Biden is trying to deny the laws of economics with our food supply just as he thinks he did with energy
Biden is trying to deny the laws of economics with our food supply just as he thinks he did with energy
By Sheryl Kaufman
A few Executive Orders quite quickly flipped the U.S. energy supply situation from surplus to shortage. Just wait until you see what they can do to the world food supply.
President Joe Biden campaigned on destroying the American fossil fuel industry. On “Day One” of his Administration, he leapt into the task. Canceling U.S. pipelines, oil leases, and infrastructure project permits, Biden turned the nation from the world’s largest producer and a major exporter to a net importer of oil and gas. Months ago, Biden was begging OPEC to increase petroleum production to alleviate U.S. shortages that had driven gasoline up a dollar across the nation during the first year of his Administration.
Compounded with the COVID-19 lockdowns and misguided employment policies that have wreaked havoc on our economy, food prices are also skyrocketing. World supply chain issues as well as energy shortages are driving inflation and leaving stores with empty shelves.
The Russian war in Ukraine tore away any remaining mask on the impact of Biden’s energy policy on our national security. That’s only the beginning of his policy errors.
Last week in Poland, the President announced that sanctions on Russia would inevitably result in world food shortages. No kidding. Russia exports 12.6 percent of the world’s fertilizer in addition to 17.6 percent of the world’s wheat exports, 38 million metric tons. Ukraine is known as “the breadbasket of Europe” as the source of wheat exports annually totaling 8 percent of the world. Further, natural gas is a key component in fertilizer, and farming requires energy, not to mention food distribution.
Without irony, at the same time Biden was in Europe, the Administration announced expansion of the Conservation Reserve Program, the federal program that pays farmers to NOT grow crops. No kidding, your tax dollars are being used to reduce your food supply, and this has been going on since the 1950s.
The Conservation Reserve Program is a typical federal program, although well intentioned, it is inefficient and ultimately misguided. Drawing an illustration from personal experience, decades ago, my dad’s construction company bought a field to make it a gravel pit. Every year they received a small payment for not planting wheat in the gravel pit. Dad tried to decline the payments, but the Department of Agriculture eventually notified him that the paperwork to stop the payments would equal the cost of several years of payments. The successor company is probably still getting payments.
If you were to assume that this program actually removed acres of land that were productive rather than rock fields or non-farmable swamps, the rationale of reducing domestic food supply at this time is unfathomable.
In food production as well as energy production, no Administration can set aside the laws of economics. Reducing supply will increase price.
You cannot deny the laws of supply and demand any more than you can deny the law of gravity. You can only deny culpability. “I didn’t push him. It’s all Trump’s fault. It’s all Putin’s fault.”
Sheryl Kaufman is a retired corporate Chief Economist and Americans for Limited Government Board Member.
To View Online: https://dailytorch.com/2022/
Cartoon: Baggage
Click here for a higher level resolution version.
To view online: https://dailytorch.com/2022/
Video: Oil Workers Say Psaki is Lying to Americans
To view online: https://www.youtube.com/watch?
ALG Editor’s Note: In the following featured column from OilPrice.com’s Irian Slav, fuel rationing is now on the table in Europe amid massive shortage of diesel fuel:
Irina Slav: Fuel rationing looms as diesel crisis goes global
By Irina Slav
Earlier this week, Vitol's chief Russell Hardy warned that a diesel shortage could trigger fuel rationing in Europe. Now, those warnings are multiplying, with fuel rationing no longer looking like an abstract idea. Europe is risking a blow to its economic growth, Reuters reported on Thursday, citing experts. Diesel is what freight transport uses to deliver goods to consumers, but it is also what industrial transport uses for fuel. With Russian refiners cutting their processing rates in the wake of several waves of Western sanctions, already tight diesel supply is going to get a lot tighter.
"Governments have a very clear understanding that there is a clear link between diesel and GDP, because almost everything that goes into and out of a factory goes using diesel," the director general of Fuels Europe, part of the European Petroleum Refiners Association, told Reuters this week.
As Vitol's Russell Hardy noted earlier this week, "Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East. That systemic shortfall of diesel is there."
Europe is not the only one feeling the diesel pinch, however. Middle distillate stocks are on a decline in the United States, too, Reuters' John Kemp wrote in his latest column.
Distillate inventories, according to EIA data, have booked weekly declines for 52 of the last 79 weeks, Kemp reported, falling to 112 million barrels last week. The total decline for the last 79 weeks amounts to 67 million barrels. Last week's inventory level was the lowest since 2014 and 20 percent lower than the five-year average from before the pandemic.
"Diesel is not just a European problem, this is a global problem. It really is," said Gunvor co-founder and chair Torbjorn Tornqvist at the FT Commodities Global Summit this week.
Energy Aspects' Amrita Sen echoed the sentiment, saying that the diesel shortage was the worst affected oil product, noting that Europe imported close to 1 million barrels daily of Russian diesel and that at the time of the Russian invasion of Ukraine, inventories of the fuel were already much lower than the seasonal average.
The problem seems to be that diesel stocks were already tight globally when Russia invaded Ukraine and the West responded with sanctions that, although indirectly, targeted its energy industry. In addition to that, according to Vitol's Hardy, there had been a shift in Europe from gasoline to diesel, which has further exacerbated the problem.
Then there are the commodity traders who are shunning Russian diesel because of the sanctions as well as payment headaches and transportation challenges as many European ports have banned Russian vessels from docking.
TotalEnergies is the latest: the French supermajor has said it will be suspending purchases of Russian diesel "as soon as possible and by the end of 2022 at the latest", the company said, unless it receives other instructions from European governments.
Instead of Russian diesel, TotalEnergies said it would switch to other suppliers, notably Saudi Arabia. It will hardly be the only one to look for alternative suppliers. It looks like a hunt for diesel is in the making, if not already fully underway.
Meanwhile, the alternative suppliers may not have enough to respond to the spike in demand in short order: Saudi Arabia is already Europe's second-largest diesel supplier after Russia but compared to its 50-percent share of the EU diesel import market, the Kingdom only has a 12-percent share.
Per Kemp's report, Asian diesel inventories are also tighter than usual, meaning all large markets for middle distillates are experiencing a shortage. This is pushing all oil prices higher, Kemp noted in his column but this is only the beginning of a bigger problem.
In addition to freight transport, diesel is the fuel used to power mining and agricultural equipment, and it is also used in manufacturing. With prices for the fuel higher, the prices of the end products will also climb higher, fueling the inflation that has turned into a major headache for Europe and the United States.
Boosting local diesel production is another option, but according to experts, they would be buying their crude oil at higher prices, and the end product will, yet again be more expensive. What's more, this ramp up of middle distillate production will take time to materialize.
"Over the next three months, diesel output needs to accelerate significantly, consumption growth must slow, and the market must avoid a significant loss of Russian exports," Kemp wrote. That would be a best-case scenario and if it does not play out, Europe in particular is in for "a severe price spike" that would result in demand depression.
Before the demand depression comes, however, inflation could enter double-digit territory in some of the most vulnerable countries. And if Moscow decides to extend its demand for ruble payments for gas to its oil exports, the situation will become even more interesting than it already is, especially for Europe.
To view online: https://oilprice.com/Energy/
No comments:
Post a Comment