The Political Page, T+56 -- March 17, 2017

Dissing Obama, backing Trump: EU overwhelmingly defeats proposal to ban oil exploration in the Arctic. If the US and the EU banned exploration of oil in the Arctic, that would leave the Arctic for Russia/Putin. Is anyone paying attention?

"Icy" water exploration: Norway plans as many as 12 oil and gas projects this year.

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Health Care Insurance in Tennessee: 

Only One Insurer In Half-The-State; No Insurer In Rest Of State 

-- President Trump -- live television -- 9:33 a.m. Central Time

Fact check. From ObamaCare healthcare exchange in Tennessee.

2017 rates and carriers

Four carriers offer exchange plans in 2016, but UnitedHealthcare is exiting the exchange at the end of 2016. That leaves three carriers offering plans in the exchange for 2017, but Blue Cross Blue Shield of Tennessee is no longer offering coverage in the metro areas of Knoxville, Nashville, and Memphis, which are the three largest metropolitan areas in the state.

BCBST is not offering individual market plans (on or off-exchange) in 30 counties in those metro areas in 2017, although by remaining in some areas of the state, they’ve avoided a full market exit and left the door open for a possible return to state-wide coverage in 2018.

For 2017 coverage, BCBSTN will not pay broker commissions for exchange enrollments in the Tennessee counties where they will continue to offer plans, which means there will be fewer enrollment assisters available to help consumers.

Blue Cross Blue Shield of Tennessee had the lion’s share of the exchange market in 2016, covering almost 69 percent of the enrollees. The carrier says that from 2014 to 2016, they expect to incur half a billion dollars in individual market losses. And although they’ve said they’ll consider re-entering the exchange statewide in 2018 or later, the market would have to stabilize first.

Because of BCBST’s exit from the three metropolitan areas, approximately 52,000 people in Nashville, 31,000 people in Knoxville, and 29,000 in Memphis must switch to a different plan for 2017 (the exchange will map them to a new plan via auto re-enrollment if they don’t pick their own).

In 2016, United and BCBST both offered plans state-wide in Tennessee. United is exiting altogether, and BCBST is leaving the metropolitan areas. As a result, residents in 73 of Tennessee’s 95 counties will only have one carrier option in the exchange.

The Obama Answer To The Expensive EpiPen Debacle -- Cuba! -- October 14, 2016

This is the key paragraph in the Huffington Post article:

Some of the island’s drugs may face hurdles entering the U.S. market, however, because the Cuban government has disregarded international patents in order to make generics widely available and keep costs down. 

Who would have guessed?

The changes promise to boost Cuba’s health care system ― which is lauded throughout Latin America for its preventative care and held up as one of the socialist revolution’s greatest achievements by the Castro government.

The island’s pharmaceutical industry has also made major advancements ― including developing the vaccine CimaVax, which impedes the growth of cancer cells, and Heberprot-P, which treats diabetic foot ulcers. Cuba has patented some 400 drugs, according to the NACLA Report on the Americas.

Drugs, rum, and cigars. What's not to like. 

Global Inflation Falls To Seven-Year Low -- October 4, 2016

Global inflation falls to seven-year low. WSJ. Data points:

• global inflation rates fell for the second straight month in August
• lowest level in almost seven years
• seven years ago: global economy in the throes of a downtown that followed the financial crisis (mark-to-market mayhem -- see below)
• inflation rate now at 2.1% (down from 2.2% in July)
• smallest rise in consumer prices since October, 2009, when they increased by 1.7%

Perhaps Krugman was correct.

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Back to the Bakken

Active rigs:

	10/4/2016	10/04/2015	10/04/2014	10/04/2013	10/04/2012
Active Rigs	32	68	190	183	189

RBN Energy: Colonial leak's impact minimized by imports, use of line 2. The big story here is how one interruption in the nation's energy pipeline system can become such a huge story. Perhaps President Obama should shut down all pipelines until they figure out what caused the Colonial leak.

The increase in waterborne flows to the East Coast in response to the recent Colonial Pipeline outage illustrated the flexibility of supply in the U.S. motor gasoline market. At the same time, the lack of a lasting impact from the loss of 8.3 million barrels of gasoline to a key U.S. demand region highlighted the degree of oversupply in the market. Today we look at how waterborne flows helped to mitigate the effects of the Colonial Pipeline outage, and how flexibility in the East Coast motor gasoline market enabled it to handle unexpected supply constraints with minimal disruption.

Colonial Pipeline is the largest source of refined product supply for the U.S. East Coast. Colonial’s primary route (from Houston to Linden, NJ) consists of four distinct segments, which, like the “arms” and “legs” of an X, meet at Greensboro, NC. One of the two Houston-to-Greensboro lines is dedicated to moving motor gasoline (Line 1, capacity, 1.37 MMb/d), and the other line (Line 2; capacity, 1.16 MMb/d) can be used to ship either distillate (diesel and heating oil) or gasoline, each of which can be move sequentially through Line 2 in “batches”.

At Greensboro, these products go into breakout tanks; from there, gasoline and distillates are sent further north (again in batches) on two mainline pipes. Line 3 (capacity, 885 Mb/d) runs from Greensboro to Linden––where it connects with the Intra Harbor Transfer (IHT) system, which facilitates deliveries to terminals across the New York and New Jersey area. Line 4 is a 32-inch-diameter pipe (capacity, ~700 Mb/d) that runs from Greensboro to Colonial’s Dorsey Junction terminal near Baltimore, MD.

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US Propane Exports Now 2nd Largest US Petroleum Product Export

From the EIA:

In the first half of 2016, the United States exported 4.7 million barrels per day (b/d) of petroleum products, an increase of 500,000 b/d over the first half of 2015 and almost 10 times the crude oil export volume. While U.S. exports of distillate and gasoline increased by 50,000 b/d and nearly 140,000 b/d, respectively, propane exports increased by more than 230,000 b/d. Propane surpassed motor gasoline to become the second-largest U.S. petroleum product export, after distillate. --- EIA

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That Phony Cut

Oil prices flat on skepticism over OPEC's efficacy -- WSJ. We have learned this:

• OPEC is pumping at record levels even after end of summer surge
• Nigeria, Libya are exempt from OPEC's "agreement" (Bloomberg story here)
• Russia is not part of the deal

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Mark to Market and Boeing

Mark to market mayhem: Investopedia.
Boeing's unique accounting method helps improve profit picture: WSJ.

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President Obama's Foreign Policy Successes

US-Russia ties crumble under weight of Syria, nuclear pact: Bloomberg

Philippines says sayonara to the US, aloha to China: WSJ

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What President Bill Really Thinks Of ObamaCare

ObamaCare is a "crazy system": Bill Clinton.

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The Demise Of The Big Box Stores

Sears to sell Craftsman for $2 billion.

Toys 'R Us to sell FOA Schwarz.

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The Market

Late morning: flat; Dow 30 up about 5 points. Oil up five cents at $49.45. NYSE:

• new highs: 55 -- CLR, another big whoop; Encana;
• new lows: 13

Opening: Dow 30 up about 50 points, if I remember correctly.

Jobs Report -- September 29, 2016

Claims rose to 254,000. And here. Well below the 260,000 forecast. Four-week moving average, down from 258,500 previously, at 256,000.

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Individual Health Insurance Premiums Soar -- Duluth News Tribune

Link here.  Data points:

• Minnesota: private health care insurance premiums to rise 67% next year
• follows BC/BS announcement earlier this summer it was eliminating all but one of its individual health policies
• insurance regulators: "premium increases are unacceptable but nothing they can do"

 

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Consumer Spending Drops; "Clouds" Federal Reserve Rate Hike Decision --  Reuters

Link here.  Data points:

• US consumer spending fell in August for the first time in seven months
• inflation showed "cautious signs of accelerating"
• US consumer spending accounts for more than two-thirds of US economic activity
• spending fell 0.1% (after accounting for inflation); analysts had expected a 0.1% gain

Not to worry: once higher gasoline prices kick in, consumer spending will increase. 

The Tipping Point: ObamaCare Has Problems; Exposed By Aetna -- Washington Post -- August 16, 2016

Updates

September 3, 2017: fewer and fewer stories on ObamaCare. No longer matters. SF Chronicle, "frustration mounts over premiums for individual health plans." Data points:

• premiums will rise by double-digits (on a percentage basis)
• very small group actually affected -- not enough to get Congress to act
• early retirees, skilled tradespeople, musicians, self-employed professionals, business owners, employees with small employers who don't provide health insurance
• Delaware example: premiums will jump 35% from $740/month to $1,000/month this November

June 21, 2017: Anthem to depart Indiana and Wisconsin.

June 12, 2017: Iowa going down. 

June 6, 2017: Anthem exits Ohio.

May 24, 2017: BC/BS to pull out of Kansas City, MO. Not trivial and it's still not TrumpCare. It's ObamaCare.

April 9, 2017: ObamaCare premiums keep rising -- Bloomberg. Costs up more than 20% in three states that have posted rates.

April 6, 2017: Aetna "pulls out" of Iowa. From the Des Moines Register.

April 4, 2017: Knoxville could be first US city where ObamaCare fails. CNN reports that Humana, the only insurer left on the Affordable Care exchange in the Knoxville area, is set to exit the market in 2018. 

February 15, 2017: IRS will not reject tax filings submitted without healthcare insurance information. 

February 15, 2017: Humana will exit ObamaCare, 2018. FoxNews reports that Aetna was the first insurer to drop out of ObamaCare.

February 1, 2017: Aetna may pull out of ObamaCare next year. Apparently the decision has been made.

November 1, 2016; even the Washington Post seems to be saying -- let's take off our gloves on ObamaCare -- and report it "neutrally." 

October 31, 2016: the tipping point in Arizona -- sky-rocketing 2017 ObamaCaare premiums. 

October 23, 2016: Pittsburgh Tribune headline -- the 2017 ObamaCare premium increases raise suggestions that ObamaCare has begun a "death spiral."

The hefty increases Pennsylvania has approved for next year's individual health plans provide new fodder for Obamacare critics who say the federal law's insurance marketplace is bound to fail.

The state's Insurance Department last week approved increases averaging 32.5 percent for the 2017 plans, making Pennsylvania one of 14 states so far to increase individual rates by an average of more than 30 percent, according to data on ACAsignups.net, a site that tracks enrollment and pricing.

August 31, 2016: The Huffington Post weighs in. I have no idea why. 

August 25, 2016: from Carpe Diem

‘Keep your doctor’ and ‘keep your plan’ got a Pants on Fire rating and have been scrubbed from Obamacare website

August 21, 2016: ObamaCare has gone from the president's greatest achievement to a "slow-motion death spiral." -- Business Insider. 

It has not been a good week for the Affordable Care Act (ACA), better known as Obamacare.

A slew of news, from insurers dropping out to possible fraud among healthcare providers, has all accumulated in a deluge of negative headlines for one of President Obama's signature laws.

In fact, it's gotten so bad that it appears that the whole program itself may be in doubt.

August 19, 2016: why are health insurers dropping out? Expenses underestimated by huge amounts. Same with Medicaid. Cost of ObamaCare Medicaid expansion was almost 50% higher than previously estimated. Congress really, really hurt the US middle class. Sold a huge bill of goods. It appears everyone lost on ObamaCare. 

August 18, 2016: even CNBC admits -- ObamaCare is now in a death spiral.

In other words, the insurance "death spiral" has arrived. Obamacare's critics have long predicted that exchange plans' high premiums and deductibles would keep all but the sickest Americans from enrolling. These people would need so much medical care that insurers would lose money no matter how much they raised premiums. Eventually, insurers would have no choice but to pull out. 

President Obama and Democratic presidential nominee Hillary Clinton have proposed a novel solution to this government-created problem — more government. They're pushing for a government-run "public option" that would usher in de facto single-payer health care. That'd be a disaster for consumers and taxpayers alike.

August 18, 2016: as ObamaCare implodes, Democrats blame insurers. An op-ed at The WSJ.

August 18, 2016: the number of stories and the media posting those stories suggest that we may have reached a tipping point on the day Aetna announced that it was pulling out of ObamaCare except for a very few exchanges. The most recent story from US News:

Aetna's decision to partially withdraw from a major provision of President Barack Obama's health care law is leaving some Americans with only one or no health insurance options, threatening the law's promise to continue to reduce the number of people who have historically been too sick or too poor to access coverage.

Aetna, retaliating in part against a Department of Justice lawsuit, announced Monday that it was leaving exchanges in 11 states, following a string of similar announcements earlier this year that came from other large insurers like UnitedHealth and Humana.

The exchanges, or marketplaces, allow some Americans who don't get health insurance from an employer to compare different plans and buy them at a tax-subsidized rate, mostly in the form of reductions to the amount they pay for their policies each month. But with insurers choosing not to participate, in part because they are losing money by covering people who are sicker and seeking out immediate care after having insurance for the first time, people who shop for these plans are left with even fewer options to choose from.

Some will have only one plan to select, and at least one – Pinal County, Arizona – will have none.

The Obama administration's response is to point out that health insurance companies are still adapting to the law and that millions of people will continue to receive coverage. Officials also point out that health insurance companies can leave or join the marketplace each year. But for many customers, Aetna's pullout will be more than just an inconvenience.  

August 18, 2016: the number of stories and the media posting those stories suggest that we may have reached a tipping point on the day Aetna announced that it was pulling out of ObamaCare except for a very few exchanges. The most recent story from The Wall Street Journal:

Barack Obama’s signature health-care law is struggling for one overriding reason: Selling mispriced insurance is a precarious business model.

Aetna Inc. dealt the Affordable Care Act a severe setback by announcing Monday it would drastically reduce its participation in its insurance exchanges. Its reason: The company was attracting much sicker patients than expected. Indeed, all five of the largest national insurers say they are losing money on their ACA policies and three, including Aetna, are pulling back from the exchanges as a result.

The problem isn’t technical or temporary; it’s intrinsic to how the law was written. By incentivizing insurers to misprice risk, the law has created an unstable dynamic. Total enrollment this year will be barely half the 22 million the Congressional Budget Office projected just three years ago. Premiums, meanwhile, are set to skyrocket, which will further hamper enrollment. It isn’t clear how this can be fixed.

August 18, 2016: the number of stories and the media posting those stories suggest that we may have reached a tipping point on the day Aetna announced that it was pulling out of ObamaCare except for a very few exchanges. The most recent story from Forbes:

The Affordable Care Act (ACA) has produced massive consolidation among health care providers, largely the result of hospitals merging and large hospital systems taking over private doctor practices. In response and in an apparent attempt to improve their negotiating position with the consolidated providers, four of the five major for-profit health insurance companies have proposed mergers: Aetna with Humana and Cigna with Anthem. The Department of Justice (DOJ) has moved to block the mergers, citing a growing threat to health care market competition.

Before making that decision, the DOJ asked Aetna, and likely the other insurers as well, how DOJ action to challenge the merger would affect the insurer’s decision to participate in the ACA exchanges. Aetna CEO Mark Bertloni wrote in reply:

The President asked us to take a long-term view when this law went into effect, and, unlike many others, we have stayed the course and worked constructively to make the public exchange market work. The acquisition of Humana puts Aetna in a significantly better position to continue and expand its support.

Unfortunately, a challenge by the DOJ to that acquisition and/or the DOJ successfully blocking the transaction would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support, leaving Aetna with no choice but to take actions to steward its financial health. …
Although we remain supportive of the Administration’s efforts to expand coverage, we must also face market realities. … We have been operating on the public exchanges since the beginning of 2014 at a substantial loss. … Our ability to withstand these losses is dependent on our achieving anticipated synergies in the Humana acquisition. …

Our analysis to date makes clear that if the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses. Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint.

In other words, Aetna’s position is that it would continue to participate in the exchanges, despite the fact that they were a money losing proposition, if a favorable decision on merging with Humana was forthcoming so the insurer would have extra synergies, i.e. profits, elsewhere. The inescapable and disturbing implication here is that due to the ACA, important decisions affecting health care markets, made both by government and by private companies, are now increasingly becoming a function of political negotiations and DOJ market concentration calculations.

August 17, 2016: the number of stories and the media posting those stories suggest that we may have reached a tipping point. The most recent one in The New York Times:

Facing high-profile withdrawals from online insurance exchanges and surging premiums, the Obama administration is preparing a major push to enroll new participants into public marketplaces under the Affordable Care Act.

The administration is eyeing an advertising campaign featuring testimonials from newly insured consumers, as well as direct appeals to young people hit by tax penalties this year for failing to enroll.

But as many insurers continue to lose money on the exchanges, they say the administration’s response is too late and too weak. The companies point to a fundamental dynamic in the marketplace in which too few healthy people are buying policies and too many sick people are filing costly claims.

And the uneasy truce between the government and insurers, which followed adoption of the health care law, appears to be fraying as some of the large companies say they are leaving or sharply scaling back. Aetna warned the Justice Department last month that the company would curtail its participation in the exchanges if the government sued to block its acquisition of Humana, a major competitor.

In a July 5 letter, disclosed by The Huffington Post, Mark T. Bertolini, the chairman and chief executive of Aetna, said that in the event of a lawsuit, “we will immediately take action to reduce our 2017 exchange footprint.” He argued that Aetna needed to form a combined insurance giant to mitigate its losses on the exchanges.

The Justice Department filed suit two weeks later, saying that the combination of Aetna and Humana would reduce competition in violation of federal antitrust law. On Monday, Aetna announced that it would sharply reduce its participation in the public marketplaces next year, offering individual insurance products in 242 of the 778 counties where it now provides such coverage.

An Aetna spokesman insisted on Wednesday that it was the growing financial losses in the exchanges — not the challenge to its acquisition of Humana — that ultimately “drove us to announce the narrowing of our public exchange presence for the 2017 plan year.”

August 17, 2016: Aetna telegraphed that it would exit ObamaCare if merger denied by Obama administration. 
 

Original Post 

 

When I first posted this story, I said the story "had legs."

Wow, was that correct. This story really has legs. Tonight at 8:02 p.m. Eastern Time, The Washington Post has a big story on Aetna saying sayonara to ObamaCare: Aetna decision exposes weaknesses in Obama's health-care law.

And another nominee for the 2016 Geico Rock Award: Carolyn Y. Johnson and Juliet Ellperin of The Washington Post.

Insurance giant Aetna’s decision to stop offering much of its individual coverage through the Affordable Care Act is exposing a problem in President Obama’s signature health-care law that could lead to another fraught political battle in Congress.

Aetna’s announcement Monday night was the latest sign that large insurers are losing money in the Affordable Care Act’s marketplaces, heightening concerns about the long-term stability of a key part of Obama’s domestic policy legacy. But addressing this issue could open the door to a nasty political fight, given that some Republicans have vowed to repeal the law outright.

I quit reading at that point. 

Norwegian Oil Production Highest In 5 Years; Consumer Prices Unchanged Month-Over-Month; Decline In Fuel Costs, Airlines, Etc., Offset Costs For Medical Care Which Showed Biggest Increase Since February; Chariots On Fire; 32 Active Rigs In North Dakota -- August 16, 2016

Active rigs:

	8/16/2016	08/16/2015	08/16/2014	08/16/2013	08/16/2012
Active Rigs	32	74	194	182	200

RBN Energy: Marcellus / Utica takeaway capacity to the southeast. The series continues.

Venezuela update. From Reuters / Rigzone:

Venezuela, which holds the world's largest crude reserves, is on track to suffer its steepest annual oil output drop in 14 years as it suffers the effects of an economic crisis and years of under investment and mismanagement, according to data seen by Reuters and interviews with company sources and workers.

The state-run oil company, Petroleos de Venezuela (PDVSA), is struggling to stem a production decline that has accelerated this year as a result of payment delays to suppliers, lack of investment in equipment, and poor planning in the country's vast oil fields.

In the 12 months to June, Venezuela's crude output fell 9 percent to 2.36 million barrels per day (bpd), while the Organization of Petroleum Exploration Countries (OPEC) has boosted its output by 4 percent, according to the group's official figures.
Venezuela's oil minister and PDVSA president, Eulogio Del Pino, last month confirmed a 220,000-barrel-per-day production decline -- around 8 percent -- so far this year compared with 2015.

Norway. July oil production highest level in five years. Why? Because many fields are producing "above prognosis." Oil output was 10% above July, 2015, and about 18% higher than the previous month. Norway produces about 1.7 million bopd, up 300,000 bopd in the past couple of months.

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The Market

Closing: market down 53 points. NYSE --

• new highs: 86, Enerplus,
• new lows: 3 (somewhat surprised)

Mid-day trading: Market down 65 points. Chariots on fire: Tesla cooperating with French authorities investigating car fire. 

Opening. Some profit taking. Market down 40 points.

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Health Costs Surge In July
And 2017 ObamaCare Premiums Are Yet To Be Set

 
US consumer prices unchanged in July as fuel costs ease. In the small print -- which could have been in the headline -- costs for medical care showed biggest increase since February.

It was the first time in five months the consumer-price index failed to advance and followed a 0.2 percent gain in June, Labor Department figures showed Tuesday in Washington. Excluding food and energy, prices rose 0.1 percent, less than projected. 

Inflation continues to tread below the Fed’s goal as U.S. companies remain challenged by frugal consumers and competition from cheaper goods made overseas. With price pressures elusive, central bankers will be less willing to raise borrowing costs.

This has nothing to do with "frugal" consumers. They are tapped out with rent increases, medical expenses and healthcare premiums. And monthly telecom bills.

The biggest slump in hotel room rates in eight years and the largest drop in airline fares since July 2015, offset continued rent increases, which had been propping up core consumer prices. Medical care costs rose 0.5 percent, the biggest gain since February.

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Aetna Pulling Out Of ObamaCare Has Legs

Now, over at USA Today: Aetna's exit deals blow to ObamaCare, patients.

The insurer blamed heavy losses for the move. In doing so, the company suggested that too many sick people are buying plans, not enough healthy people are paying premiums to make up for it and the government isn't making policy changes to fix it.

But the U.S. Department of Health and Human Services says that it has implemented new regulations to make the exchanges more appealing to insurers. For example, HHS says new rules make it more difficult for Americans to abuse the system by buying insurance when they need it and dropping it when they don't, which is illegal and extremely unprofitable for insurers.

"They did respond to some degree," but insurers are "not satisfied" with the moves, said Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation at the University of Michigan, in an interview.

One more step toward "the public option" (i.e., the USNHS).

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Racial Wealth Divide 

Yahoo!Finance is reporting:

The report finds that over the past 30 years, the average wealth of white families grew by 84%, which is 1.2 times faster than the average rate of growth for Latinos, and three times the rate of growth for blacks. By 2044, when America becomes a majority-minority country, the wealth gap between white families and black families will double.

By 2044, America will be a majority-minority country, meaning that whites will only make up 49.7% of the population. Current minorities like Latinos, African Americans, Native Americans and Asians will soon make up a majority of the American populace.

It will take black families around 228 years, and Latino families 84 years, the report estimates, to achieve the same average wealth white families have today.

What do the experts blame this on? The housing bubble.

I would add that burning down your own neighborhood doesn't exactly help.

I don't know about you, but "the housing bubble" wasn't the first thing I thought of when I saw the headline, racial wealth divide. And when you look at the graph, there is nothing to suggest that the "housing bubble" disproportionately affect non-whites.

Suggested solutions by the author or experts:

• reforming the tax code
• appointing a wealth tsar 

I'm thinking, maybe, reparations would work, also.

If you really want to see the "racial wealth divide" widen, ban fracking and watch what happens when Saudi Arabia / OPEC are back in the driver's seat.

Another incredibly superficial article based on a single graph, a single data point. 

WTI: Down To Around $41 -- July 28, 2016; Another Million Insured May Lose Their ObamaCare Coverage -- Anthem

Will we see $39 oil next week?

Previous poll: did operators "jump the gun" on adding rigs in the Bakken, 2H16?

• Yes: 56%
• No: 44%

Market down in early morning trading. Investors are concerned about something:

• jobs report?
• oil dropping to $41 and trending down?
• earnings?
• Fed hinting at rate increase in September?

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Validating Earlier Reports That Southwest Airlines Tried To Save Money Over The Years By Not Investing In Software Scheduling Upgrades

Will Heads Roll?

From The Chicago Business Journal:

Southwest Airline's massive technology outage that caused a near collapse of the carrier's operations nationwide last week continues to reverberate throughout the low-fare airline, and is likely to do so for many days and weeks to come.

An internal memo to Southwest Airlines employees from Craig Drew, senior vice president of air operations, only underscores the magnitude of the meltdown and the damage control with employees that top management is now engaged in as many workers have been outraged by the company's handling of the mess.

Drew began his memo by noting "the last week has been a trial by fire for us at Southwest Airlines, especially for those of you who were on the front line." Drew went on to praise employees for their efforts, noting "I am extremely grateful for everything you did to preserve the relationships with our customers, answering impossible questions and demonstrating the special nature of our people."

Drew tried in his memo to tamp down concerns among many employees that appropriate steps won't be taken to address the meltdown. He wrote, "our technology issue is on the minds of many of you, and I can tell you that the company is swiftly and aggressively investigating the cause so we can mitigate a future breakdown like the one experienced last week."

Sources told me Southwest's board of directors have requested an internal investigation. It remains to be seen how exhaustive the investigation will be and whether it will name names if certain of Southwest's management team fell short in executing their responsibilities.

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Anthem Voicing Concerns On ObamaCare

From the front page of the print edition of The Wall Street Journal, no longer available on-line at WSJ?:

Anthem Inc. said it is now projecting losses on its Affordable Care Act plans this year, a turnaround for a major insurer that had maintained a relatively optimistic tone about that business.

Anthem said it now believed it would see a "mid-single-digit" operating margin loss on its ACA plans in 2016, due to higher-than-expected medical costs. It expects better results next year, because it is seeking substantial premium increases.

Anthem Chief Executive Joseph R. Swedish said that the insurer will re-examine its full-on commitment to selling plans on the health law's exchanges. Anthem will take a "prudent" approach to its future offerings, he said. Anthem has been a major player in the ACA marketplaces, with 923,000 exchange enrollees, and it offers the plans throughout the 14 states where it is a Blue Cross Blue Shield insurer.

The GOP needs to run, not walk, away from ObamaCare. 

California ObamaCare Rates To Surge -- LA Times -- July 19, 2016

Los Angeles Times headline: California ObamaCare rates to rise 13% by 2017, more than 3 times the increase of last 2 years.

The gift that keeps on giving. The GOP needs to run, not walk, away from ObamaCare reform. Let the Dems handle this one. If you love ObamaCare, you're gonna love Clinton/Obama's "National Health Service" plan.

From the linked story:

Premiums for Californians’ Obamacare health coverage will rise by an average of 13.2% next year — more than three times the increase of the last two years and a jump that is bound to raise debate in an election year.

The big hikes come after two years in which California officials had bragged that the program had helped insure hundreds of thousands people in the state while keeping costs moderately in check.

Premiums in the insurance program called Covered California rose just 4% in 2016, after rising 4.2% in 2015 – the first year that exchange officials negotiated with insurers.

On Tuesday, officials blamed next year’s premium hikes in the program that insures 1.4 million Californians on rising costs of medical care, including specialty drugs, and the end of a mechanism that held down rates for the first three years of Obamacare.

Rates are expected to jump in other states, too, although complete details won’t be available until later this year. The healthcare.gov federal exchange provides insurance under the Affordable Care Act in 38 states. California and a few other states operate their own exchanges

An analysis of 14 metro areas that have already announced their 2017 premiums found an average jump of 11%. The changes ranged from a decrease of 14% in Providence, R.I., to an increase of 26% in Portland, Ore., according to the analysis by the nonpartisan Kaiser Family Foundation.

The health law's next enrollment period begins a week before election day. Democratic presidential candidate Hillary Clinton wants to build on President Obama’s program, while Republican Donald Trump wants to repeal it.

California Dreamin', The Mamas & The Papas

Random Note On Where EOG Has Several New Permits -- July 15, 2016

EOG has several new permits in the immediate area of this well:

• 17044, 1,519, EOG, Wayzetta 6-12H, Parshall, one section, t11/08; cum 508K 5/16; open hole frack with about 2 million bbls sand; s7/30/08; TD 8/18/08; short lateral;

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Exxon Declares Force Majeure on Nigerian Exports

Link here.

Oil rose as Exxon Mobil Corp. declared force majeure on shipments of Nigeria’s biggest crude export grade. Force majeure -- a legal clause that allows it to stop shipments without breaching contracts -- was declared on Qua Iboe crude after “a system anomaly observed during a routine check of its loading facility."

This follows a similar disruption in May and June. The Niger Delta Avengers, a militant group that has targeted oil installations in Nigeria this year, claimed earlier this week that they attacked the Qua Iboe crude pipeline.

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A Note for the Granddaughters

Starbucks And ObamaCare

If anyone can figure out this article, let me know. That's rhetorical. Please do not send me anything on ObamaCare. When Don sent me this article, this was my reply:

There are so many "inconsistencies" either in this article or in ObamaCare. The first paragraph clearly states that employers need to provide, not just offer, health care coverage equal to their CEOs, and then in the very next paragraph, and the rest of the story, it sounds like companies have found a way around this, to offer what employees want and will actually use. Offer, not provide.

So, I don't get it.

Bottom line for me is that this is a bureaucratic nightmare: employees have lost out in a huge way and employers have figured out how to get around the law.

Again, the GOP needs to "run away" from ObamaCare and let the Dems sort it out.

By the way, this gives me an opportunity to segue into my weekly book review. In this week's issue of London Review of Books, there are actually several reviews that interested me.

Some time ago a reader suggested I read Dante's Inferno before posting any more comments regarding ObamaCare. In this week's LRB, Tim Parks reviews a new book: Dante: The Story of His Life, by Marco Santagata, translated by Richard Dixon. This was particularly noteworthy: Dante placed the prophet Muhammad in in hell. I did not know that.

Michael Neill reviews The Reformation of Emotions in the Age of Shakespeare by Steven Mullaney. Of course, neither the writer nor the critic mention the "real" Shakespeare but that's a discussion for another time. I've discussed it often.

Thomas Jones reviews a novel by Ian McGuire, The North Water, that takes place in northern England. Whether I read the book or not, I don't know, but the place names (York, Hull, Whitby) bring back a lot of memories, and the allusions to several other books (Moby-Dick, Sylvia's Lovers, Rites of Passage, Blood Meridian) makes it tempting (to read).

Finally, John Banville reviews The Physicicist and the Philosopher: Einstein, Bergson and the Debate That Changed Our Understanding of Time, by Jimena Canales. Banville brings up Copernicus and Proust in the first paragraph which is always delightful.

I see I have, in ink, circled several words that I need to add to the word list that I share with Arianna. The list includes from this two-page article: instauration, apotheosis, gnomic, quavers.

By the way, a digression, I always knew that "Mesopotamia" meant "in between the rivers." I always knew that "meso" meant middle but I never lingered over the "potamia" and "rivers." I asked Arianna, based on that -- "potamia" and "rivers" could she think of a word that we use today that might have come from "potamia"?

Yup, she guessed it: "potable." One wonders if thousands of years ago, budding philosophers wondered why ocean water was not "potable" whereas "river water" was. I can imagine explorers leaving maps with oceans and seas and rivers drawn on them. Most important to these explorers would have been drinking water, and it's very possible these early explorers labeled squiggly lines that represented rivers, as "potami" or "potable." Over time, "potami" (potable" became the word for rivers. Right or wrong, it provides a way to remember a word and provides a few minutes of entertainment while driving cross-country.

There are several other articles or snippets of articles in this week's LRB -- way more than usual. The timing is fortunate. My subscription is up for renewal.

Spectacular Panoramic View Of The Grand Canyon -- July 13, 2016; The Perils Of Forecasting The Price Of Oil

Following various links from this story led me to this post, an audio, panoramic view. It worked fine for me on Firefox.

This sort of puts everything into perspective. No pun intended.

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Oil Price Forecasting Lessons From 2008

The Bakken boom began in eastern Montana in 2000, and in western North Dakota in 2007. The Bakken boom did not go boom until 2010 or thereabout and did not hit its stride until about 2012, at which point production records were being posted every month until the Saudi Surge, October, 2014.

On my calendar I have this note: "on August 1, 2008, a talking head on CNBC said we would see $200 oil before we saw $100 oil."

Well, we never saw $200 oil and we passed $100 so fast on the way down to $45 one can argue he may have been right. If he blinked, he did not see $100 oil on its way down to $45. LOL.

Forbes had a look back on the forecasting lessons from 2008 back in October, 2015.

First, the talking head who predicted $200 oil just as the Bakken was taking off:

But there was a section of the industry who steadfastly insisted the prices had not reached a peak. T. Boone Pickens, for example, when prices dropped close to $100 by late August insisted that “In two or three years, we’re going to be at $200 a barrel—could be $300 a barrel for oil.”

The late Matthew Simmons echoed Pickens’ price forecast at roughly the same time. The funny thing is that for several years, he had shown audiences a slide that had the famous Economist cover titled “Drowning in Oil” from 1998, in which the write-up predicted prices would remain at $12 or lower.

Next to it, he displayed the cover “We Wuz Wrong” produced after prices soared. His reward was a story about him, which appeared July 10, just two days before the price peaked.

What’s amazing is the extent to which some remain unflustered by past predictions. When Pickens was reminded last year that he had been wrong about peak oil by CNBC’s Joe Kiernan, he exclaimed, “I’m the expert!” and continued to insist that oil production had peaked in 2005—if you ignore US shale (and NGLs and biofuels, which he doesn’t mention). [Wow!]

Simmons had the same certainty, saying in September 2008, “I find it ironic that here we have the biggest industry on earth, and I’m one of the few people to figure out that we have a major problem.” Occam’s Razor would suggest that maybe he was wrong.

And the Forbes contributor dares to write that the Hubbert curve is an incorrect theory:

As I argued in my 1994 paper, “The Failure of Long Term Oil Market Forecasting,” the problem is not just the uncertainty about both fundamentals and geopolitical trends, but the tendency to embrace incorrect theories, from the Hotelling Principle to Hubbert curves. Avoiding such a trap might not yield an accurate forecast, but it should help you beat the other hikers.

I am aware of Hubert's theory but the Hotelling Principle is new to me:

This theory proposes that owners of non-renewable resources will only produce a supply of their product if it will yield more than instruments available to them in the markets - specifically bonds and other interest-bearing securities. This theory assumes that markets are efficient and that the owners of the non-renewable resources are motivated by profit. Hotelling's theory is used by economists to attempt to predict the price of oil and other nonrenewable resources, based on prevailing interest rates.

Much more information at wiki, as usual, but it will make your eyes glaze over.

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Illinois Seeks To Shut Down ObamaCare Insurer

Another ObamaCare Non-Profit Health Insurer May Fail

Updates

July 15, 2016: from Forbes -- Land of Lincoln Health to liquidate -- not an ObamaCare problem but a co-op one. 

The answer being that it’s not true to say that there’s nothing wrong with the co op model. If there were nothing wrong and they also really did have that extra effect from worker of customer participation, then they would always out-compete capitalist firms. And this far along in the process, we wouldn’t have any capitalism, we’d only have a market of socialist enterprises. Thus there must be something wrong with co ops, some Achilles Heel. And there is–it’s the difficulty they have in gaining access to capital.

Here it’s that one specific payment which is the straw that breaks the camel’s back. But that one single payment alone isn’t enough, that’s just the latest and most specific problem. For the one thing that capitalists really do bring to an organization is capital. And that’s something you need to weather the vicissitudes of changing times and more especially the costs of getting an organization up and running. This is also the basic problem that many of those co ops set up under Obamacare’s face. As they don’t have shareholders, they can’t go to them to ask for more capital. If they were to ask their owners, those who buy health insurance, they’d just be shrinking the company even faster. That’s also why such co ops haven’t taken over the economy because they do just find it that much more difficult to gain access to capital.

July 13, 2016: from Americans for Tax Reform --

Sixteen Obamacare co-ops have now failed.

Illinois announced that Land of Lincoln Health, a taxpayer funded Obamacare co-op, would close its doors, leaving 49,000 without insurance.

The co-op now joins a list of 15 other Obamacare co-ops that have collapsed since Obamacare has been implemented. Failed co-ops have now cost taxpayers more than $1.7 billion in funds that may never be recovered.

Co-ops were hyped as not-for-profit alternatives to traditional insurance companies created under Obamacare. The Centers for Medicare and Medicaid Services (CMS) financed co-ops with startup and solvency loans, totaling more than $2.4 billion in taxpayer dollars.

They have failed to become sustainable with many collapsing amid the failure of Obamacare exchanges.

Since September, 13 Obamacare co-ops have collapsed, with only seven of the original 23 co-ops remaining. Illinois’ Land of Lincoln co-op faced losses of $90 million last year and is suing the federal government for the deficit caused by Obamacare. Co-ops across the country have struggled to operate in Obamacare exchanges, losing millions despite receiving enormous government subsidies.

Original Post

 

The Chicago Tribune reports. Data points:

• Land of Lincoln Health
• 49,000 people affected
• LOLH: deteriorating financial condition; required to pay $31.8 million to other insurers "under a complex formula in the Affordable Care Act, which aims to keep premiums stable by balancing risks among insurers
• LOLH: lost $90 million last year (2015)
• federal Centers for Medicare/Medicaid Services refused to bailout LOLH
• LOLH: one of 23 non-profit health insurers; $2.4 billion in Obama money to jump-start these 23 NPHI
• the goal of the NPHI: an alternative to Big Health like BC/BS

Add LOLH to the other twelve or thirteen or fourteen of the original 23 NPHI that have failed.

Obama and Hillary now want to substitute a British-NHS-like "public option" instead of the NPHI. A federal US-NHS is gonna cost us a lot more than $2.4 billion. Say, $2.4 trillion? As a start?

By the way, a reader reminded me yesterday that BC/BS was exiting Minnesota (MNsure). I guess this would be a Blexit.

Poll: US Market Share For EVs -- June 25, 2016

Quick, without looking, what is the US market share for plug-in EVs, rounded to nearest full percent, 2015?

• 0%
• 1%
• 2%
• 3%
• 4%
• 5%

Even I was surprised, considering all that is being written about EVs. The answer can be found at this post.

When you look up the answer, note that market share peaked in 2014, and then fell in 2015. 

The reason I bring this up is because there are folks who feel that "we" need to levy taxes/fees on miles driven rather than on gasoline consumed. Assuming those taxes/fees would not be an increase in gasoline taxes already paid, I was curious to what extent EVs contributed to highway traffic.

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GOP: Run, Don't Walk, Away From The ObamaCare Debacle

Blue Cross Blue Shield of Minnesota Calls It Quits; Cites Huge Losses

Remember "MNsure"? If not, see this post. LOL. It looks like things just got worse. The AP is reporting:

Minnesota's largest health insurer will pull the bulk of its plans off the individual market due to heavy financial losses.

Blue Cross Blue Shield of Minnesota said late Thursday will affect approximately 103,000 residents who buy coverage through MNsure, with an agent or directly from the company.

The company cited heavy losses in the individual market for their exit, though it will continue offering a smaller number of plans through a subsidiary.

Governor Mark Dayton says his administration will work with people affected by the decision to ensure they can transition to new coverage for 2017 when their current plans expire.

It's the second major shakeup in Minnesota's individual health care market. PreferredOne stopped selling its plan on MNsure in 2015.

I don't know why Governor Dayton doesn't simply use other people's money (OPM) to provide insurance for these 103,000 residents. The state has a population of 5.5 million. 103,000 represents only 2% of the entire population. If everyone in Minnesota kicked in $1,000/year, these 103,000 residents would be adequately covered, one would assume. That would work out to about $54,000/newly uninsured -- that should be more than enough for annual health care insurance in Minnesota.

In addition, giving those folks a check for $54,000 up-front would be like winning the lottery. Many of the recipients would probably vote to re-elect Governor Dayton and isn't this what it's all about in the first place, anyway?

iPad may auto-correct "MNsure" to "Manure." The latter may be the preferred spelling for all I know in St Paul. 

I track the ObamaCare debacle over at the "Doomsday Chronicles."

Miscellaneous Notes -- June 4, 2016; Shock And Awe -- ObamaCare Premiums Set To Rise 50%

From Reuters/Rigzone: Nigerian militants say their aim is "zero oil output" after three new attacks. See my post of June 3 regarding Nigeria before these most recent attacks.

I think this was posted previously; I forget. Saudi Aramco diversifying. Rigzone is reporting: GE Oil & Gas has signed an agreement with Saudi Aramco and Italy's Cividale to construct the Middle East and North Africa's first-of-its-kind, high-end forging and casting manufacturing facility to serve the region's energy and maritime industries.

Speaking of which: yesterday while driving out to see the new Buc-ee's at the intersection of Texas State Highway 114 and I-35W, we drove past "GE Manufacturing Solutions" and saw six brand new Norfolk Southern diesel locomotives (black and shiny) and one new BNSF (orange and shiny) on the tracks outside the facility. I don't recall ever seeing brand new locomotives literally off the "assembly line." I did not have my camera, unfortunately, but there was no place to park, so perhaps it was best.

No links, but there have been quite a few stories on Vaca Muerta lately (over the past 24 months).

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Shock And Awe

How bad are the ObamaCare premiums going to be? From the Chicago Tribune: Blue Cross premium hikes in Texas and Oklahoma could mean Illinois sticker shock.

llinois residents who buy Blue Cross and Blue Shield health care coverage through the state insurance exchange may be in for Obamacare sticker shock, if proposed rate hikes by the largest insurers in Texas and Oklahoma are any indication.

Texas and Oklahoma are possible harbingers of Blue Cross' prices on the Illinois exchange because all three health plans are owned by the same company, Chicago-based Health Care Service Corp. Blue Cross is the most popular insurer on the Illinois exchange.

In Texas, Blue Cross and Blue Shield is seeking increases averaging 53.7 percent across its Affordable Care Act plans, according to documents posted online by the federal government. In Oklahoma, Blue Cross and Blue Shield is seeking rate increases that average 49.2 percent. It is far from certain if the rate increases will hold up on review, or how much they might change.

The GOP needs to run, not walk, away from this debacle. Let the Dems handle this one.

Trump: "Let's make America great again."
Hillary: "Let's re-visit ObamaCare."
Gary Johnson: "Let's elect Hillary."

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Re-Balancing

This appears to be the word du jour: "re-balancing." We first saw this word associated with the price of oil, how analysts suggest that the price of oil will trend high as supply and demand "re-balances."

Yesterday, I saw a new use for the term. Apparently, Greenland's ice volume is re-balancing. Actually, I'm not quite correct. The story has to do with "the glacial mass balance of Greenland."

Apparently, the "glacial mass balance of Greenland is increasing despite the fact that reliable sources continue to report that global temperatures are on the rise. 

My hunch is that "warmists" can easily explain away this counter-intutitive observation:

In recent years, the glacial mass balance of Greenland is increasing despite announcements that global temperatures are on the rise; despite warnings that the Greenland Ice Sheet is melting; and despite announcements of a possible “blocked Gulf Stream “or catastrophic increase in sea level .”

The fact is, that snowfalls are higher than the amount of ice that melts, and the mass balance is strongly positive again this year.

The source is out of Italy and any source based in Italy certainly has to be reliable; why would they lie?

Huge Insurer To Exit Califoria Over Huge ObamaCare Losses -- June 1, 2016

ObamaCare, headline, section B, today's Wall Street Journal: UnitedHealth to exit California, a key market. Business losses mount.

• Trump: "Let's Make America Great Again"
• Hillary: "Let's Re-Visit ObamaCare"
• Gary Johnson: "Let's Make Hillary President"

May's auto sales data will be out this week. Last month's data, April's top selling cars:

#10: Chevrolet Malibu
#9: Chrysler 200
#8: BMW 3-Series
#7: Chevrolet Camaro
#6: Toyota Camry
#5: Honda Accord
#4: Mazda MX-5 Miata
#3: Ford Mustang
#2: Ford F-Series
#1: Honda Civic

Tesla: free-charging won't be available for Model 3 owners, unlike earlier models/owners.

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Back to the Bakken

Active rigs:

	6/1/2016	06/01/2015	06/01/2014	06/01/2013	06/01/2012
Active Rigs	27	80	189	187	215

RBN Energy: condensate update.

“Condensates are long and you can’t give them away … No, things have changed – condensate supply is tight and prices are running up relative to WTI … But wait wait, the oversupply is back and prices are down again.” No wonder the market’s love for condensates has faded.  It’s a liquid hydrocarbon that is being buffeted by every force the market can bring to bear: declining production, lots of new committed infrastructure (stabilizers, pipelines, and splitters), wide-open export markets, volatile crack spread splitter economics -- the list goes on. Adding to this whirlwind is the fact that historically there has been limited analytical data to work with, with most condensate information buried deep inside crude production numbers from producer investor presentations and less-than-revealing Energy Information Administration (EIA) crude oil reports.  But we have some new tools to help understand what’s going on, including the EIA’s new 914 crude quality data and condensate export numbers from ClipperData.  Today, we continue our exploration of rapidly evolving condensate markets.

In Part 1 of Faded Love we revisited RBN condensate classics, including Fifty Shades of Condensates and Like A Box of Chocolates. 

We showed that while condensates are produced from all of the major basins across the U.S., the Eagle Ford in South Texas has been responsible for most of the production growth over the past five years, and how the Eagle Ford has been hit harder by low crude prices than any of the other major shale plays, resulting in declines in condensate production.  We then touched on the splitters built to process condensates in the U.S. and on other infrastructure to handle segregated processed condensate for export – now no longer required since the lifting of the crude/condensate export ban.  With the ban gone, there’s no longer anything special about a condensate barrel; it is just like any other crude oil, except lighter.  These developments have converged to create a topsy-turvy market for condensates, where both opportunities and dangers lurk for those brave enough to buy, sell and trade condensate barrels.

From today's RBN Energy blog: an update on the new EIA form 914:

The new 914, in use since January 2015 reporting, is an expanded survey for the collection of oil and gas production data from a sample of operators of oi/condensate and natural gas wells in 15 states and the federal Gulf of Mexico. For our purposes here, the big deal is that the new EIA-914 collects this crude oil production data in 10 API gravity buckets. So, after years of, well, Dancing in the Dark (our mid-2015 blog on condensate splitters), we get our first shot at official condensate statistics using the two API gravity buckets above 50 degrees API shown in Figure 1. Sampled producer companies (those large enough to be included in the survey) are required to fill out the form each month for their oil production and oil sales by API gravity category. There are 10 API gravity categories on the form reported in total for the U.S., but due to EIA’s confidentiality rules, these are collapsed to only four categories for the reporting of state‐level API gravity estimates.

There are all sorts of statistical quirks and machinations that EIA must go through to use this data due to the facts that 1) it is only a sample (85% volumetric coverage based on data from 450 operators out of roughly 13,000 oil and gas operators in the U.S.), and 2) EIA trues up and reconciles the 914 form data with production data from the individual states provided and consolidated by our friends at DrillingInfo.

Tuesday Morning Notes -- Catching Up On The News -- May 31, 2016

Venezuela -- tic, tic, tic -- Lufthansa suspends flights to Venezuela. I was wondering when this would start to happen. I'm sure it's costing them a gazillion dollars to refuel in Caracas just to get out of the country. And if they don't pay, the Venezuelan government will take possession of the planes on the tarmac. And finally, as things start to implode, security becomes a very real issue.

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Two Stories On Dante's Inferno 

From Forbes: is ObamaCare failing on purpose?  One of the dumbest questions I've seen posed, ever. A program doesn't fail on purpose. The folks driving it might be working to make it fail, but the program itself doesn't fail on purpose. Whatever.

How ObamaCare has affected the 57 US states.

The GOP needs to run, not walk, away from this debacle. Let the Dems solve this one.

Trump: "Let's Make America Great Again."

Hillary: "Let's Re-Visit ObamaCare."

Gary Johnson: "Let's Elect Hillary."

Monday, May 16, 2016 -- Motley Fool: Another Geico Rock 2016 Award Nominee?

Updates

Later, 9:40 a.m. Central Time: another Geico Rock Award 2016 nominee? Motley Fool -- they, too, now are noticing the train wreck or as some now call it, Dante's Inferno. Here's the headline:
ObamaCare's 2017 insurer rate requests are starting to stream in, and the figures are scary.

Here's the lede:

It's been more than two years since ... ObamaCare went into full effect for individual consumers...the largest insurer in the US [is] vacating a majority of the 34 states it's currently operating in ...Humana has also threatened to pack up shop due to losses suffered on ObamcaCare exchanges ... more than half of all of ObamaCare's approved healthcare cooperatives closed up shop...due to unsustainable losses...premium prices in 2017 were going to go way up...two states, Virginia and Oregon ... double-digit percentage rate hike requests...the early data is chilling and suggestive of huge premium price hikes coming ... in Virginia, Aetna ... 13% ... Anthem HealthKeepers...Blue Cross Blue Shield ... 15.8%....Aetna and Inova's joint venture .. 16.6% ...the weighted average of the 13 received rate requests is nearly 18%... in Oregon ... even worse .. average rate hikes of 32%...worse of all, it doesn't appear as if insurer rate hike requests are going to ebb once we get beyond 2017...

Well you get the picture. The article goes on and it only gets worse. We've reported everyone of those "facts" over the past two years and predicted them two years earlier. It looks like the Motley Fools and others are finally climbing out from under their rock.

As I've said over and over, the GOP needs to run, not walk away from any discussions on ObamaCare. Let the folks who engineered it, fix it.

Later, 9:00 a.m. Central Time: see first comment from a reader with first-hand experience in New England:

The increased CO2 emissions from New England's power plants is barely scratching the surface of this bizarre, devolving situation. 

During the winter, due to lack of natural gas supply, coal burners and oil burners are fired up to keep the lights on.

Last week, the city of New Canaan, CT, embarked upon a multi-decade long involvement of digging holes and emplacing underground propane tanks (ya know ... the eeevil fossil fuel) in a frantic effort to ensure their children will not freeze this coming winter during school hours. 

All across that area, government facilities, restaurants, new senior citizen complexes are being relegated to having diesel powered trucks resupply propane tanks for DECADES to come so they can have hot water to clean dishes, take warm showers, etc. 

All this within a short car ride from the biggest natgas fields on the planet.

That's very interesting. During our four years in Boston I saw the same thing -- the huge number of diesel trucks on the city roads delivering heating oil, etc, despite the natural gas glut. This sort of reminds me of taxi medallions. Obviously those comings hauling heating oil and propane have a huge invested interest that this does not change. 

Original Post

Active rigs:

	5/16/2016	05/16/2015	05/16/2014	05/16/2013	05/16/2012
Active Rigs	28	83	190	190	211

RBN Energy: natural gas supply / demand in the Northeast.

The U.S. Northeast natural gas supply/demand balance has been getting less and less short in recent years due to the onslaught of Marcellus/Utica production, and in 2015 flipped to net long supply for the first time on an annualized basis. That means the 15-state Northeast region as a whole produced more gas in 2015 than it used. Then, in the winter of 2015-16, the region reached another milestone when it ended the season net long supply for the first time. Now regional production may be flattening out and future growth is at risk as takeaway capacity projects face economic and regulatory headwinds. What does that mean for the Northeast balance going forward? Today, we begin a series analyzing the latest fundamental trends in the Northeast gas market.

The last time we looked at the Northeast natural gas supply/demand balance was last November (2015).

At the time, we predicted that the Northeast region was likely to end 2015 as a net supplier of gas for the first time on an annual average basis. Until a few years ago the Northeast was a major net demand region with little local supply. The “flip” from net demand to net supply region didn’t happen overnight, of course. Northeast production has been marching toward this milestone since 2010, when the Marcellus Shale became the “next big thing” in the evolution of shale gas production, and the pace picked up in 2013 when the Utica Shale in Ohio joined in the fun. The Northeast supply deficit has been shrinking ever since. While demand has been growing as well, production growth until last year had been far outpacing demand.

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Big Oil's Big Plans For New Natural Gas Markets

The Wall Street Journal is reporting: Producers hope to create new markets to boost demand to drag LNG prices out of the doldrums.

Natural gas transported across the world’s oceans by ship has helped to displace coal burned in European power plants and Chinese household cookers. Now, producers want it to become a fuel for cruise liners, container ships and road trucks.

In doing so, Big Oil hopes to boost demand by enough to drag prices of liquefied natural gas out of the doldrums. LNG prices last month sank to a seven-year low in Asia as demand failed to keep up with rising supply from countries including the U.S. and Australia. Wood Mackenzie, a U.K.-based consultancy, expects the global gas glut will take years to clear, with 70 million metric tons of LNG uncontracted by 2021.

This downbeat outlook helps to explain why energy companies are continuing to seek new markets in LNG, even as they cut spending elsewhere. Royal Dutch Shell PLC recently signed a deal with cruise operator Carnival Corp. to provide LNG at major ports for AidaPrima, a recently launched liner. Woodside Petroleum Ltd. in April signed a five-year deal with Norway’s Siem Offshore Inc. for Australia’s first LNG-powered marine-support vessel that will operate along the northwest coast.

Notice which major energy user is not mentioned: the US Navy. They are still researching algae-based biofuel in case there's ever a shortage of fossil fuel -- oh, that's right. Obama mandated all agencies derive 20% of all energy from "green" sources. Like algae. 

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Finally, What They All Wanted, They Got: Single Payer

The Wall Street Journal is reporting: Insurance Options Dwindle in Some Rural Regions Some health insurers quit unprofitable markets; ACA exchanges in some areas will have one insurer.

Health-insurance customers in a growing number of mostly rural regions will have just one insurer’s plans to choose from on the Affordable Care Act’s exchanges next year, as some companies pull out of unprofitable markets.

The entire states of Alaska and Alabama are expected to have only one insurer on the health law’s signature online marketplaces next year, according to state regulators. The same is expected to be true in parts of several other states, including Kentucky, Tennessee, Mississippi, Arizona and Oklahoma.

So far, more than 650 counties appear on track to have just one insurer on the exchanges in 2017, according to the Kaiser Family Foundation, which is tracking withdrawals as they become public. That would be up from 225 in 2016, when the state of Wyoming, among other areas, already had just one ACA marketplace competitor. Of the counties in jeopardy of having only a single exchange insurer next year, 70% have populations that are mostly rural.

 The good news: with no competition, advertising and marketing costs will go down, and healthcare premiums are likely to plummet.

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CO2 Emissions Increasing In New England

It Turns Out Solar/Wind Not What Was Promised

The Boston Globe reported this story over the weekend. Actually it was being reported earlier this year in Right Side News, March 2, 2016:

When Vermont Yankee was set to close, activists such as Bill McKibben claimed that Vermont “is completely capable of replacing (and far more) its power output with renewables, which is why my roof is covered with solar panels."

This isn’t what happened. Instead, natural gas generation expanded in New England.  As a result, carbon dioxide emissions increased 7 percent in 2015. 

Vermont Yankee, a 604-megawatt nuclear plant, provided New England with 42 years of reliable, carbon dioxide-free power before its closure at the end of 2014.

The plant’s capacity factor exceeded 80 percent over its lifetime—more than double the capacity factor of the most efficient solar or wind plant in the United States, which were expected by some to replace it. But, in reality wind and solar power cannot replace the generation from Vermont Yankee, because a nuclear plant can operate 24/7 and is not dependent on the wind blowing or the sun shining.

As a result, natural gas generation increased in New England by 5.5 percentage points (from 43.1 percent of generation in 2014 to 48.6 percent of generation in 2015), and with it, carbon dioxide emissions. Carbon dioxide emissions increased in New England by about 7 percent in 2015, increasing from 28 million tons to 30 million tons, according to data from EPA.

An honorary Geico Rock Award for New England?

Here's The Boston Globe story:

For the first time in five years, power plants across New England are producing more carbon emissions, dealing a setback to Massachusetts’ legally mandated efforts to reduce greenhouse gases and raising concerns that reduced production of nuclear energy will undercut environmental gains.

Last year, the region’s power plants released 5 percent more carbon dioxide than the year before, the first year-to-year increase since 2010, according to ISO New England, an independent company in Holyoke that operates the region’s power grid.

The uptick comes as Massachusetts works to curb carbon emissions in nearly every sector of its economy, in hopes of reaching its 2020 targets.
Massachusetts is legally required to reduce greenhouse gases 25 percent below 1990 levels by that date — part of a national effort to stave off global warming.

I wonder "who" exactly requires Massachusetts to reduce greenhouse gases 25% below 1990 levels by 2020? I assume ultimately the "voters."

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Wow, The Summer Travel Season Has Not Yet Begun

CBS Chicago is reporting that 4,000 travelers missed their flights because they showed up late to the airport. Okay.

My understanding is that the longest line through Midway was only 1 hour and 45 minutes. If you show up two hours early -- as recommended -- hey, never late. And the operators are delaying a/c departures to accommodate late arrivals.

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The Apple Page

Warren Buffett discloses he has $1 billion invested in Apple. I have three Apples on my mind. Our younger granddaughter needs either an iPod or the new iPad. I think the new iPad is the better deal, but she's leaning toward the iPod for convenience sake -- easier to carry while on her walks. For the house, the new iPad so May can watch television news in the kitchen. So, we'll see.

Back to Buffett: his IBM bet was a huge loser. 

Hey, We're Not Carl's Jr -- Yet -- So, Two Trainwrecks To Hit Fast Food This Year And Next: ObamaCare AND $15 Minimmum Wage -- May 13, 2016

Updates

Later, like just one minute later: The story below regarding Wendy's and kiosk ordering is a pretty good story. But this is even more interesting: Starbucks is way ahead of the game. They don't use kiosks. They use those 6-inch, hand-held, personal assistant, mobile devices called iPhones. Yup. That's right. You've seen them. Really thin.

I could not believe the number of folks who now purchase their pineapple-infused, triple-sugar, double-caffeine, guano gluten-free, chocolate lattes off their iPhones.

Seriously. The drive-through lines at Starbucks here in north Texas are so long, folks are now ordering ahead on their iPhones, and then going in to pick up their drink. It's actually faster for the baristas and the customers. First of all, the stuff is already paid for; no messy handling of gooey Starbucks cards or Hamiltons (or Tubmans in the future). Second, you don't end up behind the office gopher who was sent to order 23 coffee drinks for the office.

And if folks are willing to do this for a cup of coffee, they will have no trouble doing this at Wendy's. I have no idea why Wendy's, et al, would go to the expense of putting in kiosks when iPhones work just as well.

And don't tell me "well, not everyone has an iPhone." LOL. Maybe not in Tibet, but here in the good ol' USA even a two-year-old, like Sophia, has her own iPhone. [She doesn't know, that it's a fake.]

Original Post

Investor's Business Daily is reporting that self-service ordering kiosks will be made available across Wendy's 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.

It will be up to franchisees whether to deploy the labor-saving technology, but Wendy’s President Todd Penegor did note that some franchise locations have been raising prices to offset wage hikes.

McDonald’s (MCD) has been testing self-service kiosks. But Wendy’s, which has been vocal about embracing labor-saving technology, is launching the biggest potential expansion.

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”

It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15.

Carl's Jr CEO wrote this just a few weeks ago:

So why the increased use of technology? The major reason is consumer preference. 

Research shows that many appreciate the speed, order accuracy, and convenience of touch screens. This is particularly so among millennials who already do so much on smartphones and tablets. I’ve watched people—young and old—waiting in line to use the touch screens while employees stand idle at the counter.

The other reason is costs. While the technology is becoming much cheaper, government mandates have been making labor much more expensive.

In 2015, 14 cities and states approved $15 minimum wages—double the current federal minimum. Additionally, four states, 20 cities and one county now have mandatory paid-sick-leave laws generally requiring a paid week of time off each year per covered employee. And then there’s the Affordable Care Act, which further raises employer costs.

Dramatic increases in labor costs have a significant effect on the restaurant industry, where profit margins are pennies on the dollar and labor makes up about a third of total expenses. As a result, restaurants are looking to reduce costs while maintaining service and food quality.

Highly automated models have limited applicability for restaurants with more complex menus. For example, at CKE Restaurants, the company I lead, our Carl’s Jr. and Hardee’s employees make biscuits from scratch. They bread chicken tenders by hand, prepare complex burger orders, hand-scoop the ice cream for milkshakes, and the restaurants offer table service. None of these tasks can be effectively automated, and we wouldn’t want them to be.

So, we got two trainwrecks hitting the fast food restaurant this year and next: ObamaCare and the $15 minimum wage.

Actually, there will be a third trainwreck to hit the fast food restaurants this year: restaurants are going to have to install two more restrooms, make a total of four with the following signs: men, women, LGBT, and confused. ["Confused" will be found to be "inflammatory" by the courts, and will be replaced with something more descriptive, perhaps, "still deciding."]

In Tennessee, the restroom signage will have to be in 120 languages. 

A lot of publicly-educated millennials will probably stand in the LGBT line to order a bacon, lettuce, and tomato sandwich because the line will be much shorter than the one out front.