Externalities always felt glossed over in economics. So yes this business will ruin the river for everyone but please direct your attention to this chart and look at all that producer surplus!
Complex systems are dominated by feedback curves, but people insist on analyzing them by the forward transmission curves.
The separation between the cause and the effects are way less important than their polarity. High-order effects tend to be smaller, but they are also way more numerous, so things can cancel out or end-up resolved on either way.
and therefor you will not be surprised to find out that there has been a very recent dramatic decline in the asking price for empty containers in areas that are primarily devoted to imports, as the empty can is not worth the cost to ship it back.
In this case it's because of the time it takes to load the empties because its more profitable to use the time sailing. Some ports have rules now forcing them to take back empties so the yards don't fill up.
which then leads to negative values for the cans, and makes it profitable for some trucking outfits to run "tiltload" container trucks, that can autonomously off load an empty can ,somewhere convienient
or other wierdness where filling a can with
an otherwise unprofitable comodity ,like hay, then drives a whole industry driven by water cost and the return value of cans, or scrap metal, and who knows what else, "half cut" cars, etc.
The funny thing is that we don't need to speculate about many of the effects of this because it's already happened but nobody really paid attention to it. I am talking about the Trump 2020 OPEC deal.
First, some context. OPEC/OPEC+ generally set their production to meet demand and to keep oil prices stable. That means they aim for a floor and ceiling on oil prices. Every 3 months they meet and try and anticipate demand. Produce too much and the price is too low. This hurts revenue. Produce not enough and it creates political instabilities, both locally and abroad. It would in particular hurt security guarantees with the US that go back to FDR and King Faisal making an oil-for-security deal in 1945. Now, that doens't mean OPEC members can't and don't cheat. They can and do. But it is generally successful [1].
In January-February 2020 we had the start of the pandemic. A lot of people weren't paying attention or thought it could be contained. That was over by March 2020 and much of the world went into lockdown. A lot of travel just stopped. This had an immediate effect on the oil market. Nobody was buying. Nobody had places to store excess oil. Russia and Saudi Arabia got into an oil price war. And the futures price briefly went negative [2]. This technically was an extreme contango market [3].
So what did the Trump administration do? Well, in my estimation, they panicked. They feared this would be devastating to US oil producers. So then-president Trump went to MBS and cajoled him into getting OPEC to massively cut oil production [4][5]. How much? Initially by 9.7 million barrels per day and then going down over the next 2 years to 6.3 million. That's roughly 10% of global crude oil output.
When I say "panicked", because of the OPEC meetings every 3 months, this would've happened anyway. OPEC would've cut production. The market would've stabilized. Instead, Trump locked OPEC into a 2 year cut and essentially gave them permission to drive up oil prices. And that's exactly what happened. This deal maps pretty much exactly to the pandemic inflation spike.
And nobody talks about it. Republicans were keen to blame Biden. Democrats chose to blame "greedy" oil companies even though no amount of US production could replace what OPEC had cut. Biden even went to Riyadh to beg MBS to increase production and he refused [6]. And nobody talks about any of it.
That was 10%. The Hormuz closure is 15-20% and also impacts natural gas, helium, fertilizer and a bunch of other things not impacted by the OPEC deal. Oil is being kept at a futures price of ~$100/barrel by record withdrawals from strategic reserves. By early July, those strategic reserves will be empty and there'll be no way to inject oil back into the market other than reopening the Strait. And that will lag weeks because oil container ships move as fast as bicycles.
So think back to the pandemic. Shipping containers 6x'ed. Gas prices went way up. It impacted jet fuel and sea freight. All of that is coming in the next month or two and there's honestly little we can do about it now. If the Strait reopened today, these second and third order effects are already baked in.
This is now a structural repricing event and we're going to see crude oil and gas prices near current levels probably for years.
Trump flip-flops numerous times per day. I am beginning to think that "The Art of the Deal" was also always fake - he is unable to make a deal. Everyone sees this now.
Of course it was fake. It was ghostwritten (again, of course it was), and the ghostwriter is wracked with remorse. [1]
The idea that a chump who bankrupted a casino could outmaneuver the country that invented the term "checkmate" was always profoundly stupid... so of course, Trump's supporters lapped it up like antifreeze.
Can't someone take all possessions of Trump, Hegseth etc... and redistribute this to middle and lower class folks? I fail to see why I have to pay for increasing prices due to the actions of those guys. This is literally a racketeering scheme for milking us via increase of prices. A few get very rich, just as Smedley Butler pointed out many decades ago - even he would be shocked at the level of milking going on here.
The separation between the cause and the effects are way less important than their polarity. High-order effects tend to be smaller, but they are also way more numerous, so things can cancel out or end-up resolved on either way.
$611 for 2x 5 gallon buckets just to do my garage.
First, some context. OPEC/OPEC+ generally set their production to meet demand and to keep oil prices stable. That means they aim for a floor and ceiling on oil prices. Every 3 months they meet and try and anticipate demand. Produce too much and the price is too low. This hurts revenue. Produce not enough and it creates political instabilities, both locally and abroad. It would in particular hurt security guarantees with the US that go back to FDR and King Faisal making an oil-for-security deal in 1945. Now, that doens't mean OPEC members can't and don't cheat. They can and do. But it is generally successful [1].
In January-February 2020 we had the start of the pandemic. A lot of people weren't paying attention or thought it could be contained. That was over by March 2020 and much of the world went into lockdown. A lot of travel just stopped. This had an immediate effect on the oil market. Nobody was buying. Nobody had places to store excess oil. Russia and Saudi Arabia got into an oil price war. And the futures price briefly went negative [2]. This technically was an extreme contango market [3].
So what did the Trump administration do? Well, in my estimation, they panicked. They feared this would be devastating to US oil producers. So then-president Trump went to MBS and cajoled him into getting OPEC to massively cut oil production [4][5]. How much? Initially by 9.7 million barrels per day and then going down over the next 2 years to 6.3 million. That's roughly 10% of global crude oil output.
When I say "panicked", because of the OPEC meetings every 3 months, this would've happened anyway. OPEC would've cut production. The market would've stabilized. Instead, Trump locked OPEC into a 2 year cut and essentially gave them permission to drive up oil prices. And that's exactly what happened. This deal maps pretty much exactly to the pandemic inflation spike.
And nobody talks about it. Republicans were keen to blame Biden. Democrats chose to blame "greedy" oil companies even though no amount of US production could replace what OPEC had cut. Biden even went to Riyadh to beg MBS to increase production and he refused [6]. And nobody talks about any of it.
That was 10%. The Hormuz closure is 15-20% and also impacts natural gas, helium, fertilizer and a bunch of other things not impacted by the OPEC deal. Oil is being kept at a futures price of ~$100/barrel by record withdrawals from strategic reserves. By early July, those strategic reserves will be empty and there'll be no way to inject oil back into the market other than reopening the Strait. And that will lag weeks because oil container ships move as fast as bicycles.
So think back to the pandemic. Shipping containers 6x'ed. Gas prices went way up. It impacted jet fuel and sea freight. All of that is coming in the next month or two and there's honestly little we can do about it now. If the Strait reopened today, these second and third order effects are already baked in.
This is now a structural repricing event and we're going to see crude oil and gas prices near current levels probably for years.
[1]: https://www.macrotrends.net/1369/crude-oil-price-history-cha...
[2]: https://www.congress.gov/crs_external_products/IN/PDF/IN1135...
[3]: https://www.investopedia.com/terms/c/contango.asp
[4]: https://www.reuters.com/article/economy/special-report-trump...
[5]: https://www.reuters.com/article/world/trump-touts-great-saud...
[6]: https://www.congress.gov/117/meeting/house/114185/documents/...
The idea that a chump who bankrupted a casino could outmaneuver the country that invented the term "checkmate" was always profoundly stupid... so of course, Trump's supporters lapped it up like antifreeze.
1: https://www.cbsnews.com/news/tony-schwartz-trumps-ghostwrite...