President Joe Biden plans to add three million barrels to the Strategic Petroleum Reserve (SPR) after wiping out more than 40% of the nation’s emergency oil supplies. As a result, the country’s stocks now stand at their lowest levels since January 1984, totaling a little more than 380 million barrels. The administration had intended for the withdrawals to last for six months, with October being the end date. However, the White House sought an extension to ensure petroleum prices would keep coming down – and the suspicion is that this was due to the midterm elections. When was it decided that the oil reserve would be used as a political tool instead of its initial purpose of securing America’s energy needs in times of crisis?
Emergency Oil Reserve Give and Take
The Department of Energy announced on Dec. 16 that it would purchase three million barrels of oil to replace a fraction of what was eliminated from the SPR. This means that US taxpayers will be paying more than $70 per barrel. Interestingly enough, former President Donald Trump had proposed buying barrels of crude in the $20 range when prices had crashed, which faced Democratic opposition.
“Relative to conventional purchase contracts that expose producers to volatile crude prices, this new approach, when used at scale, can give producers the assurance to make investments today, knowing that the price they receive when they sell to the SPR will be locked in place,” the Energy Department said in a statement. “Today’s notice will pilot this new approach by starting with a purchase of up to 3 million barrels of crude oil.”
Biden has received plenty of criticism for drawing down from the oil reserve, particularly from Republicans who charge that he leaves the US vulnerable. The GOP has indicated that the House Oversight and Reform Committee will probe these releases when they assume the House majority in 2023. Of course, the chief question is whether the SPR injections will be offset by the federal government's plan to sell approximately 265 million barrels by the fiscal year 2031 to raise more revenue.
With West Texas Intermediate (WTI) futures wiping out their 2022 gains and a gallon of gasoline averaging about $3.20, the president will take full credit – and you cannot blame him. But the downward direction in petroleum markets has been primarily driven by the collapse in Chinese demand and global recession fears. Any look at the state of international energy markets will convey one word: fragile.
A Labor Market Built on Lies?
For months, the talk of the town has been the US labor market. So far this year, 4.3 million jobs have been created, which is certainly nothing to sneeze at in today's inflationary economy. But are these accurate figures? It had seemed strange, considering all indicators had signaled a sharp slowdown in the jobs arena. There might be evidence that these numbers are inflated.
The Federal Reserve Bank of Philadelphia recently published its second quarter "Early Benchmark Revisions of State Payroll Employment" report. It found that employment changes that took place between March and June were quite different than what the Bureau of Labor Statistics (BLS) reported. The regional central bank learned that employment gains were overcounted by more than 1.1 million.
“In the aggregate, 10,500 net new jobs were added during the period rather than the 1,121,500 jobs estimated by the sum of the states; the U.S. CES [Current Employment Survey] estimated net growth of 1,047,000 jobs for the period,” the report stated. Put simply, employment growth was flat in the March-June period.
Liberty Nation has reported potential discrepancies in the monthly snapshot of the labor market, particularly on the issue of double counting. The BLS report contains the establishment and household surveys. The former has recorded better-than-expected gains, while the latter has been trending sideways for months. The reason? The establishment (business) component allows for double counting, and the household aspect does not. In fact, the divergence between the two is nearly three million, thanks to the growing number of people working two or more jobs since Nov. 2021.
So, Washington’s dirty little secret may finally be exposed for everyone to see.
Recession is Nigh?
The latest factory activity is screaming recession. The S&P Global Purchasing Managers' Indexes (PMIs), which spotlight the general direction of various economic sectors, deepened into contraction territory in December and clocked in worse than expected. The Composite PMI weakened to 44.6, the Manufacturing PMI fell to 46.2, and the Services PMI tumbled to 44.4. What do these numbers convey? Output is sliding, new orders are declining, sales are falling, and employment levels are slowing. But prices are stabilizing amid improved supplier delivery times and lower prices for fuels and metals.
Everything is screaming recession these days: the housing market, the manufacturing sector, the widening spread between the two- and ten-year Treasury yields, consumer demand, and the stock market. If another economic downturn does not transpire in 2023, it would be the biggest shock.
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