Current Economics of US Oil

While there are many US industries that are struggling to maintain their normal business activities (if they have not collapsed altogether), there are some which are thriving during this pandemic. One of them is oil which has been seen to make a comeback, at least from an initial superficial glance.

Brent cruse’s barrel price increased to over $60 for the first time in over 12 months.  In addition, cobalt and lithium (among other battery metals) have seen a price increase alongside copper and nickel which has gone up even more. This is definitely good news but according to experts, not yet quite reason to celebrate a return to normal times.

According to forecasts from the American Petroleum Institute, the industry could encounter up to a million loss in jobs by 2022 as well as $9 billion risk to government revenue and American households having to spend $19 billion more on energy by 2030. Some states will be even more negatively impacted such as New Mexico and Wyoming which are likely to not only lose “thousands of industry jobs and access to affordable energy, but also billions in state revenue that could hurt public services, schools, infrastructure and health care.”

Assessing US Economic Recovery

It is not so simple to pinpoint a trajectory for economic recovery vis-à-vis the continuing impacts of the pandemic.  Jerome Powell of the Fed believes it will depend a lot on how the pandemic plays out and in respect to government regulations.  With new mutations and the resurgence of a more contagious stream, he insists that we remain aware that it is not over yet and people must continue to “stay focused on it as a country and get there. [He added that] the path of the economy continues to depend significantly on the course of the virus. A resurgence in recent months in COVID-19 cases, hospitalisations and deaths is causing great hardships to millions of Americans and is weighing on economic activity and job creation. Overall, economic activity remains below its level before the pandemic and the path ahead remains highly uncertain. As with overall economic activity, the pace of improvement in the labour market has slowed in recent months.”

It’s not easy that the burden has not been shared equally among all  Americans. Those who have suffered the most include low wage owners, African Americans and Hispanics.

Having said that, there is some indication of an economic recovery. There were 22  million jobs lost in March and April of 2020 from the pandemic.  Half of those have come back.  The economy is also only operating at 82 percent capacity. And with the vaccine and additional stimulus checks this could also forge the economic recovery further ahead.

Increased Industry Spending

At the beginning of this year, the US Congress  again received a request from industry trade associations for more spending.  This is not news in and of itself since most years it makes this request but this year the situation is even tougher. 

According to Tom Donahue, CEO of the US Chamber of Commerce, there will be more than just the stimulus endeavors Joe Biden is offering.  He pointed out that:

 “We can also stimulate the economy in a major way if we finally do the long overdue and broadly supported work of rebuilding our infrastructure. It’s the number one way to raise productivity, create jobs, and drive up incomes in a hurry. Our lawmakers should enact a fiscally and environmentally responsible infrastructure package that focuses on urgent needs like roads and bridges, modernizes our critical networks, and upgrades and expands technology like broadband. Even in a 50-50 Senate and a House divided by five votes, this can be done—and it might build some goodwill for bipartisan progress on other priorities. We’ve been working on this for more than 20 years. Let’s find a way to pay for it, and let’s get moving. This year, there can be no excuses for failure.”

In addition, the American Society of Civil Engineers (ASCE) released a series of Failure to Act reports as a prelude to the Report Card for America’s Infrastructure version.  This was an investigation into the metal and concrete-intensive construction, surface transportation, electricity, waterway systems, airports and more.  The summary found:

 “The total documented cumulative investment gap between projected needs and likely investment in these critical major infrastructure systems is more than $2.6 trillion by 2029, and more than $5.6 trillion by 2039”

Jobs in the Energy Industry

According to a recent US Federal investigation on jobs in the clean energy sector, the pay for this work is generally 25 percent higher than the country’s media salary.  One example is solar power versus regular fossil fuel.  Standard fossil fuel jobs pay (on average) $24.37 per hour.  The national average is $19.14 but when you work in wind/solar power the average jumps to $24.85 per hour.  Plus the accessibility is better as every single state offers fossil fuel work.

Further, those who get a job in the clean energy sector are also more likely to receive healthcare and retirement packages.  Indeed around 90% of those who work in the sector do which is 20% higher than those who work in the general private sector.

Hence it is probably no surprise that in September 2020, solar installers and turbine technicians were ranked by the US Bureau of Labor Statistics as two of America’s fastest growing occupations.

Happy Christmas!

It may not seem like the perfect Christmas with everything that has been going on around us but we are still here and that is already something for which we can be grateful.

While families hopefully are able to celebrate together in their safe bubbles, there is no reason to go out. America has it all this year with predicted snowy Christmasy weather for all.  The eastern half of the country is due to get a white Christmas after all.  What else is important on Christmas than good health, mulled wine, comfy sweats and a glorious winter wonderland outside?

For those fortunate enough to still have jobs, where finances are okay, why not use some of that money to help those who have lost their jobs?  Many people have already done that like the Volunteers of America staff members who have been delivering gift bags with book-themed cupcakes to thank their volunteers who usually work at the Christmas Bureau book tables. Even though this year they could not do their work they were still recognized and commended.

The goal of fundraised money this year from the Christmas Bureau is $535,000.  The Madeleine Muths Memorial Fund put over $22,000 to this goal, Ibex Flooring LLC, $6,000 and GSI Outdoors $5,000.  There is still much more that is needed and every bit helps those more in need than ever before.

US Economic Performance

According to the IMF, it is anticipated that America’s economy is on track to fare better than that of Canada, Germany and Japan.  Predicted contraction rates are:

  • America: 4.4 percent
  • Japan: 5.3 percent
  • Germany: 6 percent
  • UAE: 6.6 percent
  • Canada: 7.1 percent
  • France: 9.8 percent
  • UK: 9.8 percent

It is thought that the “macroeconomic good fortune” of the United States can be attributed to Washington’s spring stimulus. Plus, America does not have to rely on exports for its growth since such sales only account for 12 percent of US GDP.  This is pretty low when you look at the 32 percent in Canada, 47 percent in Germany and 18 percent in Japan. According to Moody’s Analytics Mark Zandi the greater flexibility of America’s labor market helps as:

 “Americans are more willing to adopt new technologies, to move for a job, and [to] make big changes in how they live and work.”

This is good news for the US economy.

Investments in Society

Investments in ideas and startups is great.  But when the investments seek to benefit society at large, that is even better.  That is what American private investment firm Bain Capital is currently in the process of doing.

The firm – one of the largest multi-asset alternative investment entities in the world – has recently raised $800m in new capital in an attempt to support businesses that are working for the greater good.  The company’s impact investment section based in Boston – Bain Capital Double Impact – is focusing on the creation of environmental, governmental and societal benefits.

Approximately 12 portfolio firms have so far been backed under this program.

Resilience of Small Businesses

What to do when a pandemic has lasted nearly a year and there is little sign of it ending any time soon?  How should struggling businesses act to stay afloat but within the guidelines?  Shockingly perhaps, there are many small firms that are rising to the challenge and showing incredible resilience during this time.

The businesses that are still open are finding new and innovative ways to keep businesses going.  All the while dealing with kids at home and other additional responsibilities.  A lot of eateries are now realizing that takeouts are the best option.  Dining areas have had to remain closed but people still want to enjoy “eating out.”  This way they can do so in a coronavirus-legitimate way and support local businesses.

Many companies have Googled “how much does SEO cost” and are finding ways to make themselves more readily searched online. Since the majority of people are spending far more time online now than ever before, it makes sense that businesses are trying to stay up to date so that people can search for them and find them more easily online.

Educational institutes are figuring out ways to teach online since they are not able to teach on campus right now. The advantage of that is that students are able to access more educational opportunities since distance is no longer an issue.

Fashion and clothing companies have adapted by making masks.  Some make masks to match outfits, others create comic masks and still others make headcoverings and masks to go together.  There is so much that can be done.

Economic Indicators: A Time for Optimism?

According to recent data from the US Bureau of Economic Analysis, there was  an increase in GDP for the Third Quarter of 2020.  This number was 33.1 percent but should not be viewed in isolation since the Second Quarter encountered a 31.4 percent decline. This is indicative of a hopeful strong start to the V-shaped economic recovery.

Also in optimistic economic news, the unemployment numbers are dropping.  In fact, the numbers show that they are at the lowest since March, when the coronavirus pandemic began.    With a PMI (Purchasing Managers Index) number of 59.3 (and that being the 6th consecutive number over 50, 50 being deemed an expansive number), things are starting to look up.

There is still much more to be done.  Many believe the stimulus packages are inadequate and that until there is a vaccine against the coronavirus and industries across the board have the capacity to resume business activities, the tragic economic problems will remain. But these figures are encouraging.