On this episode we talk about:
- Environmentalists throw tomato sauce on Van Gogh’s painting
- China stops selling gas to Europe
- Macron announces further subsidies for poor income people to buy EVs
- Biden’s plan on the gas price and tension with Saudi Arabia
- Recession?
C Thomas: Happy Hump Day! Welcome back to Looking Backwards, Looking Forwards. I’m C Thomas Printer. I’m here with Austerity Jones.
Austerity: Happy Wednesday! C Thomas, we have three items from the past and three items to look forward to. As we look backwards, let’s go around the world and start with London.
There, environmentalists threw tomato sauce on Van Gogh’s painting: the Sunflowers.
C Thomas: They certainly did. These young, crazy environmentalists have some really creative reasons to get the oil companies to stop pumping oil… Do you really think that in the Exxon board meeting, Darren Woods sitting there and he’s saying to himself: wow, I don’t think I’m gonna pump any more oil, because someone threw tomato sauce on Van Gogh’s painting! Then they pulled out a glue stick and they stuck themselves! What do you think? Mr. Chevron? What do you think, Mr. Shell? Should we stop printing oil? Because my goodness, tomato sauce on a painting! I think people will stop driving because of that… This is the ridiculousness of what these people are doing, right? Whether some of them are climbing bridges and blocking up traffic for seven hours…
I think, you take all of these people, Austerity, that don’t like oil, that don’t want us to pump oil, that don’t like energy, and what you do is, you round them up safely in a protective space like they’re used to, you move them to a cabin in the woods. Northern England is fine, as the wintertime approaches. And then they simply sit there and have three choices: You have coal, you have a piece of firewood and you have the thermostat, and you say: okay folks, now it’s gonna get cold in here, and if you wanna survive, you’re gonna have to use energy like the rest of the planet. Now you can choose, you can burn coal, and it’s gonna be very smoky. You can burn the firewood, it’s gonna be less smoky, or you can just turn the thermostat on… That’s my approach to these people, and if they choose to not use any of the three and freeze to death, you can’t fix stupid. And trust me, what they just did was very stupid.
Austerity: Then, from London to Beijing, what do you think about China stopping selling gas to Europe?
C Thomas: This has serious consequences for Europe. There’s a pressure around Europe, and it’s constricting. As we talked on the previous episodes, there was a mysterious explosion at the LNG facility and then at Freeport. This was one of the biggest ways for the US to export some of the LNG… And now the natural gas is offline there, permanently it sounds like. The next source that Europe has been getting energy, they’ve been buying some extra natural gas capacity, was China. Now that’s going away, too! From what I’m hearing, their stockpiles are pretty good for this winter, and if the winter is fairly mild, they can get through that, but they don’t have the facilities to take care of them for next year and next winter particularly.
So if you have the long view in this, this is very, very detrimental because how are they going to fill? Their capacity for next year? I don’t know. And I don’t think they know. And I think everything you’re hearing from the politicians is we just gotta get through this winter. Well that’s a very short sighted approach to how to run a country, right? We’re not talking about a budget here for a company where you have to make a quarter. We’re talking about the proliferation here of a country moving forward and having a six month view of “this is how we’re gonna have energy”. You might as well put these people in the cabin with our, you know, little environmental protestors cuz they’re gonna be out of energy very soon.
Austerity: From Beijing to Paris, Macron said there will be further subsidies for poor income people to buy electric vehicles.
C Thomas: Yes. Just another example of our lovely governments not letting the private enterprise determine what they wanna buy. Here’s $10,000 in credits to buy a vehicle that cost $80,000 or $40,000. Guess what? Those are poor income people: They can’t buy cars. That’s why they’re poor. So to give them a credit, like this is literally the bifurcation of these people’s thought process. “Oh, I’m rich. I can afford a Tesla. I believe the president of the United States, Biden last year said: Well, everyone should just go buy a DV car”. I was like: Really? Are we just gonna give them away? Because that’s what we’re trying to do. And the whole adaption of this industry has really been based on this. Here, we’ll give you $7,500 off. Then Ford raised their prices eight grand. They’re like: “We’re gonna capture that. We’re not just gonna let the consumer get that”. And now these vehicles are becoming more and more expensive because they can be, because the government is giving money away to people. So what’s gonna happen is, Macron’s gonna say, here, here’s a subsidy to buy this car. And the car makers are gonna say, we will take some of that. Thank you very much. And now the car prices are gonna go up. The people that are going to win this race are the people that are going to have the low, cheap EV cars. It’s not gonna be the luxury vehicles because there’s simply not enough people that can afford them. People forget this: Inflation takes away disposable income. It doesn’t add to it. And so what happens is, is basically you’re gonna have to have an alternative for poor people to drive, and it’s going to basically be a bicycle. You know, maybe we’re gonna have electric bicycles that might have mass adoption cuz people would be able to afford that at least. But it’s damn not gonna be subsidies for more cars for poor people, cuz if they were, if they weren’t poor, they could afford to buy the vehicle without a subsidy. So I feel like this is just hurting domestic auto manufacturers in all countries.
Austerity: Thank you, C Thomas. We have traversed the world. Now let’s talk about President Biden’s plan on the gas price and the tension with Saudi Arabia.
C Thomas: This is two parts, right? So the first part is: Biden has been releasing the strategic petroleum reserves for some time. I think it’s been since May or early in the spring, and that is running out in October. I believe it’s gonna total 180 million barrels, and it has effectively pushed the price at the pump down in about a buck. The problem is, it’s not nearly done what they thought it was going to do. Because if you look at two years ago, we’re still up a lot. Energy prices are still up a lot. They’ve come down from the, really, really high prices they were at, but now they’re starting to creep back up again. And we have basically taken half of our strategic petroleum reserves that are there for an emergency. Like I don’t know: if we have financial shocks, UK stock market… Maybe geopolitical conflicts, Ukraine, Taiwan… We’ve basically taken our emergency reserves and we put them on the open market to play politics. The reason he had them, and they were going to expire in October was he was gonna get the gas price down before the elections. The elections are coming up in a couple weeks. He’s already talking about extending the current ones, another 10 or 15 million barrels to keep a lid on this price. And then after the election, what’s his plan? Do we have a plan? Are we gonna keep releasing them? No. The reason is, now he’s achieved his objective and helped it politically as much as he can.
So that goes hand in hand with the tension we have with Saudi Arabia. Saudis came out and said, we at OPEC last couple weeks ago, decided to cut two mn barrels of production (which isn’t quite 2 million, it’s actually gonna be somewhere in the range from 800 thousand barrels to maybe 1.1 mn I heard). They said that Biden had asked them to delay announcing that until after the election or delaying it one month… I mean, this is just so transparent. It’s just playing politics with the price of energy. And as we saw from our fun little environmental protestors, I’m telling you what, energy’s a real problem, right? Energy is something we all need. It affects everything we do, rather it’s go to work, what clothes we wear. If you’re wearing fleece, guess what? It’s got petroleum in it. It’s absolutely in everything. In everything we do. Energy, energy, energy. And we don’t have a policy for this. We have a short-sighted political policy. We now have our allies in the Middle East that are basically turning away from us. And we have a real problem here. The only saving greats is we do have a ton of energy in the US that if we ever decided to actually use it, we could actually be quite powerful and very energy independent. But we just do not seem to do that because Bernie Sanders and the greenies just simply won’t allow it.
Austerity: C Thomas, do you think all these add up into a recession?
C Thomas: Well, because the traditional definition of recession was a contraction in the GDP for two consecutive quarters, it’s already happened. I know that they went and changed the definition of a recession here a while ago and said no. I don’t need a weatherman to tell me it’s snowing when I’m in a breeze. When we see contraction of the GDP, it’s been announced. It’s out. The numbers are out. We know we’re in a recession. It’s mild at this point. Could it get worse? Certainly. The problem is where we are at in the cycle? Normally the FED is lowering rates to try to help us avoid a recession. This time we’re kind of already in a recession and the FED is raising rates. Raised rates have a lag before they trickle into the economy. So the question becomes, how bad does it get? If we’re contracting now by 1.6% in the first quarter, 0.9% in the second quarter, in the third quarter basically zero, what’s it going to look like in two quarters, in three quarters? When some of these rate hikes actually trickle through into the economy, that’s the bigger question. It’s very easy to say, oh my gosh, we’re in a huge recession. Well, we’re technically in one now by the traditional definition, but how much worse can it get? The answer is, I think, a lot.
Austerity: Many thanks C Thomas for your comments and thanks to our audience for tuning in. Talk to you next week, C Thomas.
C Thomas: Thank you austerity. Until next week, let’s hope those crazy little environmental protestors get that sticky glue off their hands.
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