Global Free Market Capitalism

Put these two stories side-by-side:

• Californians are now paying, on average, more than $4 per gallon of regular gasoline (reported and linked earlier this morning). That story is a headline in the Los Angeles Times.
• Meanwhile, US exports of diesel fuel have gone up 300% since 2009 and US gasoline exports have increased five-fold since 2009 (posted and linked earlier this morning). That amazing fact does not get a headline in the The Los Angeles Times.

Does it matter that the US bans oil exports? I track "big stories" here.

Refinery utilization rates here.  In August, 1998, refinery utilization rate reached 99.9% (almost hard to believe). Between 1993 and 2007, utilization rate was generally above 92% but before 1993 and after 2007, the utilization rate was clearly below 92%. The current trend is rather subtle: the rate has been fairly stable over the past few years but well above the 75% low in September, 2008. This is way beyond my comfort level, but if refinery utilization rate can hit 98% (as it did in 1998), and current refinery utilization rate is 92%, there is a bit of room for growth. When it comes to the large numbers in diesel and gasoline production, one would think that even a one-percent change would drop to a refiner's bottom line.

For Investors Only

This is probably the reason for recent rise in price of oil:

TransCanada’s Gulf Coast Pipeline continues to drain the inventory at the Cushing, Okla., hub, pushing levels to the lowest amount since early 2012, according to the Energy Information Administration.

The inventory was less than 29 million barrels on March 21, some 20 million barrels lower than a year ago.

Cushing is the delivery location for the West Texas Intermediate crude oil futures contracts. The 485-mile, 36-inch diameter pipeline started delivering 700,000 barrels per day of crude oil from the hub to refineries on the Texas coast in January.

The next story to follow: refinery utilization, new refineries along the coast. Gasoline and diesel exports are already soaring.

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I posted this story in a short blurb yesterday. There are a lot of story lines in this article. The biggest story line: US utilities have learned from the utility debacle in Germany.

NRG Energy Inc. is continuing to expand its grasp on the household energy market by acquiring one of the top rooftop solar installation companies.

NRG, which has co-headquarters in Houston and New Jersey, is buying New Jersey-based Roof Diagnostics Solar to grow its foothold in energy renewables as well as to, according to NRG, empower "customers to control their own energy destiny through clean self-generation."

This has nothing to do with "helping the customer." This has everything to do with survival.

NRG Energy's solar portfolio surpasses 1,200 megawatts : Through its subsidiaries including NRG Yield (NYLD) and NRG Solar, one of the nation's largest solar developers, now owns and operates more than 1,200 megawatts (MW) of solar capacity. Through these facilities, NRG helps power nearly one million homes at full output with clean, renewable solar energy, which is helping reinvent the US energy ecosystem.

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Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you might have read here. 

Futures (6:49 a.m. central time): Dow up 29, trending lower. WTI oil up 41 cents. 

Libyan protesters block pipeline to port.

Canadian Pacific expresses extreme disappointment with Canadian Government legislation: Co expresses its extreme disappointment with the legislation tabled yesterday afternoon in Ottawa by the Government of Canada.
Co states:

"CP believes that the government has unfortunately chosen to introduce legislation which will do nothing to increase supply chain capacity in the grain handling system, will not move more grain to markets more quickly, and has the potential to cause great damage to the Canadian rail transportation system...Targeting the railways when our dedicated men and women are working 24/7 to recover from some of the harshest winter operating conditions ever seen, is not only ineffective but grossly unfair...CP also believes that the expansion of regulated interswitching could seriously impact Canada's competitiveness as it effectively transfers traffic that normally would move over Canadian railways and ports, to U.S. railroads and ports, potentially resulting in job losses, reduced investment and the dampening of the Canadian economy.  Interswitching will also lead to double handling of grain shipments which will slow down the grain supply chain negatively impacting transit times...

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Sylvia Nasar's Grand Pursuit: The Story of Economic Genius

I continue to read the book. I will probably finish it in the next few days. 

I am up to the US economy immediately following WWII. Fascinating. It is so interesting to see how difficult it is to predict what the economy will do. The big concern for the US  after the war was rampant unemployment with the demobilization of millions of troops.

But what Samuelson had failed to foresee was the magnitude of pent-up demand by consumers, starved for houses, cars, appliances, and other appurtenances of middle-class life and with plenty of savings in the bank. His embarrassingly wrong prediction slowed the spread of Keynesianism in academe, he always believed. Being disastrously wrong early in one's career was in some ways a salutary experience for someone who hated making mistakes and rarely did. It left Samuelson more skeptical of economic forecasts and more circumspect in the claims he made for policies he favored or opposed. 

Demobilization became a bonanza for American colleges, MIT and its embryo economics department included. The only economic bill of rights that congress passed in the wake of FDR's 1944 exhortation was the GI Bill. But that measure had a large and lasting effect on the postwar economy.

For someone who knows absolutely nothing about economic theory, this is a great book to read. Very easy to read, and well written.

What I particularly enjoy are all the literary references Ms Nasar makes, for example:

As soon as the conference disbanded, Hayek set out for Vienna. The condition of the city and its inhabitants was far worse than anything he had been able to imagine. Under occupation by the four allies for three long years, Vienna was as seedy, demoralized, and dark as it would appear to audiences who saw The Third Man, the film noir written by the English novelist Graham Greene, with its immortal line, added by the director and star, Orson Welles: "In Italy for thirty years under the Borgias they had warfare, terror, murder, bloodshed -- they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love, five hundred years of democracy, and peace, and what did they produce? The cuckoo clock."

I've only read a few Graham Greene novels, but I've read the three-volume biography of Graham Greene. 

What Word Is Missing In This Op-Ed?

From today's WSJ: America Inc.'s profit margins have hit another record. Be careful what you wish for. 

Chief among the factors contributing to profit-margin expansion is the tight lid companies have put on costs. They have been slow to hire and slow to raise wages. Inflation has outpaced gains in private-sector employee compensation over the past five years, according to the Labor Department.

Spending on new equipment has been muted, too. Aggregate capital expenditure for members of the broad S&P 1500 index has grown by just 0.8% annually over the past five years, according to S&P Capital IQ. Low rates have allowed many companies to refinance debt, cutting interest costs. The effective yield on investment-grade corporate debt, according to the BofA Merrill Lynch Corporate Master index, is now 3.1%, versus 5.8% in December 2007.

Taxes have been low as well, in part as companies offset them with losses taken during the recession. Income statements from companies in the S&P 500 showed an effective tax rate, including state and local taxes, of 29% in 2012 versus 32% in 2007, according to ISI Group's David Zion. He calculates that their cash tax rate—what they actually paid—was 25% in 2012, against 31% in 2007.

Keeping costs low by refraining from hiring or not replacing equipment can only be done for so long, though. And long-term interest rates look more likely to rise than fall over the next year. Losses to offset taxes, too, eventually get used up.

The missing word is ObamaCare. Companies will cost shift their employees to health care. Not only does this lower health care costs for corporations (better profit margins) but much more importantly, ObamaCare provide predictability for US corporations.

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In other ObamaCare news --

ObamaCare could end health insurance providers as we know them. The Fiscal Times is reporting:

The problems with the implementation of the Affordable Care Act may be masking another major change in the way health care is delivered to U.S. consumers, experts believe.

At The Atlantic's Health Care Forum in Washington on Thursday, health care and business professionals said that there’s an increasing trend in the industry toward cutting insurance companies out of the process entirely, as large, regional hospital systems move into the insurance business.

Dr. Kenneth L. Davis, CEO and president of Mount Sinai Health System, the largest health care provider in the state of New York, said that starting next year, Mt. Sinai will begin offering its own Medicare Advantage plan. It will look for other opportunities to bring premium payments directly into the hospital system, rather than filtering them through insurance companies.

Davis said he expects organizations similar to his to move in the same direction.

“Inevitably the large systems are going to move to take part of the premium dollar,” he said.

Japan's Answer To Fukkushima: Coal Power; 47 Gigawatts In Ten Years; 20% More Than Pre-Fukushima

Link here to The Wall Street Journal.

Japan is turning into a rare bright spot in the world coal market, stepping up coal-fired power generation to replace nuclear plants that went offline after the 2011 Fukushima accident.

Plans by Japanese companies to spend billions of dollars on new coal-fired plants offer a striking contrast with the U.S., which has effectively blocked new coal plants using existing technology over concerns about global warming.

And they show how deeply Japan's energy picture has changed since the March 2011 earthquake and tsunami caused meltdowns at Fukushima Daiichi nuclear reactors.

On Thursday, Kyushu Electric Power Co. said it would restart a long-frozen project to build a one-gigawatt coal-fired unit in southern Japan. Other utilities including Tokyo Electric Power Co. have announced similar plans for more coal-fired power.

If the plans all come to fruition, Japan's coal-fired power capacity would increase to around 47 gigawatts over the next decade or so, up 21% from the time right before the Fukushima accident.

Not trivial. Not trivial at all. US consumers are going to have to spend a lot of money on wind and solar to cut CO2 emissions to balance all the new Japanese CO2 emissions. The increase use of coal in Japan is a pittance compared to what is contemplated in China and India. Repeat chorus: US consumers are going to have to spend a lot of money on wind and solar to cut CO2 emissions to balance all the new Japanese CO2 emissions. 

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Where Fools Rush In, Rick Nelson

Diesel, Gasoline Exports Soaring -- March 28, 2014

Updates

December 29, 2016: I think this is a most under-reported story -- soaring US gasoline, diesel exports. A story within this story is the soaring gasoline (and I assume diesel) exports to Mexico. This is a most incredible story. It started with a story on gasoline lines in northern Mexico. Then a couple days later, a story that a) gasoline consumption was soaring in Mexico; and, b) the country's integrated oil company (Pemex) could not keep up. Mexico was the world's 6th largest consumer of gasoline as recently as 2012, but has now jumped to #4. If things were not bad enough, because of Mexico's financial difficulties, the country will cut funding to Pemex, thus exacerbating the supply-demand situation. In the western hemisphere, this has to be among the top 5 energy stories in 2016. 

November 2, 2016: embedded chart. From 1 million bopd in 2008 to almost 6 million bopd now.

Original Post

RBN Energy: a must-read. "We" may not be exporting a lot of oil, but the diesel and gasoline exports are soaring.

Gulf Coast exports of diesel and gasoline are booming. Net exports of diesel have increased over 300 percent from an average of 232 Mb/d in 2009 to 746 Mb/d in 2013. Over the same period net gasoline exports from the Gulf Coast increased five-fold from an average of 87 Mb/d in 2009 to 439 Mb/d in 2013. Today we look at the drivers behind this dramatic export growth.

This blog is the first in a two part series looking at the drivers behind increased US exports of refined products from the Gulf Coast region. In this first episode we look at whether refining margins for diesel and gasoline are correlated to the level of exports. We then look at the extent to which export volumes are related to levels of refinery throughput at the Gulf Coast. In the next episode we will look at the impact of domestic demand for refined products (or the lack of it) on export volumes and then whether export volumes seem to be sensitive to international refined product prices.

Active rigs:

	3/28/2014	03/28/2013	03/28/2012	03/28/2011	03/28/2010
Active Rigs	195	186	206	169	105

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The New York Times

Russian sanctions could hurt Big Oil. Read the article; then ask yourself -- what was the hidden agenda? The New York Times is a huge supporter of President Obama; The Times is no friend of Big Oil. What was the hidden agenda? XOM was up almost 2% yesterday; COP was up almost 1% yesterday; CVX was flat.

The Wall Street Journal

Top story, front page: Russian border buildup stokes worries. There is some irony here: as Barack Obama cuts back the military, brings the forces home, Putin is filling the void. Predictable.

I guess the "key threshold moved." I thought it was 7 million. Whatever. The Barack administration says 6 million enrolled. And just last month the administration said they had no idea how many enrolled. The numbers are as meaningless as the unemployment numbers. The difference: we have earnings reports from the big insurers in 3Q14, 4Q14, and 1Q15. I can hardly wait to see what the new premiums will be for 2014 (I assume whatever they are, the president will cap them to this year's level).

Yesterday I made a comment regarding the market this year. And I noted that this is not an investment site, warning folks not to make decisions based on what they read here or what they think they might have read here. But today, a front section article in The WSJ says US corporate profits hit new highs last year, driven by the tight lid firms have kept on hiring and spending almost five years into the economic recovery.

A great article on how colleges will respond to unionized football's implications.

Chris Christie's lawyers says he is innocent. Well, duh.

Politically correct: top US military officer wants military to rethink ethics training. Starts with the commander in chief.

Obama seeks to repair Saudi ties. Political theater. I wouldn't read the article even if I had the time.

A portrait of the Malaysian Air pilots. I always said that's where investigators needed to look.

IMF will loan the Ukraine $18 billion. Here we go again.

Out of the closet. Microsoft brings out Office software for iPad. Speaks volumes. Microsoft will use the "old Ma Bell" business model -- rent.

Full use of the Office iPad app is limited to subscribers to Office 365, an online-friendly version that users "rent" for an annual subscription rather than buy to install on their computers. For consumers, Office 365 costs $99.99 a year.

Versace profit surges as sales strengthened. Lululemon reports higher sales.

Reported yesterday: Baxter to split into two companies.

Cargill plans to exit its division that trades global coal as well as European power and gas. It will create a new venture with a Brazilian company to combine global sugar-trading activities.

Japan's answer to Fukushima: coal power. 

Heard on the street: America Inc.'s profit margins have hit another record. Be careful what you wish for. 

Chief among the factors contributing to profit-margin expansion is the tight lid companies have put on costs. They have been slow to hire and slow to raise wages. Inflation has outpaced gains in private-sector employee compensation over the past five years, according to the Labor Department.

Spending on new equipment has been muted, too. Aggregate capital expenditure for members of the broad S&P 1500 index has grown by just 0.8% annually over the past five years, according to S&P Capital IQ. Low rates have allowed many companies to refinance debt, cutting interest costs. The effective yield on investment-grade corporate debt, according to the BofA Merrill Lynch Corporate Master index, is now 3.1%, versus 5.8% in December 2007.

Taxes have been low as well, in part as companies offset them with losses taken during the recession. Income statements from companies in the S&P 500 showed an effective tax rate, including state and local taxes, of 29% in 2012 versus 32% in 2007, according to ISI Group's David Zion. He calculates that their cash tax rate—what they actually paid—was 25% in 2012, against 31% in 2007.

Keeping costs low by refraining from hiring or not replacing equipment can only be done for so long, though. And long-term interest rates look more likely to rise than fall over the next year. Losses to offset taxes, too, eventually get used up.

This article conveniently forgets one word.

The Los Angeles Times

March Madness: Florida (1) beats UCLA (4). Arizona (1) beats SDSU (4). Wisconsin (2) beats Baylor (6). Dayton (11) beats Stanford (10). Every win was a blowout. Four games on tap tonight. Update on the president's bracket.

Not good news for the president: as Syria civil war drags on, the rebels are clearly losing. With Putin now in the cat-bird's seat, Syria sees clear sailing. I haven't heard a peep out of the administration, lately, on Syria.

Average gasoline price in California hits $4 a gallon. For the first time in months, most Californians are shelling out more than $4/gallon for regular gasoline. And with the busy summer driving about to begin....

The president and the Pope find safe ground on which to talk: the poor. Michelle and the girls are still vacationing in China as far as I know.

University of California head -- Napolitano -- throws cold water on the online education craze. Well, duh. I don't even have to read the article to know what that's all about.

The Dickinson Press

All that talk about an airport for Medora. Never mind.