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Wednesday, March 21, 2012

Cringing

Oil Supply & Demand. Now really, folks:
Total products supplied over the last four-week period have averaged nearly 18.2 million barrels per day, down by 5.7 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged about 8.4 million barrels per day, down by 7.8 percent from the same period last year. Distillate fuel product supplied has averaged just under 3.6 million barrels per day over the last four weeks, down by 8.5 percent from the same period last year. Jet fuel product supplied is 1.0 percent higher over the last four weeks compared to the same four-week period last year.Link
That's, er, not a good sign. Comparison December:
Total products supplied over the last four-week period have averaged nearly 18.5 million barrels per day, down by 5.8 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged 8.7 million barrels per day, down by 4.7 percent from the same period last year. Distillate fuel product supplied has averaged nearly 3.9 million barrels per day over the last four weeks, up by 2.4 percent from the same period last year. Jet fuel product supplied is 0.5 percent lower over the last four weeks compared to the same four-week period last year.
There is some fleet replacement effect on gasoline consumption, and of course those drivers with highest mileage have the biggest incentive to replace less fuel-efficient vehicles with fuel-efficient vehicles. And yes, distillate numbers are somewhat lowered by warmer weather. But not 5% (fuel oil heating adds about 5% to US usage over the winter, and it didn't all disappear). This says something about trucking, which says something about the economy, and most definitely something about the pace of construction and retail activity. Higher employment ought to increase gas consumption rather than lowering it.

Our YTD daily average of products supplied is 18,177, stunningly down compared to last year's 19,236. There is some ongoing conversion of the trucking fleet to natural gas, but it just can't move that fast. There are adaptive limits in any given period.


Change YoY for three categories.

One of the reasons that the 2001 recession didn't impact jobs that much early on was the imbalance in autos - the late 90s dot.com boom had amped up auto sales, which then slid a bit.

So by the time we hit deceleration diffusioin in 2000, there was a real offsetting factor in autos (helped by interest rates).

However it looks like we got the de-correlator of autos last year, in part because of the Japanese tragedy and its supply-line effects. This year, that looks like it may be wearing out.

Since real pace of construction isn't as good as I thought, everything depends on autos, and I'm in major doubt over that for the reasons I have explained. Last graph:


Mid-cycle growth recessions are not really a bad thing - they generally prevent a real recession from forming. At a minimum, that's where we are.

In general (she remarked grimly), you have to have some pretty substantial non-correlator pushing the whole economic engine the other way to stay in the growth recession. Political hot air doesn't qualify.

Paper (green line) is a proxy for net inventory cycle changes exclusive of autos and energy, and somewhat on the leading edge. The blue line is of course inflated due high prices. On a 'real" basis it is well below zero. It sure looks to me like we are at the weakest part of the exit from the late 2007-2009 recession.

There is one other major factor, and it is colored purple:


Value of construction. Inflation moves that line up too, but it is the great counterweight of the US economy, and I was counting on it to pick up some slack this year as auto production stopped holding us up.

That supposition, given rates and sales, appears to be a bit dicey.

The purple line is acutely sensitive to interest rates, and right now interest rates aren't our closest friend. They're about to bottom out. Up until now they have provided a decent growth push:




Comments:
MOM,

That's, er, not a good sign.

It is consistent with the port traffic we've been seeing though. Sigh.
 
I just reread my port traffic post. There is something else consistent.

Here are the latest seasonally adjusted port traffic charts. Enjoy and/or cringe.

I too felt the need to use the word cringe. Go figure.
 
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