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Sunday, April 26, 2026

2026-04-26

***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic Fare:



.................................. The development of Chinese industrial policy since 2015 is not like anything we have seen before. The pace at which China’s productive system can mobilize resources is unprecedented. China’s astonishing $1.2 trillion trade surplus may be made up in substantial part of a lot of predictable and in some sense “inevitable” trade flows. But that giant aggregate also contains a series of sectoral stories that are simply unlike anything we have ever seen before, the electrotech revolution and the surge in Chinese motor vehicle exports are perhaps the most important and politically sensitive. With regard to questions like the global green energy transition this is utterly transformative.

Within the seemingly familiar narrative of global imbalances - a discourse which in its current form goes back to the 2000s - and amidst the well rehearsed trench warfare of contending macroeconomic perspectives, are playing out four truly radical forces defining the mid 2020s moment:
  • Trump’s trade policy rampage.
  • The new and extraordinary incontinence of US fiscal policy.
  • The AI boom, which has taken on global economic scale.
  • The gear-shift in Chinese economic policy.

But he can’t find an ‘offramp’. Instead he has inflicted economic war on the whole world.

TACO - Trump Always Chickens Out - has worked for a while. But it cannot work in this illegal war on Iran without the president of the United States admitting defeat. And so he is not (at the time of writing) chickening out. .........

Prepare for a Slump

Readers have asked what I meant by the headline phrase in the last post: ‘Prepare for a Slump’. In this post I try to explain.

The world’s key commodity supply lines for vital manufacturing sites in Asia, and for agricultural markets across the world, have been held up in the Gulf for eight long weeks - since the start of the US’s and Israel’s illegal war on Iran.

While those commodities, essential to the global economy, have been stuck in the Gulf, they have registered as a profound, if invisible economic shock after just six weeks. ............


Make America Drained Again

The United States has been a net energy exporter since 2019, meaning that it has been selling more energy abroad (in terms of Btu) than it imported for more than six years now. However, that doesn’t mean that the US has become import independent—quite to the contrary. In 2024, for example, America produced 13.2 million barrels of oil a day1 on average and imported an additional 6.6 million barrels on top. At the same time only 4.1 million barrels a day were exported. In strict barrel to barrel terms the US was a net importer of crude oil in 2024, and still is to this very day. However, with the arrival of an armada of tankers to US shores in April-May, this is about to change… 

In order to understand why is that so, we have to take a step back first, and understand why one US president after the other marketed America to be energy independent. Take notice of the use of the word: energy—not oil. You see, what made the States a net energy exporter, is the addition of NGLs or or Natural Gas Liquids at a whopping 5.9 million barrels a day to the mix. And here comes the issue. Natural gas liquids are not oil—not by a long shot—but a byproduct of natural gas production. These molecules—such as ethane, propane, butane, isobutane, and pentane—form the “wet” portion of the gas extracted from Earth. NGLs are heavier and more dense than methane (the main component of natural gas), but much-much lighter and infinitely more volatile than oil. So while these “hydrocarbon gas liquids”—as they’re called after processing—can be used as inputs for petrochemical plants, burned for space heating and cooking; they can only be mixed into gasoline to a very limited amount and cannot be used to make more diesel, jet or heavy shipping fuel.

See, not all what is marketed as “petroleum” has the same utility. When we talk about the fuels moving, feeding, mining and building the world—mostly diesel (or “distillate fuel oil” as the EIA likes to call it), jet, and bunker fuel—NGL’s are practically useless. Sure, you can make a lot of money on these molecules by turning them into plastics, or by filling them into fancy camping gas stoves, but you cannot deliver more goods or harvest more crops using them. The hard truth is, that the US consumes 16.7 million barrels of actual road, shipping and aviation fuel, but produces only 13.2-13.6 million barrels of oil every day. America is even more oil import dependent than what the headlines figures suggest.

A similar pattern emerges when we compare the various crude oil blends out there. While, for example, light and ultra light crude from Texas yields over 52% gasoline, refineries need to use more heavier oils to produce jet, diesel and heavy fuel oils needed to keep the economy humming. On top of that US refineries themselves are designed to take heavier, more sour (high sulfur) grades than the light sweet (low sulfur) crude American fields produce. This is why the US has to export its light oil and natural gas liquids (of which it has too much of) while, at the same time, has to import heavy crude (which it doesn’t have enough of) from Canada, Venezuela, and Saudi Arabia. ............





.... The longer the vital oil channel doesn’t reopen, traders say, the more consumption is going to have to recalibrate lower to align with supply that’s dropped at least 10%. And for that to happen, people will have buy less, either through prices they can’t afford, or government intervention to force consumption down. .............

The need for oil demand and economic activity to adjust lower, most likely through prices that discourage consumption, will only increase with every day the strait stays shut. .......

Ultimately, in a market where demand needs to adjust down to match lower supply, oil prices may be what drive that recalibration.

In extreme scenarios, where price alone forces the market to balance, FGE estimates that crude oil would need to surge to $250 a barrel. ........


The Petrochemical Stack Enables Global Agriculture , Shortages During What Could Strongest El Nino in Our Lifetimes Puts Famine in the Forecast for 2026-2027


Market Fare:

Up, or down? War scrambles financial markets' signalling efforts

 The traditional global asset correlations that collapsed when the war in the Middle East erupted remain broken, leaving investors to piece together strategies to trade the road to resolution with a faulty instrument panel.

Record highs for Wall Street stocks, opens new tab belie concerns about fraught ​geopolitics, how long energy supplies might be disrupted for and long-term economic damage. .........


It is demonstrating an Earnings Before Iran, Tariffs and Dubious Announcements (ebitda) mentality



Bubble Fare:




Charts:
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2: 
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4:



(not just) for the ESG crowd:



The food industry has made big promises to reduce emissions and become more sustainable, but a review concludes that many of the pledges are not backed up by evidence



Sci Fare:

Radagast: There is no cure

Yesterday I asked Claude “How often do SSRIs and SNRIs fail to result in remission of depression?”. This is the answer I received:

The honest answer is: much more often than the marketing-era framing suggested, and the failure rates compound alarmingly across successive trials. ......................



China Fare:

China's commitment to build



U.S. B.S.:

New "Autonomous Warfare Center" will automate targeted killings



War Fare:


Let’s keep this simple: every day the Strait of Hormuz is closed, more damage is done to the world economy. The US is not immune to this as it needs ammonia and helium: helium is used to make chips (which the US mostly does not make but does consume) and ammonia is vital for fertilizer. Plus oil prices go up for Americans even if they don’t run out: and they will run low on bunker fuel and jet fuel. ......................

The war continues, in a sort of weird Sitzkrieg, and Iran improves its position every day the truce continues. America wants Iran to give up in negotiations what America cannot win in war, and that’s unlikely to happen.

This is the end of the American global empire. We’re witnessing a massive change in the world order. Pity it has to be so stupid and damaging, but late Imperial states are always run by corrupt fools.





Geopolitical Fare:

That was our question. We chose wrong. Again.

I’m generally disgusted that here in the US we almost always frame war in terms of its economic impact. But in this case the price of oil illustrates how America is deceiving itself about the true cost of its decision to choose, yet again, to go to war.

There are two prices of oil right now, and between them is an unprecedented gap. One is the paper price, the Brent futures you hear about on TV, sitting around 100 dollars as I’m writing this. The other is the physical price, what a refinery actually pays for a real barrel on a real tanker. Dated Brent has hit 144 dollars. The spread is the widest it has ever been. Forty dollars. Before the war it was less than a dollar.

The paper price is the market telling us a calming story. The physical is describing reality. When those two come back together, and they always do, it’s paper that moves to meet physical reality. America is experiencing a similar gap. We are telling ourselves a story about our position in the world that is about forty dollars above what’s actually arriving at the dock.

The war is the clearest picture of what we’ve chosen. It’s not about Iran’s nuclear program. It’s a resource war aimed at China, routed through Iran, and the administration’s own advisors have said so on the record. .............



Other Fare:

100 terms deployed by the West in relation to Africa — and what they actually mean when translated from diplomatic language into historical fact.



Vids of the Week:



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