Economy

Oil hits US$120 a barrel, G7 countries to stop fossil fuel development funding

Published

1 month ago

May 31, 2022

Brussels, Belgium- Oil has hit the US$120 a barrel mark, its highest level in more than two months due to tight supplies and exports of diesel from Russia.

Traders are monitoring any European Union (EU) decision on restrictions or an outright embargo on Russian oil purchases in the coming days. Bloc members are due to meet on Monday and Tuesday.

Meanwhile, G7 countries (United Kingdom, the United States, Canada, Japan, Italy, France and Germany) have decided to stop fossil fuel development funding from the end of this year.

According to analysts’ estimates, this could shift about US$33 billion a year from fossil fuels to clean energy sources.

“The G7 committing to end public finance for fossil fuels and shift it to clean (energy) is a massive win. This is a timely reconfirmation (amid the Ukraine war) that the most viable pathway to energy security is prioritizing public finance for clean energy. These promises should now urgently be turned into action,” said Laurie van der Burg, a campaign co-manager at the green group Oil Change International.

Meanwhile, in the United States, Hawaii is seeking to replace coal and oil with solar energy, aiming to rely extensively on rooftop panels.

The State has increased the use of renewable energy in large parts by getting electric utilities to accept rooftop solar rather than fight it, as energy companies in California, Florida and other states have been doing.

“In Hawaii, we have come to the recognition that rooftop solar is going to be an important part of our grid, (and) has to be part of our grid. Some people think we are crazy. Some people think we are pretty amazing,” said Shelee Kimura, president and chief executive of Hawaiian Electric Company, the State’s largest power provider.

According to the Energy Information Administration, power plants fueled by oil supplied nearly two-thirds of Hawaii’s electricity last year, down from nearly three-quarters a decade earlier.

Economy

The US economy shrank 1.6% in the first quarter, adding to recession fears – CNN

Published

9 hours ago

June 29, 2022

Harry Miller

Minneapolis (CNN Business)The US economy shrank at a slightly faster rate than previously estimated during the first quarter, the Bureau of Economic Analysis said Wednesday.

With one quarter of negative economic growth in the books, the data adds to fears that a recession may be looming.

Real gross domestic product declined at an annualized rate of 1.6% from January to March, according to the BEA’s third and final revisions for the quarter.

Previously, the advance estimate released in April showed a contraction of 1.4%. Last month, that was revised to a decrease of 1.5%.

The first quarter GDP performance, which the BEA noted includes some unquantified effects from the pandemic and the Omicron variant surge, stood in contrast to the fourth quarter of 2021, when the economy grew at a rate of 6.9% from the prior quarter.

The first quarter of 2022, however, marked the start of Russia’s invasion of Ukraine, which sent economic shockwaves throughout the global supply chain, as well as the food, finance and energy markets.

Domestically, US inflation has soared to levels not seen in decades amid ongoing supply chain challenges, rising costs for commodities and labor and spiking oil prices.

The BEA attributed the latest decline of 0.1 percentage point to slower-than-expected growth in consumer spending, although that was partially offset by gains in private inventory investment.

The shift in estimates on consumer spending puts additional emphasis on the latest Personal Consumption Expenditures price index data, one of the Federal Reserve’s preferred gauges of inflation, said Shannon Seery, a Wells Fargo economist. The latest report is set for release on Thursday.

Wells Fargo expects a mild recession to occur in the second quarter of 2023, though strong household finances and solid consumer and business balance sheets should keep such a downturn, if it occurs, fairly tame, Seery said.

While a recession is commonly defined as two consecutive quarters of GDP declines, that’s not a hard-and-fast rule, especially for the folks who make the official determination. The National Bureau of Economic Research, the arbiter of US recessions, considers a range of indicators in addition to GDP performance and defines a recession as a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”

The advance estimate for second-quarter GDP performance is scheduled for release on July 28.

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Economy

The pandemic may have forever altered the economy, Fed Chair Powell says – CNN

Published

10 hours ago

June 29, 2022

Harry Miller

(CNN)It’s not yet clear if the US economy will ever return to its pre-pandemic status, Federal Reserve Chairman Jerome Powell said Wednesday at a central banker forum in Portugal.

“The economy is being driven by very different forces. What we don’t know is whether we’ll be going back to something that looks like, or a little bit like, what we had before,” Powell told a panel that included European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey.

The central bank heads, who collectively hold around $20 trillion on their balance sheets, discussed how “new forces” have changed inflationary dynamics and the global economic landscape — perhaps forever.

“I don’t think we’re going back to that [pre-Covid] period of low inflation,” Lagarde said, noting that Russia’s invasion of Ukraine will “change the picture and the landscape within which we operate.”

Along with pandemic-related supply chain disruptions, Powell said Russia’s war has “added tremendously” to food and inflation pressures. That has made the Fed’s role of securing price stability and maximum employment “a different exercise from the one that we’ve had for the past 25 years,” he said.

All three central bankers are battling surging inflation in their economies. The Fed embarked on a course earlier this year to hike interest rates and combat the worst US inflation since the 1980s. Earlier this month, Fed officials voted to implement an interest rate hike of three-quarters of a point, the first time since 1994 that it has approved an increase of that size.

While a growing pool of analysts and economists fear such aggressive moves could push the economy into a recession within the next 12 months, Powell said he believes the US economy is robust enough to withstand a moderation in growth, since households and businesses are both in very strong financial shape.

But the Fed Chair warned that entrenched or persistent inflation would be a worse outcome than an economic downturn.

“Is there a risk that we would go too far [with rate hikes]? Certainly there’s a risk,” Powell said. “But I wouldn’t agree that that is the biggest risk to the economy. The bigger mistake to make would be to fail to restore price stability.”

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Economy

China's Economy Shows Signs of Improvement as Covid Eases – BNN

Published

11 hours ago

June 29, 2022

Harry Miller

(Bloomberg) — China’s economy showed further signs of improvement in June with a strong pickup in services spending as Covid outbreaks and restrictions were gradually eased.

The official manufacturing purchasing managers index rose to 50.2 from 49.6 in May, the National Bureau of Statistics said Thursday, slightly below the median estimate of 50.5 in a Bloomberg survey of economists. It was the first time since February that the index was above 50, indicating expansion in output compared with May.

The non-manufacturing gauge, which measures activity in the construction and services sectors, climbed to 54.7, the highest in more than a year and well above the consensus forecast of 50.5.

China’s CSI 300 Index rose as much as 0.9% while major stock gauges in Asia broadly fell.

Government restrictions to contain Covid outbreaks have gradually eased over the last month. The financial hub Shanghai lifted its two-month lockdown at the start of June by allowing more shops to reopen, more factories to resume production, and for port operation to pick up.

The data suggests “the pace of recovery accelerated as the Covid situation stabilized,” said Peiqian Liu, chief China economist at NatWest Group Plc. There was a “broad based but still soft recovery in both production and new orders,” and the figures show the rebound is still milder compared with the recovery from the Wuhan lockdown in 2020, she said.

Some 19 of the 21 sectors in the service sectors tracked in the survey returned to expansion last month, up from just six in the previous month, according to the NBS. Gauges of sectors previously hit badly by the outbreaks all improved, such as railway transport, air transport, accommodation, catering and entertainment.

The recovery remains fragile though as the country sticks to its Covid Zero strategy, meaning restrictions could be tightened if outbreaks of the highly transmissible omicron variant flare up again. Chinese President Xi Jinping reaffirmed his Covid Zero policy this week, saying it was the most “economic and effective” for the country.

Economists, meanwhile, are holding firm on their gross domestic product growth forecasts for this year. The median projection in a Bloomberg survey for 2022 growth is 4.1%, well below Beijing’s annual target of around 5.5%. Bloomberg’s aggregate index of eight early indicators showed some improvement in June, though the recovery remains muted.

(Updates with additional details)

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