Senate Goes Back To Middle School For Impeachment Trial

There are a lot of similarities between the Senate and middle school. The inhabitants of both sit at small, cramped desks; both have a heightened sense of self-importance; and both aren’t afraid to bend (or break) the rules if they think they can get away with it.

Case in point: During the Senate impeachment trial of President Trump, senators are supposed to adhere to a rather strict set of rules meant to keep the decorum of “the world’s greatest deliberative body” intact while allowing the proceedings on the floor to run smoothly. The rules, most of which don’t apply when the Senate is in normal session, require senators to remain seated and silent during the trial. Electronic devices, including cell phones, laptops and tablets, are prohibited inside the chamber. And senators are not allowed to eat or drink anything but water when the trial is in session. The one exception is milk (yes, milk). Continue reading “Senate Goes Back To Middle School For Impeachment Trial”

New Trade Deals Give Trump a Political Boost Amid Impeachment Turmoil

While impeachment dominated the headlines this week, there was also plenty of big news on the trade front, most notably the long-awaited signing of the Trump administration’s “phase one” trade deal with China.

So what’s in the deal? Plenty of ink has been spilled about China’s commitment to purchase an additional $200 billion of U.S. goods and services over the next two years. For reference, U.S. exports to China totaled $185 billion in 2017, the baseline year, meaning that they would have to increase a whopping 54% in 2020 to keep pace.

Continue reading “New Trade Deals Give Trump a Political Boost Amid Impeachment Turmoil”

What To Expect From The Looming Senate Impeachment Trial

The impeachment of President Trump is about to enter a new, historic phase. Beginning next week, a president will be forced to defend himself at an impeachment trial for only the third time in U.S. history.

After Democrats initiated impeachment in the House, it’s now the Republicans’ turn in the Senate. Barring some extraordinary new evidence or developments, Trump is almost certain to be acquitted by the GOP-run upper chamber. But that doesn’t mean the trial won’t be filled with drama and potentially damaging consequences for one party or the other, or both. Continue reading “What To Expect From The Looming Senate Impeachment Trial”

Congress, The Big Tent Circus

The two “I” words completely dominated Capitol Hill this week – Iran and impeachment. And in typical congressional fashion, lawmakers have no clear path or consensus for dealing with either. So just when you thought the three-ring circus that is Congress couldn’t get any crazier, more confusing or more conflicting, it just did. If the first week of the new year is any indication of how the rest of 2020 will go in Washington, buckle up.

Let’s take Iran first. President Trump’s decision to kill Iranian Gen. Qassem Soleimani via drone strike near Baghdad sparked intense debate in Congress. No tears were shed on Capitol Hill over the slaying of Iran’s top military commander, as Soleimani was responsible for the deaths of hundreds of Americans. But many in Congress – mostly Democrats but also a handful of Republicans – are troubled by the president’s penchant for carrying out military actions without their OK, or even their consultation. Trump bypassed longstanding protocol when he launched the attack without first giving Congress a heads-up, adding to many lawmakers’ frustrations that the White House is usurping legislative branch authority. Continue reading “Congress, The Big Tent Circus”

Oil Markets Muted in Wake of Soleimani Assassination

In an earlier era, the risk of war between the U.S. and Iran would likely have sent oil prices skyrocketing, resulting in significant financial pain for consumers and a serious hit to the U.S. economy. But when news broke late last week that the U.S. had assassinated a top Iranian general in Iraq by drone strike, oil prices rose a fairly modest 3%. Today, they’re largely flat.

Why? In a word: Fracking, or hydraulic fracturing, the drilling technique that, combined with horizontal drilling and other tech advances, has unlocked more oil in more places across America. The Middle East is still a crucial source of supply for global markets, but thanks to the resurgence in domestic production, the U.S. is now largely self-sufficient in petroleum. In fact, we now export more crude oil and refined fuels than we import, according to the Department of Energy. (It also helps that our biggest source of imported crude oil by far is Canada. Saudi Arabia ranks a distant third.)

There’s no telling what comes next in the slowly intensifying confrontation between Washington and Tehran. But I think we can identify a couple of outcomes that won’t happen: Violence in the Persian Gulf region won’t result in physical shortages that require American drivers to queue up at gas stations the way they did during oil crises in the 1970s. And oil prices won’t climb high enough to do the U.S. economy any real damage, again unlike in the 70s, when oil price shocks helped stoke double-digit inflation and two recessions.

Since 2005, when U.S. crude production fell to a multidecade low of 5 million barrels per day, output has steadily climbed to today’s nearly 13 million barrels. Energy companies are also producing a bounty of other liquid hydrocarbons, such as ethane and propane, plus about 1 million barrels per day of ethanol. Add it up, and U.S. output roughly equals consumption. Less than a decade ago, the country depended on 10 million barrels per day of imported crude and refined fuels.

Of course, even with all that production, America isn’t independent of global energy markets. Supply disruptions on the other side of the world still affect prices here. And the Persian Gulf is a key chokepoint for the oil market. The tankers transiting its waters carry roughly a fifth of the world’s petroleum supplies, according to the DOE. A full-blown shooting war there would seriously crimp those volumes and likely lead to a significant price increase.

Yet so far, the Soleimani killing and resulting rhetoric from Iran has only caused benchmark West Texas Intermediate crude to rise by about $2, to $63 per barrel in recent trading. Retail gas prices have not yet registered any of that increase, though they probably will rise by several cents a gallon later this week.

For now, it appears that oil traders are betting that something less than World War III is imminent in the Gulf, and that global oil supplies aren’t in serious danger. Given the added production that fracking has brought to market in recent years, that seems like a good bet.

It also helps that the U.S. economy is less exposed to oil price spikes than it used to be. During the 1970s crises, say economists at Wells Fargo, “gasoline and other energy goods” made up 4% of American consumers’ spending. Today that figure is now 2%, thanks in part to significant increases in the gas mileage of modern vehicles. So oil prices would have to really soar to have the same macroeconomic effect that they did four decades ago.

Ringing in 2020 With Mixed News on Energy Prices

When it comes to your energy bills, 2020 is arriving with good news and bad news. Drivers are in for higher prices at the pump, but it should cost most folks less to heat their homes this winter.

Per travel website AAA, the national average price of regular unleaded gas now stands at $2.59 per gallon. That’s not too painful when you think back to the days of $3 gas that prevailed up until 2014 (unless you live in a state like California, where prices average about a buck higher than the nation as a whole). Still, today’s average is about 25 cents higher than it was at the beginning of 2019. Given that crude oil prices are higher than they were a year ago, that’s not surprising. And unfortunately, odds are good that the price at the pump is only going to trend up as winter turns to spring.

In each of the past several years, retail gas prices have tended to bottom out around Christmas or early in the new year and then drift higher, often peaking in the late spring or early summer. That makes sense, given that Americans tend to drive less during the depths of winter and then hit the road for spring and summer vacations. Plus, refiners start to switch over to summer-blend gasoline formulations in advance of warm weather, which adds a bit to the final cost.

A big drop in oil prices could buck that pattern this year. But with energy firms paring back their oil drilling in the U.S. to improve financial results, and OPEC committed to keeping a lid on its exports, a big drop in crude doesn’t look likely at the moment. If the U.S. and China can make more progress on patching up their trade fight, oil could even creep a bit higher as traders bet on a stronger global economy.

In the near term, the bump in oil prices resulting from the U.S. strikes that killed a prominent Iranian general in Iraq will push gas prices a bit higher. Unless the Iranians retaliate in such a way that makes full-blown war a realistic threat, I expect oil prices to ease after a few days or a week. Still, it’s one more reason to expect fuel prices to trend up.

In fact, 2020 may be the year the national average price returns to the psychologically important $3 mark for the first time since October of 2014. (It came close in May of 2018, but topped out around $2.96.)

So budget more for road trips. But most consumers should see lower heating bills.

Per the Department of Energy, retail propane prices are running more than 40 cents per gallon less now than a year ago. Heating oil: Down 7 cents. Price data for residential natural gas deliveries aren’t available yet, but gas futures contracts are down substantially from their level of one year ago, so at least some gas customers ought to catch a break on rates.

Long-range weather forecasts are notoriously difficult, but for what it’s worth, the National Weather Service’s Climate Prediction Center sees most of the country experiencing normal to above-average temperatures this winter, versus a relatively small swath of the upper Midwest that is more likely to be below average. If that forecast pans out, and heating fuel prices don’t spike, most households should see some savings on their utility bills to balance out the higher cost of filling up their gas tanks.