Most business owners are oblivious to the fact that we're possibly weeks or even days away from running out of Diesel. I can't really blame them since none of the CNBC or FOX news talking heads mention it and the "markets" keep showing prices of oil lower and stocks higher. Every morning folks check their 401K balances on their smartphones and glance at the prices of gas at their local stations and think: 'It's all good" or "We got this!" and continue on with the day. I'm just gonna put this out there:
"According to the U.S. Energy Information Administration's latest weekly numbers, the U.S. has just a bit more than 25 days of distillates, which includes diesel, left in stock."
I'm no expert on energy and I'm not saying we'll actually run out of Diesel but that's not a lot of time. Here's the thing; Most of our refiners use the kind of oil that has been cut off for the last four months. It looked like we might have resolved the dispute but now were back at war with Iran, the Straight is closed again and the kind of oil we need to keep truckers trucking is nowhere to be seen on the horizon.
The proof that the energy prices aren't reflecting reality is something called the "Crack spread" - (yes, really) which is the difference between what refiners pay for a barrel of oil and what they charge for refined products like Diesel and jet fuel. If oil prices were actually lower and totally not manipulated to SEEM lower, then the "crack spreads" would drop. They didn't though which is because refiners are paying WAY MORE for barrels of sour crude because it has to dodge mines and missiles to get out of the straight and into their refineries.
Small business owners have enough on their plates right now with interest rates higher and inflation raging at numbers that make the official rates look comical and ridiculous. Construction contractors are suffering from lower demand already and wafer-thin margins are being pressured from all sides. If additional cost increases are in the works due to fuel shortages or, as some market watchers are predicting, rationing, then we can all expect more businesses to fail as a result. The rate of bankruptcy for small businesses is increasing:
"Overall commercial Chapter 11 bankruptcy filings also increased, with 4,589 filings in the first half, up by 28 percent annually.
“The increase in bankruptcy filings over the past year, particularly among small businesses, reflects ongoing financial pressures facing households and employers,” ABI Executive Director Amy Quackenboss said in a statement.
“Higher borrowing costs, increasing expenses, and geopolitical volatility are leading more debtors to turn to the bankruptcy system to restructure obligations and pursue a financial fresh start.”
So, to recap this last week in terms of how it's affecting small business owners:
COSTS - Increasing across the board. Fuel, labor, supplies and interest are all contributing to lower margins. It's becoming harder to maintain margins without increasing prices for most products and services.
INTEREST - Capital cost hasn't risen by too much but it's harder to secure good lending terms. US 10-year Treasuries are the benchmark for home mortgages and they remained under 4.4%. Many businesses that used to rely on consumers using their home equity like an ATM are experiencing lower sales such as window/doors, siding and roofing companies.
DEMAND - Consumers are pulling back purchases in some areas more than others. Foot traffic is slower at restaurants and malls where discretionary items are sold.
FRAGILITY - Many argue that the economy is strong, that all unresolved issues will be painlessly fixed and that this is all just a hiccup.
I disagree.
I see too many unresolved issues like overpriced AI stocks and underpriced critical commodities like oil and industrial metals. I see imminent danger of severe shortages of the stuff trucks, ships and trains run on and everything they ship with it. I don't pretend to know how or when exactly these inevitable but also preventable land mines will go off. I can say however with extreme certainty that those in charge will all say: "who could have possibly seen that coming"! ...besides anyone with eyes and sentient brain. Here is what business owners should be thinking about: Situational awareness.
This administration isn't able to extract itself from recent self inflicted geopolitical situation and further escalation, which is expected, will l make things way worse. Just remember the Whack-a Mole we've all been subjected to regarding the price of oil the last few months.
It's almost as if abject confusion is a feature not a bug in the "market" price which I put in quotes anymore because of the sheer stupidity of it all. We can't rely on the numbers, estimates, or even the integrity of anyone who has real power and influence. Can't trust politics, can't trust sports, can't trust healthcare. It's hard to make decisions but they have to made regardless. We're all at the mercy of players in a Greek Tragedy which are the most devastating tragedies because all the participants know exactly what's going to happen but there's nothing they can do to stop themselves from making the tragedy a certainty. Small business owners are now the collateral damage of a decades long dissent into financial insolvency which is now coming to head. The US attacked Iran again cutting off whatever supplies were left. Trump says he's gonna control Hormuz from now on and charge all ships 20% for the trouble.
Nice plan.
I'm still waiting for someone, anyone, to tell me a plausible story about how we plan to replace the tremendous amount of oil, weapons systems and political capital we've already lost by doing the same damn thing that failed the first two times!
Iran says that the Strait of Hormuz is closed. The U.S. has reinstalled its maritime blockade of Iran. Trump is demanding a 20% payment on all cargo passing the Strait. Oil prices are rising as are the chances for a new global depression.
The U.S. is incapable of acknowledging its defeat that had followed after it had attacked Iran (twice).
It is now trying to renegotiate the Memorandum of Understanding it had to sign by using the same tools is had used when it had lost the war. This is unlikely to lead to a different outcome. - MOA
Here are some interesting reads I saw last week:
"It has been a busy week with the US making a full-break with the Mou, and it centered on the language in paragraph five of the MoU:"
"Gasoline and diesel are telling a completely different story."
"FOX Business reported that the average monthly payment for a new vehicle reached a record $770"
