Category Archives: Energy

Walmart Sues Tesla Over Solar Panel Fires, Claims SolarCity Purchase Was A Bailout

Until now, the general public was only aware of the remarkable ability of Tesla cars to spontaneously combust, that is at least when they are not smashing into random things while on autopilot. It now appears that Tesla’s solar panels (some may be unaware that several years ago, Elon Musk tried to unsuccessfully pivot Tesla into a solar power company as well as that’s where a few billion in government subsidies were to be found) are just as combustible.

On Tuesday, Walmart sued Tesla, after its solar panels atop seven of the retailer’s stores allegedly caught fire, alleging breach of contract, gross negligence and failure to live up to industry standards. Walmart is asking Tesla to remove solar panels from more than 240 Walmart locations where they have been installed, and to pay damages related to all the fires Walmart says that Tesla caused.

Walmart said it had leased or licensed roof space on top of more than 240 stores to Tesla’s energy operations unit, formerly known as SolarCity (which was basically a bailout by Elon Musk for Elon Musk who was also the largest SolarCity shareholder), for the installation and operation of solar systems. But as of November, fires had broken out at no fewer than seven of the stores, forcing the disconnection of all the solar panel systems for the safety of the public.

The breach-of-contract suit by Walmart, which was filed in the state of New York, alleges that: “As of November 2018, no fewer than seven Walmart stores had experienced fires due to Tesla’s solar systems-including the four fires described above and three others that had occurred earlier.” The fires resulted in evacuations, damaged property and inventory.

Walmart’s inspectors additionally found that Tesla “had engaged in widespread, systemic negligence and had failed to abide by prudent industry practices in installing, operating and maintaining its solar systems.’

Walmart also claimed that “Tesla routinely deployed individuals to inspect the solar systems who lacked basic solar training and knowledge and also alleged that Tesla failed to ground its solar and electrical systems properly, and that Tesla-installed solar panels on-site at Walmart stores contained a high number of defects that were visible to the naked eye, including loose and hanging wires at several locations, and which Tesla should have found and repaired before they led to fires.

It gets better: according to the suit, Tesla’s own inspection reports revealed “improper wire management, including abraded and hanging wires,” as well as “poor grounding” and “solar panel modules that were broken or contained dangerous hot spots.”

To state the obvious, properly designed, installed, inspected and maintained solar systems do not spontaneously combust, and the occurrence of multiple fires involving Tesla’s solar systems is but one unmistakable sign of negligence by Tesla,” Walmart said in the suit. “To this day, Tesla has not provided Walmart with the complete set of final ‘root cause’ analyses needed to identify the precise defects in its systems that caused all of the fires described above.”

Walmart said the first fire broke out at a store in Beavercreek, Ohio, a suburb of Dayton, in March 2018, and two more fires occurred at stores in California and Maryland in May of that year. While Tesla disconnected the panels at Walmart’s request that same month, it wasn’t enough to stop fires from occurring, and another blaze broke out in November at a store in Yuba City, California.

Ironically, the lawsuit comes at a time when Tesla has been trying to salvage its collapsing solar business; on Sunday, Elon Musk announced in a string of tweets which reeked of desperation that customers in some states can now rent Tesla’s residential, solar rooftop systems without a contract. The offer is available in six states, and will cost customers at least $50 a month (or $65 a month in California). And although Musk touted the ease of cancelling a rented roof at anytime, CNBC noted that the fine print on Tesla’s website mentions a $1,500 fee to take out the solar panels and restore the customer’s roof.

There is a reason why Tesla is basically giving the spontaneously combustible solar panels away: In the second quarter, Tesla installed a mere 29 megawatts of solar, a record low for the company in a single quarter. In its heyday, Tesla’s solar division (formerly SolarCity) installed over 200 megawatts in a single quarter.

But wait there is more.

As if allegations of shoddy quality control, dismal workmanship and overall blatant lack of professionalism weren’t enough, Walmart also “went there” and in the “explosive”, pun not intended 114-page lawsuit, piled onto a long-running controversy according to which Tesla bailed out a failing SolarCity in 2016 when it purchased the company for $2.6 billion (Elon Musk was also the biggest shareholder of SolarCity at the time, while Tesla’s Elon Musk bought out SolarCity in a gross conflict of interest), with WalMart highlighting the familial ties between Tesla and SolarCity as the underpinnings of a flawed merger that allegedly produced shoddy craftsmanship and led to fires at seven Walmart stores.

“On information and belief, when Tesla purchased SolarCity to bail out the flailing company (whose executives included two of Tesla CEO Elon Musk’s first cousins), Tesla failed to correct SolarCity’s chaotic installation practices or to adopt adequate maintenance protocols, which would have been particularly important in light of the improper installation practices,” Walmart claimed in a suit that is sure to draw regulators attention to the 2016 deal that should never have been allowed. As shown in the diagram above, SolarCity co-founders Lyndon Rive and Peter Rive are Musk’s cousins, while Musk was the largest shareholder of both companies.

So already facing a slumping stock price from dozens of lawsuits and investigations, store closings, delayed loan repayments and the departure of key executives, CNBC notes that the Walmart suit lands at a particularly difficult time for Tesla and Musk. Specifically in regards to SolarCity, Musk was slated to be deposed earlier this month in a complaint brought by shareholders over the deal.

The name “SolarCity” shows up 46 times in the lawsuit, which alleges the company had a failed business model, stemming from a goal to speed up revenue growth at all costs.

“Walmart’s experience bears out Tesla, Inc.’s and Tesla’s inability to turn around and bail out the solar panel operations acquired from SolarCity,” the suit says.

* * *

Walmart is asking a judge to declare Tesla in breach of contract, order the company to remove the solar panels from all of its stores and award damages equal to its costs and consulting fees in connection with the fires.

Tesla shares fell as much as 1.7% to $222.70 as of 6:45 p.m. in after hours trading. The stock is down 32% this year.

The case is Walmart Inc. v. Tesla Energy Operations, New York State Supreme Court, New York County; Index No.  654765/2019.

The full lawsuit is below

Source: ZeroHedge

12 US States Boosted Their Gasoline Tax Today, But Illinois’ Is The Biggest

Today, gasoline taxes are rising in a dozen U.S. states. The following infographic shows where gasoline taxes are going up today and it’s based on data from the Institute on Taxation and Economic Policy.

https://infographic.statista.com/normal/chartoftheday_18564_increase_in_gasoline_taxes_in_us_states_n.jpg(source)

California is among the states with increases and taxes in the Golden State are going up by 5.6 cents. That now equates to 47.3 cents per gallon, meaning California once again has the highest gasoline prices in the country.

But, the increase is particularly notable in Illinois given, as Statista’s Niall McCarthy notes, that the state hasn’t altered its gas tax since 1990. It’s bumping its gas tax by 19 cents to 38 cents a gallon.

As IllinoisPolicy.org’s Vincent Carudo and Joe Barnas detail below, Illinoisans will shoulder one of the nation’s heaviest tax burdens at the pump – and the DMV.

https://www.zerohedge.com/s3/files/inline-images/AP_19156774480694-1024x707.jpg?itok=v-VOIlPd

On June 28, Gov. J.B. Pritzker signed into law a $45 billion infrastructure plan that will bring Illinois drivers a record gas tax hike and higher vehicle registration costs.

Those tax and fee increases will come in addition to tax hikes on cigarettes, e-cigarettes, parking and real-estate transfers, on top of new revenue from a massive gambling expansion that includes new casinos and legalized sport betting – all of which the Illinois General Assembly introduced and passed in a single day.

The gas tax hike is the most painful increase to come, doubling to 38 cents from 19 cents per gallon.

This will bump Illinois’ total gas tax burden to the third-highest in the nation, and possibly higher if local governments exercise their increased taxing authority under the plan. An Illinois Policy Institute analysis found the typical Illinois driver will pay at least $100 more on gasoline each year under a doubled gas tax.

Illinois is one of just seven states where drivers pay layers of both general sales taxes and special excise taxes on gasoline at the state and local levels. Those multiple layers mean drivers filling up in Chicago, for example, will pay 96 cents in taxes and fees on a $2.46 gallon of gasoline – an effective tax burden of 39%.

The infrastructure plan also hikes Illinois’ vehicle registration fees to among the highest in the nation. Illinois drivers of standard vehicles weighing 8,000 pounds or less will see registration fees jump to $148 from $98.

The gas tax hike kicks in July 1, and motorists will pay more for license plate stickers starting in 2020.

https://www.zerohedge.com/s3/files/inline-images/illinois-raising-fees-01.png?itok=jie0CeR0

Taken together, increases in the gas tax and vehicle registration fees alone erase any promised income tax savings included in Pritzker’s progressive income tax plan, which Illinoisans will vote on in November 2020.

Under Pritzker’s proposed progressive tax system, a married couple in Illinois with two kids earning the $79,168 median annual income and paying the average property tax bill of $4,157 would see $195 in total tax relief, according to the Pritzker administration’s online “fair tax calculator.”

But if that same family uses two cars on a regular basis, their budget will take a $300 hit – a $200 gas tax increase and a $100 vehicle registration fee hike.

Notably, the gas tax will be tied to inflation, meaning it will automatically rise annually. This allows state lawmakers in future years to avoid blame from frustrated motorists.

Based on current inflation projections, the gas tax will rise almost a penny a year. Lawmakers’ inflation mechanism could drive the gas tax to 43.5 cents by 2025, nearly 25 cents per gallon more than it is now.

Using the most recent inflation forecasts for the United States, the gas tax will grow just short of a penny each year until 2025 – a 130% increase.

https://www.zerohedge.com/s3/files/inline-images/gas-taxes-projected-01.png?itok=9gVllt2Y

The new law lets Chicago raise its local gas tax by an extra 3 cents, which would put it at 8 cents. It allows Lake County and Will County to impose a gas tax of up to 8 cents per gallon. DuPage, Kane and McHenry counties would be able to double their 4-cent-per-gallon gas taxes to 8 cents.

According to state projections, the doubled gas tax alone will raise $1.2 billion, with $560 million going to the state and $650 million to local governments.

If Chicago and the collar counties increase their motor fuel taxes – along with automatic yearly inflation-tied increases at the state level – residents could soon be looking at the highest average gas tax burden in the country.

The Illinois Policy Institute outlined a plan in May showing how Illinois could finance $10 billion in new capital spending without tax hikes.

State lawmakers could have achieved a more responsible plan by focusing on maintenance infrastructure, reforming costly prevailing wage mandates and using an objective project selection process, while dedicating revenue from legalized sports betting and sales taxes on gasoline to transportation infrastructure.

Instead, state leaders once again chose to demand more of already-overburdened Illinois taxpayers.

Source: ZeroHedge

 

Gasoline Futures Soar As Largest East Coast Refinery Set To Permanently Close

https://www.zerohedge.com/s3/files/inline-images/Screen%20Shot%202019-06-21%20at%205.56.23%20AM.png?itok=CxFQLscR

RBOB Gasoline futures jumped overnight, accelerating their recent ascent ever since the explosion and massive inferon at the Philadelphia Energy Solutions (PES) plant, following a Reuters report that the largest east coast refinery is expected to seek to permanently shut its oil refinery in the city after a massive fire caused substantial damage to the complex.

Shutting the refinery, the largest and oldest on the U.S. East Coast, would result in not only hundreds of lost jobs but also sharply higher gasoline prices as gasoline supplies are squeezed in the busiest, most densely populated corridor of the United States.

PES is expected to file a notice of intent with state and federal regulators as early as Wednesday, setting in motion the process of closing the refinery, the sources said.

The refinery, which could still change its plans, is also expected to begin layoffs of the 700 union workers at the plant as early as Wednesday, Reuters reported. The layoffs could include about half of the union workforce, with the remaining staff staying at the site until the investigation into the blast concludes.

As reported previously, the 335,000 barrel-per-day (bpd) complex, located in a densely populated area in the southern part of the city, erupted in flames in the early hours on Friday, in a series of explosions that could be heard miles away and which some compared to a meteor strike or a nuclear bomb going off.

The cause of the fire was still unknown as of Tuesday, though city fire officials said it started in a butane vat around 4 a.m. (0800 GMT). It destroyed a 30,000-bpd alkylation unit that uses hydrofluoric acid to process refined products. Had the acid caught fire, it could have resulted in a vapor cloud that can damage the skin, eyes and lungs of nearby residents.

Prior to the massive inferno, the refinery had suffered from years of financial struggles, forcing it to slash worker benefits and scale back capital projects to save cash. It went through a bankruptcy process last year to reduce its debt, but its difficulties continued as its cash on hand dwindled even after emerging from bankruptcy in August; some have speculated that cost cutting resulted in the structure becoming fragile and susceptible to accident.

After bankruptcy, Credit Suisse Asset Management and Bardin Hill became the controlling owners, with former primary owners Carlyle Group and Sunoco Logistics, an Energy Transfer subsidiary, holding a minority stake.

Last Friday’s blaze was the second in two weeks at the complex, spurring calls from Philadelphia’s mayor for a task force to look into both the cause and community outreach in the wake of the incidents. A spokesperson for Mayor Jim Kenney declined to comment on the potential closure of the plant.

That may be difficult as investigators on the scene are said to be dealing with unstable structures that need to be certified by engineers, slowing down the inquiry, city officials said. The investigation could ultimately take months or perhaps years. Additionally, the state Department of Environmental Protection said they have concerns about the integrity of storage tanks on site, the agency said on Tuesday. The U.S. Chemical Safety Board is also investigating the incident, according to Reuters.

While none of this will make much news outside of Philly, what will impact all East Coast drivers is that gasoline futures rose as much as 5.4% on Wednesday to $1.9787 a gallon, the highest since May 23. The front month price was at $1.945 early on Wednesday.

https://www.zerohedge.com/s3/files/inline-images/rbob%206.26.jpg?itok=BBoPCgse

Futures are up 8.9% since Thursday’s close.

NY Gasoline prices have surged back into a premium over US Gulf Gasoline…

https://www.zerohedge.com/s3/files/inline-images/bfmA71.jpg?itok=TodQJMF0

All of which will drag, as always with a lag, the price of gas at the pump notably higher…

https://www.zerohedge.com/s3/files/inline-images/2019-06-26%20%281%29.jpg?itok=ICMW9MAG

The rally in U.S. gasoline futures has pushed U.S. gasoline prices above European and Asian markets, raising the prospects for US imports. According to Matthew Chew, oil analyst at IHS Markit, “chances are that (the wider price spread) could open up the arbs between U.S. Gulf/Europe and [the East Coast] PADD 1.”

Source: ZeroHedge

Labor Day 2018

The Uncomfortable Hiatus

And so the sun seems to stand still this last day before the resumption of business-as-usual, and whatever remains of labor in this sclerotic republic takes its ease in the ominous late summer heat, and the people across this land marinate in anxious uncertainty. What can be done?

Some kind of epic national restructuring is in the works. It will either happen consciously and deliberately or it will be forced on us by circumstance. One side wants to magically reenact the 1950s; the other wants a Gnostic transhuman utopia. Neither of these is a plausible outcome. Most of the arguments ranging around them are what Jordan Peterson calls “pseudo issues.” Let’s try to take stock of what the real issues might be.

Energy: The shale oil “miracle” was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday (The Next Financial Crisis Lurks Underground). For all that, the shale oil producers still couldn’t make money at it. If interest rates go up, the industry will choke on the debt it has already accumulated and lose access to new loans. If the Fed reverses its current course — say, to rescue the stock and bond markets — then the shale oil industry has perhaps three more years before it collapses on a geological basis, maybe less. After that, we’re out of tricks. It will affect everything.

The perceived solution is to run all our stuff on electricity, with the electricity produced by other means than fossil fuels, so-called alt energy. This will only happen on the most limited basis and perhaps not at all. (And it is apart from the question of the decrepit electric grid itself.) What’s required is a political conversation about how we inhabit the landscape, how we do business, and what kind of business we do. The prospect of dismantling suburbia — or at least moving out of it — is evidently unthinkable. But it’s going to happen whether we make plans and policies, or we’re dragged kicking and screaming away from it.

Corporate tyranny: The nation is groaning under despotic corporate rule. The fragility of these operations is moving toward criticality. As with shale oil, they depend largely on dishonest financial legerdemain. They are also threatened by the crack-up of globalism, and its 12,000-mile supply lines, now well underway. Get ready for business at a much smaller scale.

Hard as this sounds, it presents great opportunities for making Americans useful again, that is, giving them something to do, a meaningful place in society, and livelihoods. The implosion of national chain retail is already underway. Amazon is not the answer, because each Amazon sales item requires a separate truck trip to its destination, and that just doesn’t square with our energy predicament. We’ve got to rebuild main street economies and the layers of local and regional distribution that support them. That’s where many jobs and careers are.

Climate change is most immediately affecting farming. 2018 will be a year of bad harvests in many parts of the world. Agri-biz style farming, based on oil-and-gas plus bank loans is a ruinous practice, and will not continue in any case. Can we make choices and policies to promote a return to smaller scale farming with intelligent methods rather than just brute industrial force plus debt? If we don’t, a lot of people will starve to death. By the way, here is the useful work for a large number of citizens currently regarded as unemployable for one reason or another.

Pervasive racketeering rules because we allow it to, especially in education and medicine. Both are self-destructing under the weight of their own money-grubbing schemes. Both are destined to be severely downscaled. A lot of colleges will go out of business. Most college loans will never be paid back (and the derivatives based on them will blow up). We need millions of small farmers more than we need millions of communications majors with a public relations minor. It may be too late for a single-payer medical system. A collapsing oil-based industrial economy means a lack of capital, and fiscal hocus-pocus is just another form of racketeering. Medicine will have to get smaller and less complex and that means local clinic-based health care. Lots of careers there, and that is where things are going, so get ready.

Government over-reach: the leviathan state is too large, too reckless, and too corrupt. Insolvency will eventually reduce its scope and scale. Most immediately, the giant matrix of domestic spying agencies has turned on American citizens. It will resist at all costs being dismantled or even reined in. One task at hand is to prosecute the people in the Department of Justice and the FBI who ran illegal political operations in and around the 2016 election. These are agencies which use their considerable power to destroy the lives of individual citizens. Their officers must answer to grand juries.

As with everything else on the table for debate, the reach and scope of US imperial arrangements has to be reduced. It’s happening already, whether we like it or not, as geopolitical relations shift drastically and the other nations on the planet scramble for survival in a post-industrial world that will be a good deal harsher than the robotic paradise of digitally “creative” economies that the credulous expect. This country has enough to do within its own boundaries to prepare for survival without making extra trouble for itself and other people around the world. As a practical matter, this means close as many overseas bases as possible, as soon as possible.

As we get back to business tomorrow, ask yourself where you stand in the blather-storm of false issues and foolish ideas, in contrast to the things that actually matter.

Source: James Howard Kunstler

U.S. Chamber of Commerce Launches Yet Another Financial Campaign Against U.S. Workers and Main Street…

Today U.S. Chamber of Commerce President Tom Donohue announced another campaign to protect and defend his Wall Street contributors against initiatives that benefit Main Street U.S.A. This is not the first time, and unfortunately it will likely not be the last time.

For a great historic reference consider THIS ARTICLE from 2014; when the U.S. Chamber of Commerce announced their direct attack against the Tea Party backed candidates that threatened to remove the massive lobbying power of Tom Donohue’s corrupt officials. That 2014 reference point has two parts. I strongly urge anyone who would defend the U.S. CoC approach to read both.

https://theconservativetreehouse.files.wordpress.com/2017/12/shameful-seven-with-donohue.jpg

The overwhelming majority of economic punditry and opinion come from salespeople on the purchased payroll, direct and indirect, of the chamber. It is one of the most, check that, it is the most corrupt and abusive enterprise in the history of our nation. They are pulling out a very familiar playbook.

(Reuters) – The U.S. Chamber of Commerce on Monday denounced President Donald Trump’s handling of a global trade dispute, issuing a report that argued the tariffs imposed by Washington and retaliation by its partners would boomerang badly on the American economy.

The Chamber, the nation’s largest business lobby group and a traditional ally of Trump’s Republican Party, argued the White House is risking a global trade war with the push to protect U.S. industry and workers with tariffs.The group’s analysis of the potential hit each U.S. state may take from retaliation by U.S. trading partners painted a gloomy picture that could increase pressure on the White House from Republicans ahead of congressional elections in November.[…] The Chamber is expected to spend millions of dollars ahead of the November elections to help candidates who back free trade, immigration and lower taxes. It has already backed candidates who share those goals in Republican primaries. (read more)

The U.S. Chamber of Commerce consists of a massive multinational DC lobbying group that four consecutive administrations’ have allowed to write the actual language in U.S. trade deals and trade negotiations.  Bush, Clinton, Clinton, Bush, Bush, Obama, Obama all gave the U.S. Chamber of Commerce the keys to the U.S. economy, and walked away.  The U.S. middle-class was nearly destroyed in the process.

CTH has stood alone, for years, against the insufferable horde of CoC political mouthpieces and their media conscripts.  The U.S. Chamber of Commerce is at the corrupt center of almost every scheme that fund the Deep Swamp to the detriment of our nation. They are the most vile and insidious UniParty group of lobbyists in Washington DC.

Until Donald Trump came along, they held virtually unlimited power over the U.S. economy.  The Chamber is a cancer; and any politician who associates with that abhorrent group should be excised from existence with extreme prejudice.

https://theconservativetreehouse.files.wordpress.com/2017/07/the-big-club-4-e1500321906624.jpg

Source: By Sundance | The Conservative Tree House

WSJ Sounds The Alarm: “There’s No Getting Over” Gas at $4 a Gallon

Consumers, who are already being squeezed by rising interest rates (even as the return on their cash deposits remains anchored near zero), are facing another potential constraint on their already limited purchasing power. And that constraint is  rising gasoline prices, which, as we pointed out last month, could erode the stimulative impact of President Trump’s tax plan as rising prices sop up what little money the middle class is saving.

As prices rise and banks scramble to update their forecasts, the Wall Street Journal has become the latest publication to sound the alarm over what is, in our view, one of the biggest threats facing the US economy in the ninth year of its post-crisis expansion. 

In its story warning about $3 a gallon gas (of course, we’re already seeing $4 a gallon in parts of California and other high-tax states), WSJ cited Morgan Stanley’s latest projection that rising gas prices could wipe out about a third of the annual take-home pay generated by the tax cuts.

Rising fuel costs can also feed inflation and pressure interest rates. Even though the Federal Reserve typically looks past volatile energy prices in the short term, higher energy costs help shape consumer confidence. And with the central bank poised to be more active this year, rising energy costs pose an additional risk to the economy.

Morgan Stanley estimates that if gas averages $2.96 this year, it would take an annualized $38 billion from spending elsewhere, an upward revision from the bank’s $20 billion estimate in January. That would wipe out about a third of the additional take-home pay coming from tax cuts this year, the analysts said.

Patrick DeHaan, petroleum analyst at GasBuddy”Three dollars is like a small fence. You can get through it, you can get over it,” said Patrick DeHaan, petroleum analyst at GasBuddy, a fuel-tracking app. “But $4 is like the electric fence in Jurassic Park. There’s no getting over that.”

Of course, MS’s take appears downright pollyannaish when compared with a Brookings Center report that we highlighted last month.

The left-of-center think tank, which of course has every reason to hope that the next recession will materialize on President Trump’s watch, projected that consumers would soon spend about half of the money saved from tax cuts on fuel costs.

And in a report published in April, Deutsche Bank illustrated how rising fuel costs will disproportionately squeeze the most vulnerable among us – a cohort of consumers who already shoulder an outsize share of the country’s household debt.

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.15db.jpg?itok=H0g5_RQa

The FT put it another way…

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.15ft.jpg?itok=HdnzBFje

As the chart above shows, middle-income families – aka the engine of consumption – will be the hardest hit by rising gas prices.

Indeed, small business owners in California, where gas prices are the fifth highest in the nation thanks to taxes and stringent emissions standards, say they’ve seen their energy bills shoot higher in the past few months. Car salesmen say consumers are asking more questions about mileage, according to WSJ.

Robert Lozano, a car salesman in Los Angeles where some gas prices are already above $4, said the dealership’s gas bill has climbed from about $9,000 to about $12,000 a month recently.

Customers are inquiring more about electric vehicles, he said.

“It’s more in the consumer’s mind as to what the most efficient vehicle is.”

With oil already at $70 a barrel, early indicators imply that the summer driving season could see an unusually large spike in demand for gas…

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.15vacations.png?itok=oOyR1nG8

…As the number of Americans intending to take vacations in the next six months climbs to its highest level in decades.

Heightened vacation intentions suggest the number of vehicle miles driven will also climb (because people tend to travel greater distances when they go on vacation). As the chart below shows, fluctuations in miles driven – a close proxy for gas demand – are quickly reflected in prices at the pump.

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.14gascorrelation.png?itok=Q3j2fPOJ

While the US’s increasing prominence in the oil-export market could soften some of the economic blow as the energy business booms, other large business from airlines to shipping companies would feel the pinch at a time when costs are already rising.

But some economists say the growing importance of energy to the U.S. economy could blunt some of the impact from rising oil prices.

The country has become a more prominent supplier of crude oil and fuel. Domestic production has reached record weekly levels of 10.7 million barrels per day and a lot of it is being exported.

[…]

“People don’t understand how we could double crude oil production” and see higher gas prices, said Tom Kloza, global head of energy analysis at the Oil Price Information Service. “The answer lies in the balance of payment. We are an exporting power right now.”

[…]

Airlines and shipping companies will also be paying more for jet fuel and diesel – costs that may be passed along to consumers. Even companies such as Whirlpool Corp. have noted that higher oil prices have boosted the cost of materials.

Refiner Valero Energy Corp. said it wouldn’t expect consumer demand to drop off until oil prices are at $80 to $100.

But demand is only one factor driving up oil prices. Supply issues have also weighed on oil traders’ minds. Traders pushed oil prices higher as the US pulled out of the Iran deal as some worried that it could impact global supplies (though, as we’ve pointed out, there are plenty of other buyers waiting to step in and buy Iranian crude). Even if the Iranian crude trade isn’t impacted by sanctions, plummeting production capacity in Venezuela could ultimately have a bigger impact on global supply.

Conflicts in other oil producing regions could also impact supplies, pushing prices higher.

Last week, Bank of America became the first Wall Street bank to call $100/bbl for Brent crude (at the time, it was trading around $77/bbl) in 2019. That could send prices to highs not seen since 2008. Other banks have been scrambling to raise their forecasts as well. 

With the Fed changing its language in its latest policy statement to reflect rising inflation expectations, rising oil prices could also inspire the Fed to hike interest rates more quickly for fear that the economy might overheat. That could result in four – or perhaps five – rate hikes this year.

The resulting effect would be like economic kudzu strangling the buying power of consumers and possibly forcing a long-overdue debt reckoning as millennials, who are already drowning in debt, are forced to put off home ownership and family formation until they’re in their late 30s or even their 40s.

Source: ZeroHedge