Ben what a bummer! Way to bring us all down Ben. Dude, we were feeling happy in this little bubble world of earnings driven economic expectations and you go and have to ruin our little economic recovery fantasy world bliss. Why did you have to tell us the truth man and ruin the buzz? That you and most of your friends at the Fed saw the risks to growth as weighted to the downside. Why tell us that the economic expansion is only proceeding at a moderate pace and only because it is being supported by stimulative monetary and fiscal policies. We may be high but to some it felt like we were doing it on our own. Why tell us that the housing market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction? And on top of that, you remind us that this is an important drag on household spending.
Then you have to bring up that darn slow recovery in the labor market and the attendant uncertainty about job prospects. Did you have to go and say that after two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, a pace insufficient to reduce the unemployment rate materially? Or that in all likelihood it is going to take a significant amount of time to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009. Or tell us that nearly half of the unemployed have been out of work for longer than six months. Or say that long-term unemployment not only imposes exceptional near-term hardships on workers and their families, it also erodes skills and may have long-lasting effects on workers’ employment and earnings prospects. Man, you had better do something to get us feeling better or at least send us into oblivion again.
I mean even talking about the potential for more stimulation later if we get feeling really bad does little to bring back my buzz today. And even the talk of more stimuli has many wondering that if things are still so weak then why should we make a commitment to expand our business? Because Ben as you said yesterday, many banks continue to have a large volume of troubled loans on their books, and bank lending standards remain tight. With credit demand weak and with banks writing down problem credits, bank loans outstanding have continued to contract. Small businesses, which depend importantly on bank credit, have been particularly hard hit.
Not to mention what this downer kind of talk can do to oil demand expectations. This less than bright outlook by the Fed Chairman once again can get the oil market to focus on over supply. Not even the storm threat down in the Gulf at this point seems to be taking our mind off of that glut. Oh sure, we downgraded the storm threat expectations but it is already having some impact on BP clean up operations. The National Hurricane Center now says we have two tropical waves down south, one that is in the Gulf of Mexico and one that is headed that way. At this point they both have a 40% chance of becoming a tropical cyclone.
The weak economic conditions are one reason we saw a bearish Energy Information Agency report. The most bearish aspect was the out of season distillate fuel inventories that increased by 3.9 million barrels. Distillate fuel demand has averaged 3.6 million barrels per and while up by 9% from the depths of despair a year ago, is not nearly enough to cut into our near record amount of supply. The EIA sais that overall refinery inputs came in at 15.5 million barrels per day during the week and that refineries operated at 91.5% of their operable capacity last week. Gasoline production decreased last week, averaging 9.3 million barrels per day. Distillate fuel production increased last week, averaging 4.5 million barrels per day. U.S. crude oil imports averaged 10.0 million barrels per day last week, up by 696 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 9.5 million barrels per day, 203 thousand barrels per day above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.2 million barrels per day. Distillate fuel imports averaged 174 thousand barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.4 million barrels from the previous week. At 353.5 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.1 million barrels last week, and are above the upper limit of the average range.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at email@example.com