Soaring Fuel Prices Hit Americans Hard

Guest Post:
By Nick Barile

If you’ve glanced at the big numbers on top of the gasoline pump recently, you’ve undoubtedly noticed the slow, dreadful escalation of fuel prices.  The majority of Americans are now paying close to $4.00 per gallon of gasoline, which has threatened the economic recovery and pushed many families closer to the brink. Why? Because, like it or not, our world runs on sweet crude oil.

Everything you buy, eat, or interact with is in existence because of oil. Your groceries, your school commute, your laptop- even this article that you’re reading right now- all have a relationship with oil that’s not going to end well. It’s important to understand why fuel prices are so high, and what you- and our country- should do to combat them.

Oil, natural gas, and other commodities’ prices reflect the speculation of investors based on the current environment. Almost all consumables are based on the centuries-old theory of supply and demand. If America is on the road-trip to recovery, then she’s going to have to fill the tank more than sitting idly in the depths of the Recession.

It seems that along with our own economic expansion, we have witnessed a dramatic uptick in the world’s consumption of oil. China and India have been rapidly expanding economically, and population growth has resulted in more vehicles being on the road than ever before.

The instability of the Middle East has also been the culprit for the theft of more American dollars. Revolutions of the Arab Spring have caused fear of a supply disruption, which would bring back the gas shortages of the 1970’s. Even more so, the United States’ increasingly hawkish foreign policy with Iran has led investors to become wary of yet another war fought within sight of oil wells, further causing fear of a drop in supply.

But our government isn’t doing that well in easing tensions. Our continued presence in the Middle East has led to many outbreaks of violence, stressing any political stability to be had. And the Obama Administration’s belligerence towards Iran has caused many near-panics for speculators, as Iran has retaliated with threats to stem the flow of oil out of the Middle East.

Our current policy is the equivalent of throwing water on a grease fire. It may seem the correct thing to do, but in reality, all it does is further spread the flames and result in more problems. If the United States wants to truly prevent political instability, then the government needs to dramatically re-think the interventionist foreign policy it has maintained for the past decade.

Even so, there are countless things to be done at home in order to hopefully quell gas prices’ jumpiness.  The first is a relatively obvious answer: more domestic production. Few will deny the risks of oil exploration. There have been catastrophes, no doubt, but we are on the verge of an economic one if Americans see gas prices upwards of $5 a gallon (not a far-fetched thought at all, as gas prices in Europe hover around $9 per gallon).

Although many advocate higher efficiency standards, it’s important to consider the feasibility of such requirements. The Chevrolet Volt, for instance, a poster-boy for President’s push for alternative energy, has been a spectacular marketing failure because of its price and ROI factor.

Consumers will simply not pay ridiculous sums of money for a car just to lower annual gasoline bills- that would take 27 years to recoup the investment. Even though Europe is a horrible example to follow in terms of production, they have been able to raise their efficiency by using two things: diesel fuel and small scooters/”Vespas”.

Diesel provides for much better fuel economy than its counterpart (capable of hitting near 50 MPG on the highway), and most gas-powered mopeds/scooters can achieve near 100 miles to the gallon. If America were to adapt itself to these things, gas consumption would fall dramatically than our current plans of driving 8 cylinder SUVs to work.

 


While we generally agree with Nick’s pov, we here at DataAnalytics

disagree with a few key points the author made.

Demand for gasoline the U.S. is at a 17 year low, while Europe is at a
decade low. Which more than off-sets the increases in China and India.

Also, the False Inflection points that are utilized by the traders are convenient ‘triggers’ that enable them to raise the prices without any accountability or real proof. The Iranian ‘issues’ were all media and government created, in order to allow the street to drive the prices up during that supposed ‘tense’ period.

Middle-East tensions with regard to oil supply has been something the
market has had to deal with for about 40 years, this is not something new.
But because the media and the government made so much noise about it,
it in turn gave the green-light to speculators, to panic investors and drive
up the Nymex/Cushing contract prices under false pretenses.

DataAnalytics findings reveal that Speculation accounts for approximately (+/-)28% of the price of a barrel of Brent Crude. NOT the 15% the St. Louis Fed came up with. Kevin G. Hall, of McClatchy states, “Oil and gas prices were soaring thanks again in no small part to rampant financial speculation on top of (exaggerated) fears of supply disruptions.”

Hall’s March report highlights the fact that despite rising prices at U.S. gas pumps, demand in the U.S. was so low it has “become a net exporter of gasoline, unable to consume all that it generates.”

We also believe that Europe is not a ‘horrible’ example of production, as
Europe’s GDP is not much different than the U.S.’s over the past4 years.
We also would really like to see the U.S. government and State governments seriously adapt alternative transportation methods, such as bicycles and scooters much more widely than it is. Our roads and highways are in general, not bicycle/scooter friendly at all. Especially on the east and west metro coast areas.

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The (In) Complete Postal Package

By DataAnalytics
Updated 4/26

“The Senate offered a lifeline to the nearly bankrupt U.S. Postal Service
on Wednesday, voting to give the struggling agency an $11 billion cash
infusion while delaying controversial decisions on closing post offices
and ending Saturday delivery.”

Now, you can add another dead-beat, inefficient entity to the ledger of
irresponsible, incompetent organizations surviving on the government’s
(READ: Tax Payer) dole. In fact, ELEVEN BILLION DOLLARS WORTH…
Latest figures show the post office is 12 BILLION dollars in debt with a now
projected debt of 21 BILLION– not 18 Billion by 2016.

__________________________________________________________

Neither snow, sleet or rain can usually stop postal carriers from
delivering the U.S. mail, but critical financial difficulties certainly could.

Now staring straight down the barrel of a projected 18.2 BILLION
dollar loss, the United States Postal Service is seeking approval
to increase the price of a first-class stamp to $0.50 cents, up from
the current $0.45, to try and stave off the inevitable bail out.

Suffering from internal inorganization and fairly inefficient operational
methods with some very antiquated and restrictive governmental
regulations, first-class mail volume has fallen 20% since its peak in
2006 along with a 22% decline in overall mail handling volume since 2007.

usps financial chart

usps financial chart

A key measure shown in the chart above, is the total expense column.
As revenues fell expenses significantly increased, which only serves
to highlight the ongoing inefficiencies within the postal service.
Particularly alarming are the large jumps in the expenses to revenues
from 2009 to 2011.

E-R Spread

E-R Spread

Revenue to Expense mean loss 2006-2011:

  • -$4.28 billion

Aggregate revenue loss 2006-2011:

  • -$5.1 billion

Year-over-Year mean debt 2006-2011:

  • -$2.42 billion

Increase of debt 2006-2011:

  • 83%

While these deficiencies certainly contribute to the continual losses,
it is also partly due from not adapting very well to the more recent
electronic and techno media revolution. The resulting drop off in usage
from 2009-2008 had netted a minus $7 billion dollar drop in revenue.

bill-payment graph

bill-payment graph

Couple these inefficiencies with over paid management, often
problematic unions and so forth and one can see why the post office
is one of the more mismanaged quasi-governmental agencies in the U.S.
It is public knowledge that the postal service has been running huge
deficits for many years now and its viability is in serious question.

In addition to the stamp rate hike, the USPS will be taking further steps
to reduce the massive short-fall of income. This would include cutting
approximately 150k jobs, ending Saturday service and closing up
to 3,500 facilities.

The suggestion of a fully privatized postal system has been brought up
more than ever over the past few years and now in more recent months
and rightly so. But question remains, will the price hikes and cuts be
effective enough to ensure the longevity and sustainability of the postal
service as it exists, without tax-payer intervention…

Well, when I originally published this back in February, I was thinking
that perhaps the debacle that the USPS is, would be able to hold off on
bleeding the tax payer for money.

But two months later, the said  Tax-Payer intervention comes to fruition.
My question is; when will the next bail-out occur and how much more tax payer
money will the postal service steal from the tax paying public?

15 BILLION? 20 BILLION? Does it even matter anymore?

After all, B-B-B- Benny and the Fed will just “Print” up some more of our
Fiat currency to sustain any and all that the government deems necessary.
Never mind that your grandchildren will be on the hook for the insurmountable
debt obligations, for generations to come…

Foreclosures, Delinquencies and the Illusion of a Housing Recovery

DataAnalytics

While mortgage delinquency rates are showing signs of easing, residential foreclosures
are once again, on the rise. A  data-point worth noting, is that delinquencies did inch upward
from 7.2% in January to 7.3% in February. That key metric is certainly something to keep an eye on.

According to LPS and RealtyTrac, approximately 2.7+ million residential properties are
in some form of loan delinquency and as of February, approximately 800+ thousand
homes have been repossessed.  RealtyTrac CEO Brandon Moore said the “numbers point
to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

So while defaults do seem to be declining, 1-4 family forfeitures are now increasing and
according to leading broker-dealer Amherst Securities, “some 9.5 million homes are
still at risk of default.” much to the chagrin of the real estate industry.

 

 

  • 2.7 Million mortgage delinquencies (30/60/90-day)
  • 1.41 Million distressed assets (approx. 34% of all inventory)
  • 1.6 Million Shadow assets (possibly 3+m in total)
  • 26% +/- of mortgage holders currently ‘underwater’ (negative equity)
  • 5.4+ Million total housing assets (includes claimed shadow assets)
  • 13 -/+ Month Supply of total Housing Inventory

Overall “printed” housing inventory stands at approximately 4+/- million units in the U.S.
(as the industry and its contingent of boosters do not account for or care to acknowledge the
millions in shadow inventory) with 2.43m existing homes, 1.41m distressed assets, approximately 151k new homes and at least 1.6 million of shadow inventory, that is publicly disclosed.

(estimates for total inventory are as high 7+ million units, due to the very real possibility
that
many banks – at the urging of the FHA and the Fed are not disclosing all of their distressed/shadow inventory)

Another data-point in decline, is sales of foreclosed homes, which has fallen approximately 24.3%
in the first two months of 2012 from December 2011 according to LPS. This drop off is more rough news for the already over-supplied inventory of the U.S. housing market.

So while there is a glimmer of positive data with regards to mortgage loan defaults, the pace of  forfeitures are accruing and sales of all homes, existing, new and distressed has been slowing. Unfortunately, this trend will place even further downward pressure on already overall weakened home prices.

Which in turn, has the affect of creating additional negative equity for a portion of existing mortgage holders who are not yet ‘underwater’ but are barley maintaining current mortgage payments.

Thus, increasing the likelihood of additional loan defaults as well as strategic-defaults.
Negating any exaggerated  and so-called “housing recovery.”

Analysis from all of these key metrics and data points, reveal a sobering picture for the residential real estate market. Housing, may in fact not recover for another 5 to possibly 10 years.