Our So-Called Foreign Policy: Nothing to See About This Biden-Wall Street-China Connection?

Tags

Biden, Biden administration, BlackRock, China, Donald Trump, globalism, inflation, Obama administration, oil, Our So-Called Foreign Policy, solar panels, State Department, Strategic Petroleum Reserve, tariffs, Thomas E. Donilon, Trade, Wall Street

It’s a good thing that conspiracy theories are never, ever true. Otherwise, several recent developments in U.S.-China relations would rightly alarm anyone hoping that U.S. policy toward the People’s Republic would reflect efforts to further American national interests rather than selfish special interests.

Those dangerously loony conspiracy theorists would probably begin by noting that last month, the State Department announced Secretary Antony J. Blinken’s appointments to a Foreign Affairs Policy Board that since 2011 has “provided independent advice on the conduct of U.S. foreign policy and diplomacy” on issues that today include “strategic competition with the People’s Republic of China.”

The new Board is chaired (as originally reported by The Washington Free Beacon) by Thomas E. Donilon, who the wingnuts would no doubt immediately observe was the White House National Security Advisor during the Obama administration, which compiled a consistent record of coddling China on both the national security and the economic fronts. And as the Free Beacon post makes clear, out office, Donilon had been a leading voice for continuing to coddle China, too. 

They’d surely further point out that he’s sure found lucrative employment in the right place. For Donilon is now Chairman of the BlackRock Investment Institute, an arm of the finance company of the same name that happens to be the world’s largest asset manager. These conspiracy-mongers would likely explain that BlackRock has been one of Wall Street’s most enthusiastic boosters of sending huge amounts of capital from the United States and around the world into China. Indeed, it’s just become “the first foreign-owned company to operate a wholly owned business in China’s mutual fund industry,” in CNBC.com‘s words.

The strategy will of course net immense fees for BlackRock and the other finance giants pursuing it. And we’d probably hear from the loons that BlackRock has touted major benefits for the People’s Republlc other than making available to its dangerous totalitarian government oceans of new resources – specifically by helping China “to address its growing retirement crisis by providing retirement system expertise, products and services.”

Then these paranoiacs would presumably try to bolster their credibility by arguing that even lefty zillionaire George Soros has warned that BlackRock-like operations in China will “damage the national security interests of the U.S. and other democracies.”

More grist for the conspiracy industry’s mills: Yesterday’s report in The Wall Street Journal that the Chinese government “is implementing changes to its rules governing publicly offered securities investment funds” that would “include requiring foreign-owned fund managers such as BlackRock and Fidelity to create Communist Party cells when operating in China.” Along with the failure of Donilon or BlackRock (or Fidelity, where I park most of my family’s financial accounts) to utter a peep of protest. Not to mention the silence of the Biden administration.

And the icing on this cake of delusion? Recent signs of a China policy shift by a Biden administration that had been surprisingly Trump-y on the subject given the President’s long history of supporting pre-Trump globalist policies of indiscriminately expanding trade and investment with China. Like the persistent talk of cutting tariffs on Chinese imports to help fight inflation. Like the suspension of new levies on Chinese solar panel imports that were transshipped through Southeast Asian countries to evade U.S. trade curbs. Like the sale of oil from America’s Strategic Petroleum Reserve to a Chinese entity (Unipec).

But obviously there’s nothing to see here. Because as I said, conspiracy theories are never, ever true.

(What’s Left of) Our Economy: Demonization and Double Standards on Gas Prices

Tags

Biden, demand, Democrats, Elizabeth Warren, energy, gas prices, inflation, oil, oil prices, sanctions, supply, Ukraine-Russia war, Vladimir Putin, {What's Left of) Our Economy

According to the reasoning of President Biden, Massachusetts Senator Elizabeth Warren, and many other Democrats and progressives, Vladimir Putin, or Big Oil, or American gas station owners, or some combination of those three, have been getting nicer or less greedy and/or more patriotic (when speaking of the domestic actors). What’s the evidence? The average price of a gallon of gasoline in Anerica has fallen during this period.

After all, the President and his fellow Democrats have been saying since at least mid-spring March that prices at the pump had been soaring because the Russian dictator’s invasion of Ukraine (and resulting sanctions) has pushed up world oil prices, because the world’s oil companies have been earning “windfall profits,” and because U.S. gas station owners have been (unpatriotically) price-gouging.

Since mid-June, though, as Mr. Biden has just noted, gas prices are down. So the above culprits must have become less villainous. In fact, since several authoritative sources track these prices, it’s possible, depending on which one is considered most trustworthy, to know exactly how much less villainous.

Specifically, according to the GasBuddy.com website, national average pump prices are down 6.87 percent over the last month. So clearly, Putin, Big Oil, and gas station owners have collectively become 6.87 percent less heinous and/or avaricious and, in the case of U.S.-owned oil companies and the gas station owners, less unpatriotic.

The widely followed Lundberg survey says regular grade gasoline has become 4.14 percent cheaper during this period – so the Democrats’ culprits in its view haven’t become quite so benign.

They look better in Triple A’s eyes, though, since that organization calculates that pump prices are off by 6.74 percent.

Of course, the above analysis is the most childish and even self-serving form of nonsense. Gas prices, like prices of practically everything, depend on numerous interacting factors having nothing to do with foreign strongmen or corporate iniquity. World oil prices are the biggest single determinant, but these in turn are affected by national and global demand, which in turn results from the overall state of the economy, which in turn can be strengthened or weakened by fiscal policy (e.g., stimulus bills) and monetary policy (e.g., interest rates). Don’t, however, forget refining and pipeline availability, and even weather (as in bad hurricane seasons shutting down oil facilities in the Gulf of Mexico in particular).

Complicating matters further, these and other oil price determinants don’t affect retail gas prices all at once, as they understandably take varying amounts of time to work their way through a lengthy production and distribution system. Meanwhile, future supplies depend on private investors examining this multi-faceted and highly fluid landscape to judge whether committing capital to the oil industry is their best bet for maximum returns. And these calculations are inevitably highly uncertain given that any payoffs will inevitably be years off.

So it’s indeed childish to ignore the complicated and constantly interacting dynamics of an enormous industry that at bottom needs to keep wrestling with inevitably fluctuating supply and demand conditions. And it’s self-serving because for years the President and his party have clearly worked hard to reduce the role played by a fossil fuel like oil in the U.S. energy picture.

If you doubt that self-serving claim in particular, or any of the above analysis, ask yourself this: Are these oil industry critics remotely as likely to start praising the producers and the gas station owners (or Putin) for reducing prices as they’ve been to slam them for the price increases?

(What’s Left of) Our Economy: A Terrible March for U.S. Trade – With Worse Likely to Come

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Advanced Technology Products, Canada, China, currency, dollar, European Union, exchange rates, exports, Federal Reserve, goods trade, imports, inflation, Japan, Made in Washington trade deficit, manufacturing, Mexico, oil, services trade, Trade, trade deficit, {What's Left of) Our Economy

So many records (mainly the wrong kind) were revealed in the latest official monthly U.S. trade figures (for March) that it’s hard to know where to begin. Some important points need to be made before delving into them, though.

First, don’t blame oil. Sure, this trade report broke new ground in containing a full month’s worth of Ukraine war-period data. But despite the disruption in global energy markets triggered by the conflict, on a monthly basis, the U.S. petroleum balance actually improved sequentially, from a $2.94 billion deficit to a $1.58 billion surplus on a pre-inflation basis (the trade flow gauges from these monthly government releases that are most widely followed)

And even on an inflation-adjusted basis, February’s $8.73 billion oil deficit shrank to $5.15 billion in March.

Second, don’t blame inflation much at all. The Census Bureau doesn’t report after-inflation service trade results on a monthly basis, but it does provide this information for goods (which comprise the great majority of U.S. trade flows). And the March figures show that before factoring in inflation, the goods trade deficit worsened by 18.89 percent from $107.78 billon in February to a new record $128.14 billlion, whereas when inflation is counted, this gap widened on month by 18.86 percent, from $115.96 billion in February to $137.83 billion in March. (Major trade wonks will note that these goods and services data are presented according to two different counting methods, but trust me: the difference in results is negligible.)

Third, don’t blame China. The March pre-inflation goods deficit with the People’s Republic was up sequentially from $42.26 billion to $47.37 billion (12.10 percent). But neither that absolute level nor the rate of increase was anything out of the ordinary, much less a record. In fact, the monthly percentage increase was just half the rate of that of the shortfall for total non-oil goods (a close worldwide proxy for China goods trade) – which hit 24.06 percent. One big takeaway here: the Trump China tariffs are still exerting a major effect, along of course with the supply chain knots Beijing has created with its over-the-top Zero Covid policy.

But regardless of where the blame lies, (and it looks like major culprits are continued strong U.S. spending on both consumer goods and capital equipment, combined with an improvement of the supply chain situation outside China), all-time highs and worsts abounded in the March trade report, include worsenings at record paces.

The combined goods and services trade deficit jumped on-month by 22.28 percent, to $109.80 billion. That total was the third straight record for a single month and the increase the fastest since the 43.71 percent explosion in March, 2015 – a month during which much of the country was recovering from severe winter weather.

As mentioned above, the $128.14 billion goods trade gap was the highest ever, too, topping its predecessor (January’s $108.60 billion) by 17.99 percent. As for the 18.89 percent monthly increase, that was also the biggest since March, 2015 (25.18 percent).

Even a seeming trade balance bright spot turns out to be pretty dim. The headline number shows the service trade surplus improving by 1.96 percent – from $17.98 billion to $18.34 billion. Unfortunately, nearly all of this increase stemmed from a big downward revision in the initially reported February surplus, from $18.29 billion.

As known by RealityChek regulars, the aforementioned non-oil goods trade deficit can also be called the Made in Washington trade deficit – because by stripping out figures for oil (which trade diplomacy usually ignores) and services (where liberalization efforts have barely begun), it stems from those U.S. trade flows that have been heavily influenced by trade policy decisions.

And not only was the March Made in Washington deficit’s monthly increase of 24.06 percent the second fastest ever (after March, 2015’s 31.24 percent). The March, 2022 level of $128.70 billion was the biggest ever.

The story of the non-oil goods trade gap’s growth was overwhelmingly a manufacturing story. The sector’s huge and chronic trade shortfall shot back up from $106.49 billion in February (which was a nice retreat from January’s $121.03 billion) to a new record $142.22 billion. And the monthly percentage jump of 33.55 percent was the biggest since the 37.62 percent during weather-affected March, 2015.

Manufactures exports advanced sequentially by a strong 20.53 percent this past March. That topped the previous all-time monthly high of $105.37 billion (set back in October, 2014), by 8.15 percent. But the much greater volume of imports skyrocketed by 27.43 percent. And their $256.18 billion total smashed the old record of $222.79 billion (from last December) by 14.98 percent.

Within manufacturing, U.S. trade in advanced technology products (ATP) took a notable beating in March, too. The $23.31 billion trade gap was an all-time high, and its 73.65 percent monthly growth the worst since the shortfall slightly more than doubled on month in March, 2020 – as the Chinese economy and its huge electronics and infotech hardware manufacturing bases reopened after the People’s Republic’s initial pandemic wave.

Yet as noted above, despite these extaordinary manufacturing and ATP trade numbers, the latest March numbers for manufacturing-heavy U.S. China trade were anything but extraordinary. U.S. goods exports to the People’s Republic increased on-month by 15.36 percent – slower than the rate for manufactures exports globally, but the fastest rate since the 52.47 percent rocket ride they took  last October.

Goods imports from China, however, rose much more slowly from February to March than manufactures imports overall – by just 12.10 percent, from $42.26 billion to $47.37 billion.

When it comes to other major U.S. trade partners, the March American goods deficit with Canada of $8.03 billion was the highest such total since July, 2008 ($9.88 billion). It was led by a 30.81 percent advance in imports reflecting the mid-February reopening of bridges between the two countries that had been closed due to CCP Virus restrictions-related protests.

The goods deficit with Mexico worsened even faster – by 35.11 percent, to $11.92 billion. That total was its highest since August, 2020’s $12.77 billion.

Another major monthly increase (31.59 percent) was registered by the U.S. goods shortfall with the European Union, but its March level ($16.87 billion) was subdued relative to recent results.

Anything but subdued was the Japan goods shortfall, which shot up sequentially in March by 49 percent. The $6.77 billion total also was the biggest since November, 2020’s $6.78 billion, and the monthly jump the greatest since the 84.37 percent burst in July, 2020, during the rapid recovery from the sharp U.S. economic downturn induced by the first wave of the CCP Virus and related economic and behavior curbs.

The Europe and Japan trade figures stem significantly from a development that’s bound to turn into an increasingly formidable headwind for the U.S. trade balance for the foreseeable future – the dollar’s rise versus other leading currencies to levels not seen in 20 years. And unless it’s reversed substantially soon, China’s latest currency devaluation, which began in mid-April, will weaken the effects of both the Trump tariffs and the Zero Covid policy. So even if the Federal Reserve’s (so far modest) inflation-fighting efforts do slow the American economy significantly, it’s likely that, as astronomical as the March trade deficits were, we ain’t seen nothin’ yet.

Those Stubborn Facts: Is the European Union Really Standing with Ukraine?

Tags

energy, European Union, military aid, natural gas, oil, Russia, Those Stiubborn Facts, Ukraine invasion, Ukraine-Russia war

Amount of European Union payments to Russia for

energy supplies since it invaded Ukraine: $38

billion

 

Amount of European Union aid to Ukraine to help

it resist the Russian invasion: $1.09 billion

 

(Source: “The EU is paying 35 times as much for Russian fuel as it’s given Ukraine for defense, chief diplomat says,” by Sinead Baker, Business Insider India, April 6, 2022, https://www.businessinsider.in/politics/world/news/the-eu-is-paying-35-times-as-much-for-russian-fuel-as-its-given-ukraine-for-defense-chief-diplomat-says/articleshow/90686530.cms)

(What’s Left of) Our Economy: A February Reprieve from Lousy U.S. Trade News

Tags

CCP Virus, Census Bureau, China, coronavirus, COVID 19, Federal Reserve, goods trade, inflation, manufacturing, monetary policy, non-oil goods trade deficit, oil, services trade, trade deficit, Ukraine-Russia war, Wuhan virus, {What's Left of) Our Economy

It wouldn’t be accurate to start off this post with a statement on the order of “As bad as the full-year 2021 inflation-adjusted trade figures released last week were, the new pre-inflation data for February were good.” But a contrast was unmistakable, with yesterday’s latest monthly report from the Census Bureau containing some decidedly encouraging news – even though the numbers were pre-Ukraine war, and therefore pre- all the disruption to global supply chains – in particular in the food and energy sectors – that the conflict has already brought.

And the story even begins at the beginning. The combined goods and services trade deficit decreased sequentially for the first time since October. The slippage was only 0.05 percent, and the monthly total ($89.19 billion) was still the second highest ever (behind January’s $89.23 billion). But that January figure itself was revised down 0.52 percent.

Goods trade produced somewhat better results. February’s shortfall of $107.47 billion represented its first monthly drop since October, and the decrease was 1.04 percent. The February goods trade gap was the second biggest on record, too, but January’s $108.60 billion mark was downgraded by 0.24 percent.

When it comes to the broadest trade balance results, the only black mark was found in the service sector. In February, its long-time surplus shrank for the second straight month, decreasing by 5.62 percent, from $19.37 billion to $18.29 billion. That total was the smallest since November’s $18.30 billion. At least the January number was revised up by 1.05 percent.

More good news came on the export front. Total American sales abroad climbed 1.84 percent on month to $228.63 billion – a new record that nosed ahead of the previous all-time high (December’s $228.35 billion) by 0.12 percent.

Goods exports were up to on a monthly basis in February – by 1.79 percent, to $158.78 billion. That total was the second highest ever – 0.15 percent below October’s $159.02 billion.

Services exports improved, too in February. At $69.85 billion, they were 1.96 percent higher than January’s $68.51 billion. But reflecting the outsized hit this sector took from the CCP Virus and related lockdowns and behavioral changes, these totals remain below pre-pandemic levels.

Combined goods and services imports set their seventh straight monthly record in February, increasing 1.30 percent from $313.72 billion in January to $317.81 billion. The January total, however, was revised down by 0.12 percent.

Goods imports alone lengthened their string of monthly records, too, in February, with its $266.25 billion total topping January’s $264.59 billion by 0.63 percent. Their January total was downgraded fractionally.

The biggest relative imports increase came in services, where February’s $51.57 billion in purchases from abroad represented a 4.95 percent jump from January’s $49.13 billion. And the February total marked an all-time high – beating November’s $50.49 billion by 2.14 percent.

Oil was responsible for the overall February trade figures not being considerably better. The petroleum deficit soared by $2.67 billion on month, from a miniscule $115 million to $2.78 billion – the highest.monthly total since September’s $3.37 billion. And this surge was led by an 18.57 percent increase in oil imports. The monthly total of $23.11 billion, moreover, was the highest since December, 2014’s $25.01 billion.

Much higher prices per barrel of oil bought obviously deserve the blame for much of this news. But even adjusting for inflation, U.S. oil imports for February increased by 4.31 percent – the biggest relative rise since last May’s 6.47 percent.

In line with the improvement in the overall February trade deficit, the non-oil goods shortfall fell by 3.43 percent on month in February. At $103.56 billion, this deficit – which RealityChek regulars know covers the trade flows most affected by U.S. trade policy – was still the second highest on record, after January’s $107.24 billion. But the decrease was the first since October. And it resulted from the ideal combination of both a rise in exports and a decline in imports.

This ideal combination also encouragingly appeared in the February data for two long-term (and related) problem areas in U.S. trade flows – manufacturing and China.

The chronically huge American manufacturing trade gap shrank in February by 12.01 percent – from a record $121.03 billion to $106.49 billion. The decrease was the third straight and the biggest percentage-wise since the 12.70 percent plunge in November, 2019. In addition, the new level the lowest since April, 2021’s $103.60 billion.

As indicated, moreover, manufacturing exports were up on month in February – by 2.40 percent, from $92.33 billion to $94.55 billion. The increase, however, did follow a 7.80 percent sequential decrease in January that brought these foreign sales to their lowest level since last August.

Manufacturing imports, though, decreased for the third straight month – by 5.78 percent, from $213.36 billion to $201.03 billion. The monthly drop was the biggest in percentage terms since February, 2021’s 6.98 percent (amid the CCP Virus’ powerful second wave), and the new February total was the lowest since last April’s $198.06 billion.

America’s trade with China is dominated by manufactures, so it’s not surprising that its also chronically huge goods surplus with the United States plummeted by 15.69 percent sequentially in February, from $36.37 billion to $30.67 billion. This nosedive was the greatest in percentage terms since the 25.19 percent of February, 2020, when the Chinese economy was still seized up by sweeping CCP Virus-induced lockdowns.

Just as important, this monthly cratering was more than 4.5 times bigger than the monthly drop in the U.S. global non-oil goods deficit – the closest worldwide proxy for U.S.-China goods trade. It’s the latest evidence of the Trump tariffs’ effectivness at keeping enormous amounts of Chinese products out of the U.S. market.

As for the new February U.S.-China goods deficit’s level, it was the lowest since last July’s $28.65 billion.

And goods exports to and goods imports from China moved in exactly the right ways from an American standpoint. The former edged up 1.04 percent, from $11.48 billion to $11.59 billion – a performance that snapped a three-month losing streak. But the latter dropped for the second straight month, by 11.68 percent, from $47.85 billion to $42.26 billion. Decreases in imports from China are typical in post-holiday season February, and this latest drop-off was the biggest in percentage terms since last February’s 13 percent.

All the same, as promising as these February trade results are, one month’s worth of data alone reveal nothing about longer term trends and possibilities. And as mentioned at the outset, the Ukraine war impact is yet to be recorded. Further, more major changes may be in store in the U.S. and global economies, especially as the Federal Reserve is sounding more determined than ever to cool torrid inflation dramatically even if it means slowing growth dramatically. (Unless the central bank chickens out, if only because of the unmistakably political impact such tightening would have during an election year?) And as if all this uncertainty wasn’t enough, never forget that the trade figures are just about the most lagging-y set of indicators that the federal government releases.

So as with so many other dimensions of the U.S. economy, meaningful clarity on trade flows looks unlikely to emerge until the impacts of external shocks like the CCP Virus and the Ukraine war wear off.  That day will come at some point, won’t it?   

P.S. Yes, because my own schedule this past week has been disrupted nearly as much as the economy these last few years, this is my latest effort to catch up on reporting on recent economic releases.  More to come! 

 

Im-Politic: Major U.S. Ukraine Policy Puzzles on the Home Front Remain Unsolved

Tags

Biden, Democrats, gasoline, Iran, Iran deal, Iran nuclear deal, JCPOA, oil, oil prices, Our So-Called Foreign Policy, rural areas, Russia, sanctions, taxes, Ukraine, Ukraine invasion, Ukraine-Russia war, Vladimir Putin

Maybe you readers can help me out here, because I am really confused about what President Biden and other Democrats are saying about the biggest political and ethical issues surrounding his Ukraine war-related decision to ban oil imports from Russia and its likely effect on gasoline prices.

On the one hand, Mr. Biden and his party have portayed the higher oil prices as a sacrifice that Americans should be proud to pay in order to support Ukraine’s unexpectedly stout resistance to the Russian invasion, and one that the nation will agree to pay.

On the other hand, these Democrats have taken to blaming the higher pump prices on the Russian aggression itself, to the point of pushing the social media hashtag #PutinPriceHike.

Unquestionably, the Russian dictator’s decisions are ultimately responsible for the recent shake up in the global oil market that’s driven up prices for oil and all its derivatives (like gasoline) the world over. But now that he’s taken these steps, it seems that some fundamental consistency should be displayed in the Democrats’ case for the response they favor. For example, they could tell the public something like, “Yes, our response to the Russian attack will raise the price of oil. But higher pump prices are a sacrifice we should be proud to make for the cause of global security and freedom.” Why haven’t they?

Something else noteworthy about the stance of the President and his party. The effect of higher oil prices is the epitome of a regressive tax. In other words, because Americans at all income levels will face the same percentage increase when they pump gasoline (and when they heat their homes, if they rely on oil). So the bite on household budgets is deepest for the poorest and shallowest for the richest of us.

Higher oil prices will also surely kneecap any Democratic hopes of improving their political performance in rural America. After all, residents of the nation’s small towns and farming areas use much oil for transportation than their urban counterparts. So do the enormous number of voters in the suburbs, who played such a big role in Mr. Biden’s victory in 2020.

And let’s not forget an mammoth irony about higher U.S. and world prices for oil – as well as natural gas, another major Russian export. As has been widely observed, without steps that dramatically reduce the volume of Russian sales  globally, the more importers pay per barrel, the more revenue flows into Vladimir Putin’s treasury – and war machine. The same goes for Saudi Arabia and Venezuela, along with Iran if the President succeeds in his apparent aim of negotiating a deal aimed at preventing Tehran from building a nuclear weapon in part by lifting economic sanctions on its economy.

Whatever you think of President Biden’s approach to the Ukraine war, it should be clear that it can’t succeed for any length of time until firm support on the home front is secured. These unsolved puzzles and outright contradictions make clear how far his administration remains from achieving that essential goal. 

(What’s Left of) Our Economy: #PutinPriceHike? Not Even Close – Yet

Tags

baseline effect, Biden administration, CCP Virus, coronvirus, COVID 19, energy, fossil fuels, gasoline, inflation, lockdowns, oil, Putin, sanctions, stay-at-home, Ukraine invasion, Ukraine-Russia war, Wuhan virus, {What's Left of) Our Economy

According to the Biden administration, it’s the #PutinPriceHike. That is, don’t blame anything Washington has or hasn’t done for the the bulk of the high gasoline prices Americans have been paying lately. Instead, blame Russian dictator Vladimir Putin, his aggression against Ukraine, and the global oil market turmoil it’s triggered.

The trouble is, if you look at these prices in a comprehensive, statistically legitimate way, scapegoating Putin in this case isn’t justified yet. But the same methodology shows that Mr. Biden and his aides are off the hook, too – at least until recently.

Critics (see, e.g., here) have countered the Biden claims by noting that strong U.S. gasoline inflation predates the Ukraine war and even Russian military buildup by many months, and they’re right. As known by RealityChek readers, however, that’s far from the whole story. In particular, they’re ignoring the impact on gasoline and other prices of the ongoing aftermath of the CCP Virus pandemic, the brief but sharp recession created by the disease and related lockdowns and voluntary behavioral changes, and ongoing stop-start U.S. economy that’s still resulting.

In other words, they’re ignoring the “baseline effect” caused by the economic shocks of the 2020 pandemic year in particular. These drove economic activity down to such low levels, and kept it there so long, that any major return to normal (and therefore normal prices) is going to produce unusually lofty inflation stemming from a catch-up effect. Therefore, it won’t be possible to determine the role of other contributors to inflation in gasoline or any other goods and services until this baseline effect fades significantly and finally disappears. And therefore, scapegoating Biden for soaring gasoline prices pre-Ukraine buildup isn’t justified, either.

RealityChek reported yesterday that the latest official U.S. figures show that the baseline effect has ended for headline inflation, and looks on the way out for core inflation (which strips out food and energy price. And roughly the same is true for gasoline prices.

The table below shows their monthly year-on-year percentage changes for last year (2020-21) in the middle column and for pandemic-dominated 2019-2020 (in the righthand colum). The numbers begin in March because March, 2020 was the first month in which the virus began significantly affecting the economy.

Gasoline price annual percentage changes      2020-21             2019-20

March:                                                               22.58                 -10.05

April:                                                                 49.68                 -32.03

May:                                                                  56.51                 -33.67

June:                                                                  45.42                 -23.41

July:                                                                   41.93                -20.12

Aug.:                                                                  42.76                -16.67

Sept.:                                                                  41.93                -15.43

Oct.:                                                                   49.52                -18.15

As is evident, starting in March, 2020, gasoline prices began nosediving from their levels of 2019, and steep annual drops continued (though at a slower pace) through October. It’s easy to understand why. The combination of lockdowns and stay-at-home behavior caused automotive travel to crater, and national demand for gasoline naturally plummeted as well. Further, that’s clearly a big part of the reason why during the following March-October period, gasoline prices prices skyrocketed on the same annual basis. They were returning to normal from an artificially low base. And as a result, it’s wrong to blame the Biden administration exclusively or even mainly for this hot gasoline inflation.

From that point, however, the Blame Biden case gets stronger. The above table stops in October, 2021 because November was when the Putin military buildup began – and according to the Biden argument, gasoline prices really began taking off. What happened to annual gasoline prices increases from then until the end of  2021, and how strong was the baseline effect? Here are the numbers for November and December, with the 2020-21 annual increases in the middle column and the 2019-20 increases in the righthand column:

Gasoline price annual percentage changes      2020-21             2019-20

Nov.:                                                                  57.76                 -19.53

Dec.:                                                                  49.34                 -15.34

The strong 2020-21 yearly price increases continued for these two months. But the baseline effect (from the big 2019-20 price drops) weakened. In fact, the December, 2019-20 annual 15.34 percent annual gasoline price decline was the smallest such figure since March, 2019-20’s 10.05 percent. And the annual increase for the following March (22.58 percent) was less than half December’s 49.34 percent.

What about this January and February? For these months, of course, the comparison years are 2021-22 (whose increases are presented in the middle column) and 2020-21 (in the right hand column).

Gasoline price annual percentage changes      2020-21             2019-20

Jan.:                                                                   40.02                  -8.90

Feb.:                                                                   38.01                   5.42

So the story for the first two months of this year – between the start of Putin’s buildup and the (late February) invasion – is that annual increases slowed, but the baseline effect vanished much faster. Indeed, between February, 2020 and February, 2021, gasoline prices actually rose. So the administration’s #PutinPriceHike claims hold much less water.

Blaming Putin will become more credible going forward, as sales of Russian oil worldwide are curbed by sanctions. Since the global oil market is so thoroughly integrated, U.S. oil supplies will be crimped and upward price pressures will strengthen. But this is also the point at which other major administration policies will rightly attract attention for their role in spurring torrid gasoline inflation. They include in particular measures and rhetoric that throughout the President’s term have convinced oil and other fossil fuel providers that their industries’ growth will keep facing ever greater policy obstacles, and whose cumulative effect has undercut their ability to ramp up output quickly to fill the Russia gap.(See, e.g., here and here.)

All of which means that, as is the almost always the case with major economic trends and developments, recent gasoline price inflation has many causes, not one. And they can change profoundly in their nature and respective importance with the kinds of changing circumstances that have shaken the global oil and U.S. energy policy landscapes since the CCP Virus pandemic began. Let’s all hope, therefore, that American leaders across the political spectrum begin spending more time developing effective responses to oil price inflation, and less on bombarding each other and the rest of us with facile talking points.

Following Up: Podcast On-Line of National Radio Interview on the Economics of the Ukraine War

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Following Up, fossil fuels, Iran, Iran nuclear deal, JCPOA, Market Wrap with Moe Ansari, natural gas, oil, Russia, Ukraine, Ukraine-Russia war

I’m pleased to announce that the podcast is now on-line of my interview yesterday today with Moe Ansari on his nationally syndicated “Market Wrap” radio program.

Press the “play” button under “Current Market Wrap” at this link for a timely discussion of how the Ukraine war – and especially sanctions on Russian fossil fuel exports – will likely impact the U.S. and global economies. And we shine a special spotlight on how the recent burst of energy diplomacy is influencing the talks on curbing Iran’s nuclear weapons ambitions.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: Back on National Radio to Talk War and the Economy

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climate change, energy, European Union, fossil fuels, green energy, Green New Deal, Iran, Iran nuclear deal, JCPOA, Making News, Market Wrap with Moe Ansari, Moe Ansari, natural gas, oil, renewable fuels, Russia, Ukraine

I’m pleased to announce that tonight I’m scheduled to be back on the nationally syndicated “Market Wrap with Moe Ansari” radio program to discuss the economic – and especially energy – repercussions of the Ukraine-Russia war.

“Market Wrap” is broadcast nightly between 8 and 9 PM EST, the guest segments typically come in the second half-hour, and you can tune in by visiting Moe’s website and clicking on the “Listen Live” link on the right-hand side.

As usual, moreover, if you can’t tune in, the podcast will be posted as soon as it’s on-line.

And keep checking in with RealityChek for news of upcoming media appearances and other developments

(What’s Left of) Our Economy: Now Oil’s Fueling the U.S. Trade Deficit’s Boom

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Advanced Technology Products, Biden, CCP Virus, China, climate change, COP26, coronavirus, COVID 19, exports, Glasgow, imports, lockdowns, manufacturing, non-oil goods deficit, oil, oil imports, oil trade, OPEC, supply chains, tariffs, Trade, trade deficit, Trump, UN Climate Change Conference, vaccine mandates, Wuhan virus, {What's Left of) Our Economy

So many records and multi-month or year highs and lows were revealed in this morning’s official report on U.S. trade flows (for September) that it’s tough to know where to begin. What caught my eye immediately, though, was a development that concerned a product that hasn’t generated much major trade news lately, but has produced quite a few headlines in the last few weeks alone: oil.

With the United Nations’ latest global climate change conference still underway in Glasgow, Scotland, and President Biden still asking members of the Organization of Petroleum Exporting Countries to boost their production to ease national and global energy shortages, it’s more than a little interesting that September saw America’s oil trade deficit balloon from $28 million (yes, with an “m”) in August to $3.38 billion (with a “b”).

That monthly total is the biggest since May 2019’s $3.98 billion and the $3.35 billion sequential worsening is the greatest such change for good or ill in absolute terms since the $3.52 billion improvement in this deficit in Dec., 2012 (when the monthly oil deficits were regularly some five or six times larger). It’s also the biggest increase in the oil trade shortfall since Jan., 2013 ($3.86 billion).

At least as interesting: On a year-to-date basis, the oil trade balance has shifted from a $13.98 billion surplus to a $6.84 billion deficit, mostly because oil imports are up 23.55 percent during this period.

The monthly spurt in the oil trade deficit weighed heavily on the overall September trade figures, accounting for 41.26 percent of the rise in the total deficit to a record $80.93 billion.

Moreover, not only was the September combined goods and services trade shortfall an all-time high. It beat the previous record (set in June) by a healthy (or sickly?) 10.52 percent, and the 11.52 percent monthly jump was the greatest such widening since the 19.87 percent recorded in July, 2020, when the U.S. economy was rebounding sharply from the short but deep downturn produced by the CCP Virus’ initial wave and the shutdowns and lockdowns mandated in response, along with major consumer caution.

September’s deficit resulted from both major trade flows moving in exactly the wrong way. Total imports set their third straight monthly record, increasing by 0.58 percent to $288.49 billion. And overall exports sank by 3.01 percent, to $207.56 billion. That total was the first monthly falloff since February and the biggest since the 19.96 percent plunge in April, 2020 – when the pandemic’s impact on the U.S. economy was peaking.

Still worse was the trade story in goods, where the $98.16 billion gap grew by 9.99 percent over the August total to a new record $98.16 billion. That figure broke the old mark (also set in June) by 5.25 percent, and the monthly increase was also the biggest since July, 2020 – when it rose by 12.20 percent.

Here, too, both exports and imports can be blamed. As with total exports, the former also decline for the first time since February, and the 4.71 percent sequential decrease to $142.71 billion was the steepest since the 25.10 percent crash dive suffered in pandemic-y April, 2020.

Goods imports, meanwhile, climbed by 0.78 percent to $240.86 billion – a new record , too.

Since manufacturing dominates U.S. goods trade, it’s not surprising that much of this September deterioration on the merchandise side came in industry. This sector saw its own longstanding and massive deficit hit a second straight monthly record, rising 1.60 percent to $118.75 billion.

Manufacturing exports dropped on month by 4.69 percent, from $97.13 billion to $92.58 billion. But the much greater amount of imports was down only 1.25 percent, from $214.041 billion to $211.33 billion.

These new records have pushed the 2021 manufacturing deficit so far to $968.25 billion – 22.52 percent bigger than last year’s January-through September number. So the full-year shortfall is sure to top $1 trillion for the fourth straight year – and by October.

Yet another all-time high was reported in an important manufacturing sub-sector – advanced technology products (ATP). The $50.50 billion worth of these goods imported by Americans in September set a monthy record, and one that broke the previous mark of $47.24 billion set in October, 2019, by 6.91 percent. Largely as a result, the ATP deficit surged sequentially by 22.82 percent in September, to $19.74 billion. The total was the biggest since last November’s $21.90 billion and the increase the fastest since May, 2020’s 22.98 percent – early during that US rebound following the CCP Virus’ first wave.

With many of these ATP goods coming from China, the import boom in this category understandably led to a big (15.01 percent) increase in the bilateral merchandise deficit. Indeed, the monthly rise, from $31.74 billion to $36.50 billion was the biggest since the shortfall’s near-doubling in April, 2020 – when the Chinese economy was bouncing back from its own broad virus-related shutdown – and the level was the highest since December, 2018’s $36.60 billion.

Goods imports from China hit $47.41 billion – their highest level since October, 2018’s $52.08 billion. And their 10.27 percent jump in September was the biggest such monthly change since the 18.23 percent increase of this past March, at the start of the U.S.’ last post-CCP Virus recovery.

The China goods deficit in September did worsen faster than its closest global proxy – the U.S. non-oil goods deficit (which widened by 6.47 percent). It’s still also growing more slowly on a year-to-date basis – 14.89 percent versus 18.60 percent, which indicates that the Trump tariffs continued by Mr. Biden are still restraining it. But the gap is narrowing.

What’s especially sobering about these and other recent trade figures is that the overall deficit rose by 7.50 percent between the second and third quarters of this year while the rate of economic growth fell by 40.31 percent.  That’s not supposed to happen. Clearly, virus- and lockdowns- and mandates- and supply chain-related disruptions are distorting normal economic patterns, but that’s a huge discrepancy nonetheless.  Worse (in this sense), the American economy’s expansion is so far expected to speed up again in the fourth quarter. Although trees aren’t supposed to grow to the sky, it seems a safe bet that the U.S. trade deficit going forward will do a pretty good imitation.