american beauty
market vibes
May 13…)
In the news
“US oil ouptput has peaked.” Javier Blas Bloomberg
Mr. Blas writes, “[US shale oil output] has likely peaked, and a decline in production is expected, although it may not be as rapid as in previous downturns. Shale companies are trimming spending, announcing they will reduce the number of drilling rigs and fracking crews they employ.”
He continues, “The US accounts for two in 10 barrels of oil pumped worldwide, so what happens there has an outsized impact.” In my opinion, this has been true in recent years because the oil cartel has been limiting supply by restricting its own. Two in 10 barrels is therefore an arbitrary number. This “two in 10” era is now ending as I type my thoughts this morning.
The amount of known untapped proven oil reserves held by the top 5 producers is 1.1 trillion barrels or about 50 years of consumption at 100 million bpd. Technology is constantly lowering the cost curve to locate, fund, and bring oil to market. The concept of "peak" oil has always been a specious argument that gets trotted out when producers are facing market conditions they don’t like. In the Y2-teens, Permian producers had no problem drilling for $25 oil. Russia has often said $40/barrel is fine if it can sell enough barrels.
There is no such thing as too high or too low in a free auction, which is where Trump is taking us now. There is only demand. An eighth grader has no problem understanding and calculating the x/y axis in a demand chart, but the most sophisticated economic minds can’t seem to tie their own shoes.
What the world needs now is energy abundance to stimulate economic activity to create jobs, thus taxes, kick-starting an era of reconstruction and desperately needed social services for desperately poor millions of people—not weaponry to kill each other and not pedantic, oppressive central bankers parsing inane data and crying about employment being too high.
If oil prices are artificially too high, there will be less consumption of oil. If there is less consumption of energy per se, there will be less economic activity. Oil is the egg before the chicken. It is as essential as government itself. Therefore, its price is like a tax.
In other AI news, there is literally nothing tradable worthy of mention. Xi Jinping is amazing, Trump is awful. Stocks are in a new bull market… etcetera. Nothing about gold. The dollar may hit resistance if it doesn’t. Trade optimism is fading. Welcome to Tuesday!
We have CPI today, artfully crafted by the Bureau of Labor Statistics for its paid-up superusers. The BBG survey anticipates prices rose 0.3% in April.
In the markets
A rather extensive look at RVs and flat prices in gold and oil this morning, plus a reality check on markets and news in the vibe… here we go!
