shortages: gasoline and metals

the Colonial pipeline hack

I’ve been noticing recently that the Bloomberg radio presenters on the pre-opening show have become increasingly frantic, emotional and nonsensical in doing their jobs. This is despite the fact that both are experienced and knowledgeable. I presume the attempt to channel their inner Fox News isn’t an accident, but comes from a calculation by management that becoming less fact-based and rational will boost ratings. Weird for a Mike Bloomberg operation.

In any event, the most recent topic is the supposed threat of runaway inflation, on which their sensationalism makes no sense at all, in my view. What I found much more interesting, both on Bloomberg and CNBC yesterday, was interviews with a representative of the Gas Buddy app about the effect of the Colonial ransomware attack–which contradicted the Bloomberg narrative of a rip-roaring shortage rolling its way up the east coast to threaten the Mid-Atlantic states and New England.

The Gas Buddy story: there’s plenty of gasoline in local depot storage on the East Coast. Not at gas stations, though. In Georgia, for example, gasoline purchases for Sunday-Wednesday are 60% above normal. In the Carolinas, the figure is +40%. According to GB, people are not only filling up their vehicles but hoarding by loading up auxiliary tanks and gas cans as well. So many gas stations have run dry. Resupply demand has far outpaced the ability of gasoline trucks to ferry fuel from depot storage.

This is not inflation. If anything, it’s a small addition to the momentum building for a switch to electric vehicles. It’s also a cautionary tale about our reliance on public utilities that have inadequate cyber security protection, despite years of discussion about this vulnerability.

metals

My first stock market job was as a natural resources analyst. I started out with oil and gas, then added gold and diamonds, and finally base metals–which is the supposed inflation culprit today.

The most important thing about mined resources (including oil and gas) is that only oil/gas and iron/steel are big enough to rate their own entries in the national accounts. At the current $10,000+ per metric ton (which is a huge increase over last year), the US will use about $17 billion worth of copper this year. That’s about 0.08% of total US spending this year, up from something like 0.05% in 2020. This is like a rounding error. It’s not runaway inflation.

What’s the most interesting for us as investors about copper, I think, is that, like other base metals, China is by far the largest consumer in the world. So the price rise is evidence of strong growth in industrial activity there. About two decades ago there was a years-long bull market in industrial metals driven by Chinese economic growth. The possibility that we’re in another period like that is probably worth looking at.

My point remains that we’re not in 1970s-style, nor any of the more extreme instances of out-of-control general price rises, as we’ve seen elsewhere in the Americas or in Weimar Germany.

One sore point, though: semiconductors

more tomorrow

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