million bpd consumption (about 15% of total global demand). In other words, crude imports amount to almost three-quarter of its needs. At $80 oil, this totals $880 million per day or approximately $320 billion per year. Imagine what China’s trade surplus would look like without its oil import bill!
Ironically, given the current hostility between the world’s superpowers, China has an affinity for US oil because of its light and easy-to-refine nature. China’s refineries tend to be low-grade and unable to efficiently process heavier grades of crude, unlike the US refining complex which is highly sophisticated and prefers heavy oil such as from Canada and Venezuela—back when the latter actually produced oil.
Thus, China favors EVs because they can be de facto coal-powered, lessening its dangerous reliance on imported oil. It also likes them due to the fact it controls 80% of the lithium ion battery supply and 60% of the planet’s rare earth minerals, both of which are essential to power EVs.
However, even for China, mining enough lithium, cobalt, nickel, copper, aluminum and the other essential minerals/metals to meet the ambitious goals of largely electrifying new vehicle volumes is going to be extremely daunting. This is in addition to mass construction of wind farms and enormously expanded solar panel manufacturing.
As one of the planet’s leading energy authorities Daniel Yergin writes: “With the move to electric cars, demand for critical minerals will skyrocket (lithium up 4300%, cobalt and nickel up 2500%), with an electric vehicle using 6 times more minerals than a conventional car and a wind turbine using 9 times more minerals than a gas-fueled power plant. The resources needed for the ‘mineral-intensive energy system’ of the future are also highly concentrated in relatively few countries. Whereas the top 3 oil producers in the world are responsible for about 30 percent of total liquids production, the top 3 lithium producers control more than 80% of supply. China controls 60% of rare earths output needed for wind towers; the Democratic Republic of the Congo, 70% of the cobalt required for EV batteries.”
As many have noted, the environmental impact of immensely ramping up the mining of these materials is undoubtedly going to be severe. Michael Shellenberger, a life-long environmental activist, has been particularly vociferous in his condemnation of the dominant view that only renewables can solve the global energy needs. He’s especially critical of how his fellow environmentalists resorted to repetitive deception, in his view, to undercut nuclear power in past decades. By leaving nuke energy out of the solution set, he foresees a disastrous impact on the planet due to the massive scale (he’d opine, impossibly massive) of resource mining that needs to occur. (His book, “Apocalypse Never”, is also one I highly recommend; like Dr. Koonin, he hails from the left end of the political spectrum.)
Putting aside the environmental ravages of developing rare earth minerals, when you have such high and rapidly rising demand colliding with limited supply, prices are likely to go vertical. This will be another inflationary “forcing”, a favorite term of climate scientists, caused by the Great Green Energy Transition.
Moreover, EVs are very semiconductor intensive. With semis already in seriously short supply, this is going to make a gnarly situation even gnarlier. It’s logical to expect that there will be recurring shortages of chips over the next decade for this reason alone (not to mention the acute need for semis as the “internet of things” moves into primetime).
In several of the newsletters I’ve written in recent years, I’ve pointed out the present vulnerability of the US electric grid. Yet, it will be essential not just to keep it from breaking down under its current load; it must be drastically enhanced, a Herculean task. For one thing, it is excruciatingly hard to install new power lines. As J.P. Morgan’s Michael Cembalest has written: “Grid expansion can be a hornet’s nest of cost, complexity and NIMBYism*, particularly in the US.” The grid’s frailty, even under today’s demands (i.e., much less than what lies ahead as millions of EVs plug into it) is particularly obvious in California. However, severe winter weather in 2021 exposed the grid weakness even in energy-rich Texas, which also has a generally welcoming attitude toward infrastructure upgrading and expansion.
Yet it’s the Golden State, home to 40 million Americans and the fifth largest economy in the world, if it was its own country (which it occasionally acts like it wants to be), that is leading the charge to EVs and seeking to eliminate internal combustion engines (ICEs) as quickly as possible. Even now, blackouts and brownouts are becoming increasingly common. Seemingly convinced it must be a role model for the planet, it’s trying desperately to reduce its emissions, which are less than 1%, of the global total, at the expense of rendering its energy system more similar to a developing country. In addition to very high electricity costs per kilowatt hour (its mild climate helps offset those), it also has gasoline prices that are 77% above the national average.
*NIMBY stands for Not In My Back Yard.
While California has been a magnet for millions seeking a better life for 150 years, the cost of living is turning the tide the other way. Unreliable and increasingly expensive energy is likely to intensify that trend. Combined with home prices that are more than double the US median–$800,000!–California is no longer the land of milk and honey, unless, to slightly paraphrase Woody Guthrie about LA, even back in the 1940s, you’ve got a whole lot of scratch. More and more people, seem to be scratching California off their list of livable venues.
Voters in the reliably blue state of California may become extremely restive, particularly as they look to Asia and see new coal plants being built at a fever pitch. The data will become clear that as America keeps decarbonizing–as it has done for 30 years mostly due to the displacement of coal by gas in the US electrical system—Asia will continue to go the other way. (By the way, electricity represents the largest share of CO2 emission at roughly 25%.)
California has always seemed to lead social trends in this country, as it is doing again with its green energy transition. The objective is noble though, extremely ambitious, especially the timeline. As it brings its power paradigm to the rest of America, especially its frail grid, it will be interesting to see how voters react in other states as the cost of power leaps higher and its dependability heads lower. It’s reasonable to speculate we may be on the verge of witnessing the Californication of the US energy system.
Lest you think I’m being hyperbolic, please be aware the IEA (International Energy Agency) has estimated it will cost the planet $5 trillion per year to achieve Net Zero emissions. This is compared to global GDP of roughly $85 trillion. According to BloombergNEF, the price tag over 30 years, could be as high as $173 trillion. Frankly, based on the history of gigantic cost overruns on most government-sponsored major infrastructure projects, I’m inclined to take the over—way over—on these estimates.
Moreover, energy consulting firm T2 and Associates, has guesstimated electrifying just the US to the extent necessary to eliminate the direct consumption of fuel (i.e., gasoline, natural gas, coal, etc.) would cost between $18 trillion and $29 trillion. Again, taking into account how these ambitious efforts have played out in the past, I suspect $29 trillion is light. Regardless, even $18 trillion is a stunner, despite the reality we have all gotten numb to numbers with trillions attached to them. For perspective, the total, already terrifying, level of US federal debt is $28 trillion.
Regardless, as noted last week, the probabilities of the Great Green Energy Transition happening are extremely high. Relatedly, I believe the likelihood of the Great Greenflation is right up there with them.
As Gavekal’s Didier Darcet wrote in mid-August: ““Nowadays, and this is a great first in history, governments will commit considerable financial resources they do not have in the extraction of very weakly concentrated energy.” ( i.e., less efficient) “The bet is very risky, and if it fails, what next? The modern economy would not withstand expensive energy, or worse, lack of energy.”
While I agree this an historical first, it’s definitely not great (with apologies for all the “greats”). This is particularly not great for keeping inflation subdued, as well as for attempting to break out of the growth quagmire the Western world has been in for the last two decades. What we are seeing in Europe right now is an extremely cautionary case study in just how disastrous the war on fossil fuels can be (shortly we will see who or what has been a behind-the-scenes participant in this conflict).
Essentially, I believe, as I’ve written in past EVAs, we are entering the third energy crisis of the last 50 years. If I’m right, it will be characterized by recurring bouts of triple-digit oil prices in the years to come. Along with Richard Nixon taking the US off the gold standard in 1971, the high inflation of the 1970s was caused by the first two energy crises (the 1973 Arab Oil Embargo and the 1979 Iranian Revolution). If I’m correct about this being the third, it’s coming at a most inopportune time with the US in hyper-MMT* mode.
Frankly, I believe many in the corridors of power would like to see oil trade into the $100s, and natural gas into the teens, as it will help catalyze the shift to renewable energy. But consumers are likely to have a much different reaction—potentially, a violently different reaction, as I noted last week.
The experience of the Yellow Vest protests in France (referring to the color of the vest protestors wore), are instructive in this regard. France is a generally left-leaning country. Despite that, a proposed fuel surtax in November 2018 to fund a renewable energy transition triggered such widespread civil unrest that French president Emmanuel Macron rescinded it the following month.
*MMT stands for Modern Monetary Theory. It holds that a government, like the US, which issues debt in its own currency can spend without concern about budgetary constraints. If there are not enough buyers of its bonds at acceptable interest rates, that nation’s central bank (the Fed, in our case) simply acquires them with money it creates from its digital printing press. This is what is happening today in the US. Many economists consider this highly inflationary.
The sharp and politically uncomfortable rise in US gas pump prices this summer caused the Biden administration to plead with OPEC to lift its volume quotas. The ironic implication of that exhortation was glaringly obvious, as was the inefficiency and pollution consequences of shipping oil thousands of miles across the Atlantic. (Oil tankers are a significant source of emissions.) This is as opposed to utilizing domestic oil output, as well as crude from Canada (which is actually generally better suited to the US refining complex). Beyond the pollution aspect, imported oil obviously worsens America’s massive trade deficit (which would be far more massive without the six million barrels per day of domestic oil volumes that the shale revolution has provided) and costs our nation high-paying jobs.
Further, one of my other big fears is that the West is engaging in unilateral energy disarmament. Russia and China are likely the major beneficiaries of this dangerous scenario. Per my earlier comment about a stealth combatant in the war on fossil fuels, it may surprise you that a past NATO Secretary General* has accused Russian intelligence of avidly supporting the anti-fracking movements in Western Europe. Russian TV has railed against fracking for years, even comparing it to pedophilia (certainly, a most bizarre analogy!).
The success of the anti-fracking movement on the Continent has essentially prevented a European version of America’s shale miracles (the UK has the potential to be a major shale gas producer). Consequently, the European Union’s domestic natural gas production has been in a rapid decline phase for years.
Banning fracking has, of course, made Europe heavily reliant on Russian gas shipments with more than 40% of its supplies coming from Russia. This is in graphic contrast to the shale output boom in the US that has not only made us natural gas self-sufficient but also an export powerhouse of liquified natural gas (LNG).
In 2011, the Nord Stream system of pipelines running under the Baltic Sea from northern Russia began delivering gas west from northern Russia to the German coastal city of Greifswald. For years, the Russians sought to build a parallel system with the inventive name of Nord Stream 2. The US government opposed its approval on security grounds but the Biden administration has dropped its opposition. It now appears Nord Stream 2 will happen, leaving Europe even more exposed to Russian coercion.
Is it possible the Russian government and the Chinese Communist Party have been secretly and aggressively supporting the anti-fossil fuel movements in America? In my mind, it seems not only possible but probable. In fact, I believe it is naïve not to come that conclusion. After all, wouldn’t it be in both of their geopolitical interests to see the US once again caught in a cycle of debilitating inflation, ensnared by the twin traps of MMT and the third energy crisis?
*Per former NATO Secretary General, Anders Fogh Rasumssen: Russia has “engaged actively with so-called non-governmental organizations—environmental organizations working against shale gas—to maintain Europe’s dependence on imported Russian gas”.
Along these lines, I was shocked to listen to a recent podcast by the New Yorker magazine on the topic of “intelligent sabotage”. This segment was an interview between the magazine’s David Remnick and a Swedish professor, Adreas Malm. Mr. Malm is the author of a new book with the literally explosive title “How To Blow Up A Pipeline”. Just as it sounds, he advocates detonating pipelines to inhibit fossil fuel distribution.
Mr. Remnick was clearly sympathetic to his guest but he did ask him about the impact on the poor of driving energy prices up drastically which would be the obvious ramification if his sabotage recommendations were widely followed. Mr. Malm’s reaction was a verbal shrug of the shoulders and words to the effect that this was the price to pay to save the planet.
Frankly, I am appalled that the venerable New Yorker would provide a platform for such a radical and unlawful suggestion. In an era when people are de-platformed for often innocuous comments, it’s incredible to me this was posted and has not been pulled down. In my mind, this reflects just how tolerant the media is of attacks on the fossil fuel industry, regardless of the deleterious impact on consumers and the global economy.
Surely, there is a far better way of coping with the harmful aspects of fossil fuel-based energy than this scorched earth (literally, in the case of Mr. Malm) approach, which includes efforts to block new pipelines, shut existing ones, and severely restrict US energy production. In America’s case, the result will be forcing us to unnecessarily and increasingly rely on overseas imports. (For example, per the Wall Street Journal, drilling permits on federal land have crashed to 171 in August from 671 in April. Further, the contentious $3.5 trillion “infrastructure” plan would raise royalties and fees high enough on US energy producers that it would render them globally uncompetitive.)
Such actions would only aggravate what is already a severe energy shock, one that may be worse than the 1970s twin energy crises. America has it easy compared to Europe, though, given current US policy trends, we might be in their same heavily listing energy boat soon.
Solutions include fast-tracking small modular nuclear plants; encouraging the further switch from burning coal to natural gas (a trend that is, unfortunately, going the other way now, as noted above); utilizing and enhancing carbon and methane capture at the point of emission (including improving tail pipe effluent-reduction technology); enhancing pipeline integrity to inhibit methane leaks; among many other mitigation techniques that recognize the reality the global economy will be reliant on fossil fuels for many years, if not decades, to come.
If the climate change movement fails to recognize the essential nature of fossil fuels, it will almost certainly trigger a backlash that will undermine the positive change it is trying to bring about. This is similar to what it did via its relentless assault on nuclear power which produced a frenzy of coal plant construction in the 1980s and 1990s. On this point, it’s interesting to see how quickly Europe is re-embracing coal power to alleviate the energy poverty and rationing occurring over there right now – even before winter sets in. When the choice is between supporting climate change initiatives on one hand and being able to heat your home and provide for your family on the other, is there really any doubt about which option the majority of voters will select?
Tyler Durden
Tue, 10/26/2021 – 19:30 -
- Israel Holds Largest-Ever Military Drill With Participation Of An Arab Gulf Nation
Israel Holds Largest-Ever Military Drill With Participation Of An Arab Gulf Nation
For the first time in history, Israel and the United Arab Emirates (UAE) are conducting joint military drills this week which includes air force exercises, following the Abraham Accords Peace Agreement between the two countries brokered by the Trump administration in September 2020.
Before the signing of the historic peace deal at the Trump White House, no Arab Gulf country had so much as diplomatic relations with Israel, but now an influential Gulf state within the GCC alliance is engaged in military exercises with the Jewish state.
Image source: IDF The “Blue Flag” drills are being held over southern Israel’s Ovda airbase, which is in the Negev Desert about 60km north of Eilat and also include multiple other countries, namely the United States, United Kingdom, France, and Germany.
Some 70 fighter jets and 1,500 military personnel will participate in what the chief of Israeli air force operations Amir Lazar is calling the largest-ever international aerial drills held in Israel.
Crucially it comes after weeks of Israeli leaders confirming that the country’s military and intelligence have resumed “practicing” for war against Iran. Israeli media last week described “intense” drills aimed at conducting strikes on the Islamic Republic’s nuclear facilities.
However, given the participation of UAE and European allies, Israel has been quick to deny that this week’s exercises in the Negev are focused on Iran:
Amir Lazar, chief of Israeli air force operations, told reporters at the southern Ovda airbase the drills “don’t focus on Iran”, but army officials have said Iran remains Israel’s top strategic threat and at the center of much of its military planning.
The defense chief added this important caveat:
Lazar said the visit, set for Tuesday, was “very significant” as “someday” the nations participating in the drill would be “working together” to counter the Iranian threat.
Indeed the Saudi-UAE-Kuwait Gulf alliance has long quietly cooperated with Israel on intelligence operations especially connected with the decade-long war in Syria, where Assad was seen as a central power in the so-called Iran axis which includes Hezbollah.
Yet more recently the Iranians and Saudis have held surprisingly positive talks in efforts at defusing proxy wars in places like Yemen, Iraq, and Syria.
Tyler Durden
Tue, 10/26/2021 – 19:10
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