Rolling Pins & Peace Pipes: Markets, Energy, and Inflation on the Rise
If you believe the news from around the world, one recent development is that the peace pipe is being passed around. For the first time since the commencement of the Russia/Ukraine conflict, the President of the United States has spoken to the President of Russia in “a lengthy and highly productive phone call”. Of course, no one knows if the pipe is actually being smoked or, more importantly, what kind of ganja has been packed in the pipe. What is known is that Russia can stop this war any time that it wants to. Ukraine doesn’t have the same luxury. No matter, news of negotiations was enough to flatten out the WTI futures curve like a rolling pin being put to the dough at Pizza Star. While the market remains backwardated, it only is slightly so and the green shoots of contango are indeed emerging. According to the EIA, crude inventories increased by 4.1 million barrels to 427.9 million barrels. East Coast gasoline inventories are at their highest levels in over 3 years. WTI ended the week at $70.74, knowing that a diplomatic breakthrough could add a considerable amount of oil to the market. The Tank Tiger is happy to show you all of the crude storage that you will (eventually) need. Right now, the storage prices are still in the “manager’s special” range.
While we’re on energy, don’t sleep on electricity. U.S. electricity demand is now estimated to grow at an average annual rate of 2% over the 2025-2027 period, which is equivalent to adding the total electricity demand of California over the next three years. Did you know that a ChatGPT query consumes nearly 10x more electricity than a Google search? Electric eel farming is not currently practical because zoologists don’t know much about how electric eels reproduce.
We all waited with bated breath on the hotly anticipated U.S. inflation report. CPI and core CPI checked in at 3.0% and 3.3%, respectively. Both results were higher than analysts’ predictions. The Fed has been trying like heck to get inflation down to 2% and this misdirection means extra vigilance in monetary policy adjustments. Most of the data suggests a robust labor market and inflation rates that appear to be climbing. For the week, the S&P 500 gained +1.5%. Very interesting recipe. Pat-a-cake, pat-a-cake, baker’s man. Bake me a cake as fast as you can.
