Global Oil Supply Increases in July

I Just Can't See It

Help me out here. I keep reading scary sounding stuff like this in the NYT:

In an ominous echo of 2008, European bank stocks on Wednesday fell 10 percent or more — and banks in Europe are beginning to hoard cash, crimping the interbank loans that keep the global financial system operating smoothly. While borrowing costs for banks in the United States and Britain have crept up only slightly recently, borrowing costs for Continental banks that lend to one another have doubled since the end of July.

More optimistic market watchers point out that these rates are still well below those at the height of the financial crisis. But they nonetheless are the highest since the spring of 2009.

Because European banks trade billions of dollars daily with their American counterparts, fears of contagion have spread.

The actual Euribor interbank loan rate data are here:

As you can see - rates are not back to the heady levels of 2004-2005, never mind 2008-2009.  And they've dropped in the last few days.  I just am unable to look at this data and summon any fear of an imminent problem*. So is this just a case that the NYT reporter is not numerate enough to actually look at the graph before writing about the subject?  Or am I missing something?

* Not to say there couldn't be a major problem down the road - the ECB has calmed the Italian/Spanish bond markets for the moment, but it's critical that that calm holds.

Oil/Gas Prices

Banking Stress Indicators Still All Green

Euro Area Industrial Production

Euro Area Retail Trade Stats

Economic Crisis Humor

If you haven't seen this, it's hilarious.

Congress Defunds Flying Pig Research

Robin Harding in the FT echoes my thoughts, only he says it much better:

As the economy grows each year the caps are supposed to stop Congress from increasing spending in line with it. Two-thirds of the planned savings are supposed to happen between 2017 and 2021; only a third is scheduled for the next five years.

That is implausible for two reasons. First, it assumes that future Congresses will abide by today’s promise to limit their spending and that representatives elected in 2016, 2018 and 2020 will happily slice ever deeper into the federal budget to fulfil it.

Second, because the deficit cuts build over time, by 2021 federal discretionary spending is supposed to fall to 5.4 per cent of gross domestic product. Pigs may also fly – but not if the research project to give them wings has to be funded from a federal budget of that size. Since 1971, with little variation depending on which party held power, discretionary spending has averaged 8.7 per cent of GDP.

The lowest level federal spending has hit in the past four decades was 6.2 per cent of output in 1999, as a decade-long economic boom headed towards its dotcom apogee and the peace dividend from cold war victory paid out in full.

Morning Tealeaf Reading

Reading the state of the global economy is only getting harder.  However, here's my read this morning (subject to change without notice):

• I think that the US economy is likely to improve a bit in the second half (absent new and unforeseen shocks).  I think the slowdown in the last few month's data was primarily a function of the high energy prices in the spring.  Those in turn were caused by turmoil in the Arab world and actual loss of Libyan production.  I expect global oil production will resume growing now (perhaps slowly and fitfully) at least for a bit.
• I think the Republican ploy over the debt limit has probably caused a significant hit to confidence and aggregate demand in July/August.  However, people will forget after a short while.  The actual agreement seems to be only very mildly contractionary in the near term and in the medium and long term it is all subject to renegotiation anyway.  There's probably some lasting damage to investor confidence that might cause some relative shifts in the prices of different asset classes but not have a big impact on the real economy.
• The US fiscal picture continues to be very unsustainable in the medium term, but I don't think we are close enough to the edge of the precipice for it to cause serious economic damage this year or next.
• Large US banks seem broadly sound.
• In the absence of specific reasons to contract, the economy will tend to revert to its natural tendency given enough resources - to grow.  I would be surprised to see an out-and-out recession in the US now.
• However, I think the US recovery will continue to be basically jobless as companies continue to invest in more technology as a substitute for hiring.  I don't expect to see much if any improvement in the employment/population ratios.  I don't expect the highly polarized political system to be able to come up with anything that has any impact on this.
• Europe still seems to be in a world of trouble to me.  Now that Spain and Italy have lost bond market confidence to the degree that they have, I don't see how this can get better without getting a lot worse first.  It's going to take heroic efforts to avoid a complete break-up of the Eurozone, and the current political leadership has certainly not shown any sign of the necessary courage and ability - at every stage, they've shown an uncanny knack for doing too little, too late.  It's hard to see how the worsening crisis doesn't eventually lead to an outright Eurozone recession.
• The implications for the rest of the world are complex, however.  A loss of European demand will tend to be a drag on other economies.  On the other hand, in a resource constrained world it may tend to moderate resource prices (particularly oil) and in turn allow a little more room for everyone else to grow before triggering the next energy price shock.

Your thoughts welcome in comments...

German Exports

Italian bond yields are flashing red again. In thinking about the long term future of the Eurozone, much obviously depends on the willingness of Germany to accept changes in the structure of the Euro such that the situation will work better for other countries than it does at present. Accordingly, it's helpful to think about where Germany's actual interests lie.

Clearly, as a major exporter, its interests are strongly bound up with who is buying its exports and what they are buying.  I found some statistics on this at the United Nations International Merchandise Trade Statistics website.  Firstly, here is what Germany is mainly exporting:

Little More on the Debt Limit

NYT:

Officials have said repeatedly that Treasury does not have the legal authority to pay bills based on political, moral or economic considerations. It cannot, for instance, set aside invoices from weapons companies to preserve money for children’s programs.

The implication is that the government will need to pay bills in the order that they come due. President Obama has warned as a result that the government “cannot guarantee” payments of Social Security benefits or other popular programs. Officials also have disputed the assertion of some Republicans that the government could prioritize interest payments.

That doesn't sound good...

Fed and the Debt Limit

Very interesting piece in the FT:

Wall Street bankers, from senior executives to traders, are complaining that the Federal Reserve is refusing to engage in scenario planning for a US downgrade or default.

With days until the Treasury’s August 2 deadline to raise the debt ceiling, bankers say they are not getting a response to efforts to discuss the market impact of a failure to reach a deal in Washington or if credit ratings agencies cut the US triple A rating.

Autos in the US Economy

Automation or Offshoring? Evidence from General Motors

Oil: Up or Down?

Steve Levine has an interesting blog post pointing out the financial market actors are increasingly betting that the price of oil will rise:

Oil traders are betting as a herd that they are on the cusp of potentially their most profitable period since the Libyan uprising stoked fears of Saudi Arabian oil being lost to the market. Hedge funds, among the biggest players in oil futures, are leading this charge, according to the U.S. Commodity Futures Trading Commission, which tracks such data. They have upped their bets on a serious rise in oil prices three weeks in a row -- the first time that has happened since late February-early March, Reuters reports.

The reasoning?

Interesting Blog on the Constitutional Option

I was sitting on the patio of my local country market this morning with my son and our puppy. We got chatting with a nice guy on a bike and he turned out to be Michael C. Dorf, a Constitutional Law Professor at Cornell. It transpired that he has a blog Dorf On Law and that he's been hosting a fascinating debate amongst eminent constitutional lawyers on the options that the President has should Congress fail to raise the debt limit.

I highly recommend reading it since it currently appears to me that there's a fair chance Congress will fail to agree.  House Republicans seem to be completely intransigent and unwilling to compromise.  Democrats are much more willing to compromise, but if they capitulate completely on this issue, they are going to find themselves having to capitulate on lots of other things too - Republicans will draw the lesson that they can get everything they want by threatening to blow up the government altogether.  So Democrats probably should not accede to Republican demands entirely, and the tenor of the news coverage at the moment suggests that they won't.

Latest European Bond Spreads

Energy in the Industrial Revolution

IEA Calls Halt to SPR Releases

According to the FT:

The International Energy Agency has decided not to repeat a highly unusual decision to draw on strategic oil reserves, while defending the original release as successfully meeting a “market need”.

The western countries’ oil watchdog made 60m barrels available for 30 days after June 23, saying this would cover the loss of Libyan output before other Opec members could raise their production.

This use of reserves for only the third time in the IEA’s 37-year history had achieved its goal, said the organisation’s secretariat on Thursday. “The action served a market need by adding liquidity and bridging the gap to additional supplies from Opec countries,” read a statement.

That didn't last long...

Quality of Political Leadership

The debate over raising the debt limit in the United States has been interesting to me, because two thinkers who I have a great deal of respect for took diametrically opposed viewpoints.  On the one hand, Calculated Risk has been adamant that it was all a bunch of political theater and the debt ceiling would be raised in time.

Congress will probably push this to the brink, but they will raise the debt ceiling before the country defaults. The first rule for most politicians is to get re-elected, and the easiest way to guarantee losing in 2012 is to throw the country back into recession. If that happened, I believe the voters would correctly blame the leaders of Congress, and I think Congress knows that too. Therefore it won't happen. I'm not worried and neither are investors.

On the other hand, Bruce Bartlett has been warning for months that, no, in fact the Republican congress was quite capable of failing to raise the debt limit:

It's never happened before. And I think many people in financial markets, and perhaps even in Washington, just assume away the possibility. They cannot conceive of the insanity of allowing the debt to default. But what I keep trying to explain to people is that these Tea Party people really are that crazy. And I'm just trying to get people to believe me.

European Interest Rates

International Oil Efficiency vs Gas Prices

US Survival Statistics

Taking "Singularity" Apart

The term "singularity" as applied to the medium-term future of technology/humanity bundles together a variety of predictions for purposes that suit advocates of continued technological development, but don't necessarily have to occur together.  In this post, I want to briefly point out the different pieces, and comment on the strength of the connections.  For readers wanting some more background on the concept, the Wiki article is a good place to start.

Global Oil Supply up in June

Saudi Oil Production Up 450kbd in June

Hmmm

New research effort:

Last month President Obama traveled to Carnegie Mellon University in Pittsburgh to unveil a $500 million effort to create advanced robotic technologies needed to help bring manufacturing back to the United States. But lower-cost computer-controlled mechanical arms and hands are only the first step.

So we're hoping to replace Chinese peasants with robots in factories here.  This is going to help unemployed Americans how?

US Oil Consumption

US 10 Year Treasury Note Interest Rates

Chinese Inflation

Employment Population Ratios by Gender

Brazilian Oil Production

Update on North Sea Oil Production

Latest Saudi Oil Stats

Morning Singularity Watch

Peak Oil is not Synchronous

Do Energy/Environment Blogs get read in Government?

Apparently so. From one of the internal EIA email exchanges released by the NYT in association with the Urbina shale gas articles (p33 of here):

Question about the New York Times

There's another couple of pieces by Ian Urbina in the New York Times.  This is the guy last seen noting that there's a lot of radioactivity in some of the wastewater from shale gas drilling/fracking.  The new pieces report on a lot of internal skepticism at energy companies and regulators, respectively, about the economics of shale gas:

But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.

In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.

“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”

“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.

Government Controlled Oil Stocks

Oil Prices

Spain and Italy

Some musings on Europe

Latest Iraqi Oil Production Stats

European Bank Leverage

May Global Oil Supply and the Libyan Mini Shock

Life Expectancy Declines and Peak Oil Stress?

Japanese Inflation

Data from the IMF.  The aftermath of a big speculative bubble can really last a very long time...

Wind and Solar Global Stats

Saudi Arabia to Produce 10mbd in July?

At the end of April, I noted this WSJ quote:

Saudi Oil Minister Ali Al-Naimi said Sunday that oil production from the kingdom was 8.292 million barrels per day in March, down about 800,000 barrels a day from 9.125 million barrels per day in February. Most estimates, including the monthly report of OPEC—which relies on external databases—had seen a rising or stable production at about nine million barrels a day in March.

Ok. So here we have the Wall St Journal - premier business newspaper in the world - quoting the Oil Minister of Saudi Arabia, as to the level of Saudi oil production.  With three decimal places, four significant figures, no less.

You ought to be able to rely on that, right?  Mr al-Naimi must know how much oil his fully nationalized oil industry produces.  And the Wall St Journal surely wouldn't make an error in reporting his words.  And even if you didn't believe the Murdoch-owned conservative WSJ, you have the left-leaning SF Chronicle reporting the same thing.  And clearly, if they are giving three decimal places, it's not some off-the-cuff remark.  He must have spoken with some precision from notes, or given a printed handout or the like, to mention both months with four significant figures each.  So it must be true, right?

OPEC MOMR Screws up Supply Graph

The OPEC MOMR is out today.  Usually I comment on the latest global oil supply numbers.  In this case, there seems to be some error and I can't work out what is going on.  They say:

but the graph looks like this:

Note that a) it ends in April, not May, and b) the green line is above 87, in contrast to the text saying that May was 86.77, and therefore April must have been 86.63mb/d.

Guess we got a little rushed there at the end?

Anyway, most likely supply was fairly flat in May.  The IEA will have their numbers next Thursday, so hopefully that will clarify matters.

Global Solar Capacity Grew 73% in 2010

Global Energy Efficiency Declined in 2010

Chinese vs US Vehicle Fleets

Chinese Expressways vs US Interstates

The above graph compares the size of the US Interstate highway system (according to FHWA Table HM 220), with the Chinese Expressway system (according to the Chinese National Bureau of Statistics Table 16-4).  Both series currently run through 2009.  The notional extrapolation shown as the thin pink line suggests that the Chinese system will exceed the length of the US system sometime this year.  We won't know for sure until 2013.

Of all the different ways that China is overtaking the US, this seems like it might be a particularly psychologically significant one to Americans.

The US Crude Production Peak is not Symmetrical

European Unemployment

Eurozone Oil Consumption

Tight versus Loose Cultures

More on Oil Import/Export statistics

Global Oil Exports/Imports

Global Shipping Capacity

Global Trade Has Recovered From the Great Recession

US Manufacturing Employment