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  • Energy Musings, April 28, 2023

    Energy Musings contains articles and analyses dealing with important issues and developments within the energy industry, including historical perspective, with potentially significant implications for executives planning their companies’ future.

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    April 28, 2023

    Bananas, Kumquats, and Today’s Inflation Problem

    Many investors believe inflation is on the run and soon will return to pre-pandemic lows. There is a history of head fakes about inflation that needs to be examined. READ MORE

    Bananas, Kumquats, and Today’s Inflation Problem

    Cornell University economist Alfred Kahn, President Jimmy Carter’s advisor on inflation and chair of the Council on Wage and Price Controls, was famous for talking about recessions and depressions as necessary to win the battle with the raging inflation of the 1970s.  He was chastised for using such scary language – remember we were not far removed from the Great Depression.  Kahn switched to calling them bananas until a banana company took offense and he changed to kumquats.  Who knew what a kumquat was?

    Politicians in Washington hate talking about recessions, let alone depressions.  But if inflation does not retreat to the Federal Reserve’s 2% target rate, people will continue suffering.  The good news: the March Consumer Price Index (CPI) for all items posted an increase of 5.0%, the smallest monthly rise since May 2021.  Energy falling 6.4% helped, with gasoline falling 17.4%, although electricity rose 10.2%.  Fortunately, the latter counts less in the index than the former.

    In the 1970s when the CPI was rising by 15%, Arthur Burns, chair of the Federal Reserve, asked his economists to develop an index that was less politically sensitive.  They came up with Core CPI which strips out the volatile food and energy components.  In March, however, Core CPI increased by 5.6%, largely attributed to an 8.2% increase in housing that represented over 60% of the total increase.  So much for getting rid of the volatile categories.  Compared to expectations, the March CPI was slightly better while Core CPI was slightly worse.  Good news or bad?

    On the bad side, since March 2021, the CPI has increased by 14.0% driven by food prices climbing 18.0% and energy soaring 23.6%.  Without those categories, Core CPI was 12.4% higher – better but not by much.  For consumers, food and fuel claim significant shares of people’s budgets but so do housing, autos, and health care expenses.  Inflation hurts, no matter who you are.

    Despite Main Street’s suffering, Wall Street cheered the CPI report.  Investment managers and CNBC talking heads rejoiced at the lower rate declaring the “end of inflation!”  They called the CPI’s steady decline since peaking at 9.1% last June a victory.  For them, the CPI is heading directly to the Federal Reserve’s 2% inflation target.  The stock market will soar.  Break out the champagne!

    At What Cost?

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  • Energy Musings, November 29, 2022

    Energy Musings contains articles and analyses dealing with important issues and developments within the energy industry, including historical perspective, with potentially significant implications for executives planning their companies’ future. While published every two weeks, events and travel may alter that schedule. I welcome your comments and observations. Allen Brooks

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    November 29, 2022

    Energy Market Outlook Seen By Investors And Analysts

    Observations from RBC energy investor survey and Fed Bank energy conference provide a set of unconventional views of energy markets and their future along with how energy stocks may trade. READ MORE

    Inflation And Interest Rates Continue To Roil Energy Markets

    Investors think inflation has peaked but the real world seems to just begin seeing its impact and higher interest rates are proving a problem. Gavekal Research shows a different perspective. READ MORE

    New England’s Winter May Not Be Fun As It Will Be Costly

    Heating oil and electricity prices have soared with supply shortage fears, so weather will determine how costly winter is. Forecasts suggest a normal winter with periods of severe cold. READ MORE

    Europe’s Energy Wildcards Less Effective Than Anticipated

    Russia oil ban and Europe oil and gas price caps may be less effective than originally thought. Politics have created regulations that hold potential for market chaos and underground options. READ MORE

    Random Energy Topics And Our Thoughts

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  • Energy Musings, November 15, 2022

    Energy Musings contains articles and analyses dealing with important issues and developments within the energy industry, including historical perspective, with potentially significant implications for executives planning their companies’ future. While published every two weeks, events and travel may alter that schedule. I welcome your comments and observations. Allen Brooks

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    November 15, 2022

    Age Of Inflation: More Unseen Challenges For The New Normal

    Despite the CPI easing, we still see more inflation and interest rate problems ahead. READ MORE

    New York Times Climate Skeptic Has Change Of Heart

    He wonders if the pandemic’s arrival is more reflective of possible climate problems. READ MORE

    COP27 Struggles For Relevance In Energy-Challenged World

    In an energy crisis, security of supply is trumping political concern over climate change. READ MORE

    October’s Stock Market Harvest Was Very Good For Energy

    Energy has had an outstanding 2022 and October’s performance was a record. READ MORE

    Random Energy Topics And Our Thoughts

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