economics

Back to the Carter Gas Lines

Today, the Biden administration announced that it is selling another 20 million barrels from the US oil reserve. It’s obvious at this point what the administration’s plan is- they are selling our nation’s future security in order to safeguard Democratic election chances by depleting our nation’s reserves of a vital war material.

When Biden took office, the US oil reserve was 638 million barrels. As of July 17, the US strategic oil reserve stood at 480 million barrels. In the 189 intervening days, there were 158 million barrels removed from the reserve, with more already earmarked to be removed and sold. Accounting for all promised sales, the reserve will be less than 340 million barrels by October 1. That means nearly than half of our oil reserves will have been sold by the administration in less than 9 months, and represents the lowest amount of oil in reserve since 1983.

The graph below, found at this location, outlines the depletion of our reserves, but keep in mind that this graph was created on June 17, which was before the most recent sales and releases that were authorized by the Whitehouse.

Keep in mind that Biden announced in March the release of 240 million barrels. This administration has no choice but to continue selling oil at this rate all the way through the election. What this means is that we will continue bleeding oil from the reserves at the rate of more than a million barrels a day.

It’s much worse than that, however. The SPR contains two kinds of crude: medium-sour, and light-sweet. Typically, US refiners prefer medium-sour crude, which can easily be processed into gasoline and other products. The light-sweet in the reserves has a much lower density, and is not as favored by refiners. So far, 85% of the oil removed from the SPR has been the medium-sour crude.

By October, the SPR will hold only 179 million barrels of medium-sour crude. Clearly, Biden is running out of firepower and out of time. By 2023, the US SPR will be virtually out of medium-sweet crude in the SPR.

Should that happen, you can expect gas shortages and when you can find gasoline, expect to see prices hit $10 a gallon or more.

By Divemedic, ago

Economic Smoke and Mirrors

Much is being made of how the unemployment rate has dropped to only 3.6 percent under Biden’s watch. That number isn’t an indication of a healthy job market. In fact, it’s misleading bullshit.

To understand why, you have to understand what unemployment is measuring. The unemployment rate only measures the number of people who are out of work despite their best efforts to find gainful employment. The labor department assumes that anyone who has been out of work for longer than 6 months isn’t looking for work, so excludes them from the calculation.

To get a more accurate measure of how the labor market is doing, look at the labor force participation rate, as published by the Fed. That is a measurement of the percentage of those who are not in the military or in prison and who are actually employed or actively looking for work.

For June of 2022, that number stands at 62.2. Granted, it was lower during the pandemic lockdowns (April 2020 to November 2021), but that was because the government was actively prohibiting people from working. Even then, the participation rate never fell below 60 percent.

Other than that time period, the last time you can find a participation rate of 62.2 or less was May of 1977. Before that, the labor force participation rate was lower (in the 50’s and 60’s), but there is a HUGE reason for that: women were part of the labor force, but most of them were stay at home housewives and were not participating because they were not working or looking for work.

What this means is that this President has a lower labor force participation rate of any US President since we began measuring it.

By Divemedic, ago

Inflation

July is the time of year when I do the budget for the coming year for my businesses. That’s the main reason why I didn’t post yesterday. Busy with business. From an inflation standpoint, things are actually looking more dire than they were last year. My property taxes are up 10%, my landscaping costs are up 15%, insurance costs up 21%, and interest (in dollars) on the mortgage is up 18% year over year.

In December, I posted about the increasing popularity of rent control. It turns out that Florida’s constitution and state laws make rent control a difficult prospect at best. So the communists in the blue counties are looking at other ways to make financial war on landlords. Miami-Dade is looking at requiring that tenants be provided government funded attorneys in landlord/tenant disputes. That also increases both the expense and risk for landlords. If that catches on, then there will be even more increases.

I predicted that landlords would find other ways to increase income without increasing rent. Things like fees for lawn maintenance, rental fees for appliances like washers and dryers, forcing maintenance costs like pressure washing on to the tenants.

It seems like I called it, because that is exactly what is happening. Landlords are passing these “extras” on to tenants, adding all sorts of fees on to the lease. These are costs that are associated with a rental property that tenants just don’t think about. Here is a complaint:

“Usually these increased costs do not come with increased services or amenities,” Rabin said. “They are often used as a way to deprive people.”

Take washers and dryers. Once common in rentals across Florida, now, many tenants rent not just their apartments and homes, but the appliances within it.

I don’t see how making you rent a washer and dryer is a way to deprive a tenant. A washer and dryer is an unnecessary convenience item that costs the landlord to both purchase and maintain. Many tenants destroy these appliances because, well, they just have no respect for the property of others.

The cost of buying and maintaining property is increasing. That includes opportunity cost. Let’s say that I bought a house for $200K. I can rent it out, or I can sell it. The only way that I would (and do) choose to rent is if I can get a better return on that investment by renting than by selling it. As housing prices rise, so do rent costs.

The same goes for appliances. Washers, dryers, kitchen appliances, they all cost money. In the past two years, I have had to replace a range, repair a refrigerator and a central air conditioner, and replace a dryer. That costs money that must be recouped. As appliance prices increase, so do my costs. As the cost of lawn maintenance and appliance repairs increase, so do my costs. That means higher fees and rent.

So far, I limit the fees on my rental property. I charge an application fee for each adult who will live at the property. That covers my cost to do the background and credit check. I provide a washer, dryer, and lawn maintenance. I pay HOA fees. The tenant provides for electric, water, and trash service. They also have to pay for cable TV and Internet service, if they so desire.

So how rents are priced is actually pretty straightforward: the amount that it costs me to maintain and rent the property is my base. That includes maintenance expenses, insurance, taxes, landscaping, administrative overhead, and legal expenses. To that, I add my expected return on investment. Since there is more risk than previous years, my expected return is around 8 percent. If I get much less, it is more profitable to sell. The resulting number is my rent.

What all of this means is that my rents this year will be increasing to reflect those added costs and risks. Last year, I increased rent on my rental property by 8%. This year, the increase will likely have to be around 9 or 10 percent.

By Divemedic, ago

Price Controls Coming?

Biden is going after oil company profits, blaming them for the rising fuel prices that have been caused by his policies. Russians, Republicans, oil companies, it is everyone else’s fault that his socialist policies are failing. Isn’t that always the case when communism and socialism fail? They didn’t do it right? Or something?

At any rate, he has demanded that they slash profits and make more fuel. This is impossible, of course. US refineries are already at 96% of capacity, and it would take years to build new refinery capacity, even if the Democrats would grant the permits. In fact, oil companies will likely not build another refinery in the US, ever. Since the west has stopped buying Russian fuel, the refineries that are remaining just can’t keep up.

Instead, the left will continue to blame oil company profits. Look for price controls to come next. Perhaps a Biden EO nationalizing the oil industry. Or a 100% tax on oil company profits, or perhaps they will come up with something else that is even less likely to work, but more likely to screw things up more. Why?

That’s what socialists/communists do.

By Divemedic, ago

75 basis points coming at ya

The Fed is expected to raise the benchmark funds rate by three quarters of a percent today. Goldman Sachs is now predicting consecutive 75 basis point rate hikes in June and July, followed by a 50 basis point move in September and 25 basis point moves in November and December, taking the fed funds rate to a range of 3.25%-3.5% by the end of the year.

Keep in mind that the rate has been, with the exception of FY2019, at an average of less than one percent since 2008. The Fed chairman has now said that he will have to purposely cause a recession in order to get inflation under control. Think about that for a minute, and what that means. The powers that be are going to purposely shut down the nation’s economy.

Meanwhile, gas prices near me are at $4.95 a gallon. If I drive 10 miles away, I can hit Sam’s club and get $4.53 a gallon, meaning that a single fill up of my pickup’s 40 gallon gas tank pays for nearly my entire annual membership fee.

Things are about to get a whole lot worse. We are so incredibly screwed.

By Divemedic, ago

No Mean Tweets

People are complaining as housing costs rise. This teacher can’t afford to buy a home that she wants, but also complains that rent is too expensive, as rent costs nationwide are above $2,000 for the first time ever. But, hey, she doesn’t have to read mean Tweets, so she has that going for her.

“Rents are going up just as fast as home prices are,” says Fairweather. Yes, that is how economics works. People buy houses, then rent them out. If the cost to buy goes up, then so does rent. The same thing happens in restaurants, when the cost of food goes up, the prices at the restaurant go up. It isn’t rocket science. Take a look:

Beginning in February/March of 2021, rents began to skyrocket. Renting a home costs 15% more than it did a year ago. If only we could pinpoint an event that happened in January of 2021 that could be responsible for this rapid increase in housing costs.

Reading her Linked in page, she lists the following as her causes:

Children • Education • Human Rights • Politics • Poverty Alleviation • Social Services

Given that, I am guessing that she voted for Biden. Fuck her. She is getting EXACTLY what she voted for. Boo fucking hoo.

By Divemedic, ago

Smarter Than You

A Massachusetts service station owner says that oil companies are making too much profit from gasoline sales, so is now refusing to sell it any longer. He has decided that it is better for people not to be able to buy gasoline at any price, than to sell it for the market rate, because profits are evil.

This is the typical liberal mentality: “You are too stupid to make the decision as to whether or not gasoline is too expensive, so I will make that decision for you. Go buy an electric car, or something.”

By Divemedic, ago

Party of Science

This is why science can’t be trusted. Orange County, Florida’s commission hired a consulting firm to study whether or not putting rent controls in place would be productive. The consulting firm noted that rent controls wouldn’t work, mainly because the supply of rental housing is being overwhelmed by demand. They went on to say that capping rents would further reduce supply. In other words, basic economic theory.

The county government is not happy that the facts didn’t fit their version of reality and are demanding a refund.

“If (commissioners) saw that a consultant who was supposed to do fact-finding on rent stabilization was so biased as to say you’re getting outside attention, then we really should get a refund on this report,” (County Commissioner) Bonilla said. “Unfortunately, it looks like they were not ready to do the job they were hired to do, and they were too biased to provide a report that we deserved.”

Says the commissioner who is pushing for rent control

By Divemedic, ago

Collapsing

California average gas prices just broke $6 a gallon. The national average is currently 25% less than that at $4.59 a gallon, but many experts are calling for gas prices to reach $6 a gallon within the next 60 days. So they are calling for a 25% increase in 2 months, meaning that fuel prices are now doubling every 8 months. Since everything you buy has to be transported from one place to the other, this will continue to contribute to inflation.

In fact, gas stations in Washington state are already preparing for $10 a gallon gasoline prices. We are on the cusp of seeing hyperinflation and a collapse of the US economy.

By Divemedic, ago

Venezuela as a Map

The Fed is asking businesses to enact a hiring freeze to help fight inflation. The thought here is to cut off the demand for labor, which will prevent wages from increasing. This will in turn lower the amount of money available to chase goods, which will reduce demand and thereby control inflation. In other words, they want to make everyone poorer by keeping you from being able to get a job or run your business.

This is a common scenario for socialism/communism:

  • They enact policies of free stuff, which causes runaway inflation.
  • To combat that inflation, they begin wage and price controls.
  • This causes shortages of goods and labor.

How long will it be before we are eating our pets?

https://www.youtube.com/watch?v=Wdld7SqnIxE

Inflation won’t be controlled by keeping people poor on purpose. It will be controlled by stopping leftist idiots in the government from doing things like mailing out checks so people can have free Internet.

By Divemedic, ago