Unless National Security Adviser John Bolton and Secretary of State Mike Pompeo manage to gin up a war with Iran, the terrible crop conditions across much of the Midwest this year means that some fuel ethanol distillers will be shutting down operations. Quibbles about the objectives of Trump administration officials aside, the statement is pretty straightforward — the two issues are connected. Fuel ethanol uses corn as a feedstock. A bad crop pushes corn prices up, increasing costs to ethanol plants. But ethanol’s price depends on the cost of gasoline driven by world oil prices. Corn prices have already risen significantly from early spring. Fuel prices have been moderate and stable. The “margin” for ethanol plants — based on input (corn) costs vs. product prices — has been dropping and is near zero. Unless something, such as military activity in the Persian Gulf, pushes oil prices higher, ethanol plants will start to shut down with the highest-cost, … [Read more...] about Real World Economics: Oil prices, war, and a bad corn crop
When oil price will rise again
During the Iran hostage crisis, Ayatollah Ruhollah Khomeini famously proclaimed, “America can’t do a damn thing against us.” Forty years later, tensions between the longtime enemies are flaring again — but when it comes to oil markets, now it’s Iran whose options are limited.Story Continued Below The rapid pace of escalation over the past couple of weeks, culminating in an Iranian drone shootdown and President Donald Trump’s last-minute reversal of a military strike order, means uncertainty is high. But Iran experts and market analysts said the Islamic Republic was acting out of desperation to try to gain leverage — and that any major attempt to disrupt the flow of oil would likely last just days or weeks before incurring massive retaliation. Oil prices have hopped up over the past couple of days, with Brent crude, a key benchmark, rising past $65 per barrel. But that’s short of their springtime highs. That’s the good news for … [Read more...] about Iran is trying to jack up oil prices. Will it work?
In this June 6, 2019, file photo specialist John Parisi, left, works with traders on the floor of the New York Stock Exchange. (AP Photo/Richard Drew, File) Gains in energy and Internet companies helped drive stocks broadly higher on Wall Street on Thursday, snapping a two-day slump for the market in an otherwise choppy week of trading. The gains were initially fueled by rising oil prices, which boosted energy companies after a suspected attack on two oil tankers in the strategic Strait of Hormuz. The sector sustained its gains as a mix of media, Internet and consumer-oriented companies took the lead in pushing every major index higher. Small-company stocks rose more than the rest of the market. The S&P 500 index rose 11.80 points, or 0.4%, to 2,891.64. The benchmark index has been seesawing this week, opening strong on Monday, and then falling for two straight days before reversing course again on Thursday. The uneven week follows the index's best week of 2019. The Dow Jones … [Read more...] about Jump in oil prices helps give U.S. stocks a boost
Jun 06, 10:38 AM EDT Newsletter Signup BusinessTechnologyWorldNationalMedia & CultureOpinionSportsLuxury Business By Adam Levine-Weinberg 06/06/19 AT 10:27 AM A renewed spike in global trade tensions and evidence that economic growth is slowing have combined to send the stock market tumbling over the past month or so. Airline stocks including Spirit Airlines (NYSE:SAVE) have been caught in the downdraft.In fact, Spirit Airlines stock, which hit a recent peak near the $65 mark in late 2018, has since fallen more than 20% to around $50.However, Spirit Airlines' position as a budget carrier targeting leisure travelers means that trade wars and slower global growth shouldn't hurt it very much. Domestic consumer spending, a more relevant metric for Spirit, remains fairly strong. Moreover, the recent economic turmoil has caused oil prices to plunge, which will provide significant cost savings for airlines.Spirit Airlines shareholders fear slowing growthFor each of … [Read more...] about Falling Oil Prices Will Boost Spirit Airlines’ Bottom Line
By Sarah McFarlane WSJ Pat Minczeski WSJ Thu., April 18, 2019 Two sets of oil producers are fighting for dominance: the growing U.S. shale patch and the Organization of the Petroleum Exporting Countries. Investors are trying to figure out which side has the stronger hand. Oil prices are near 2019 highs, which could give the impression that OPEC, with its production cuts, is the current dominant force. But output from U.S. shale oil producers has doubled from its level five years ago, and more supply coming later in the year could flood markets yet again. Gordon Gray, head of oil and gas research at HSBC, calls the OPEC vs. American producers a “tug of war.” OPEC’s aim is to prevent inventory buildup and keep prices at a higher level to balance its members’ government budgets. OPEC and its allies, including Russia, agreed to cut output by a collective 1.2 million barrels a day for six months starting in January, helping prices to rise by a … [Read more...] about OPEC vs. Shale: the Battle for Oil Price Supremacy