Above the Fold 

Oil Prices Have Been Elevated All Year and Washington Stands to Profit 

One of the most debated actions by the Biden administration in 2022 was the release (sale) of millions of barrels of crude oil from America’s Strategic Petroleum Reserve (SPR). The unprecedented move, the largest since the Arab oil embargo during 1973 and 1974, did little to moderate prices. Beginning in April, the Energy Department began auctioning the black gold to big oil producers, U.S. oil refiners and a wide swath of foreign buyers. This year’s collective release from the SPR is slated to end this month, and according to sources, Washington has theoretically locked in nearly $4 billion in profit as it sold 180 million barrels of crude at an average of $96.25 apiece, well above the current market price of $75. Energy prices have come in over the last few months as global demand ebbs with China’s harsh lockdowns, rising output domestically and slowing consumer demand all major factors.  

The Energy Department has already begun to replenish the reserves slowly over a period that could take many months or even years, so it’s hard to say where the net profit or loss will end up, but it seems if anything, Washington at least made a good trade. The SPR currently holds roughly 382 million barrels of oil. At the start of the year, stocks were roughly 593 million, according to the Energy Department, and were already down from a peak of 727 million barrels in 2009. United States officials have targeted the $70 range as an area they would like to refresh reserves, and the good news is that the U.S. has emerged as the top crude producer, supplying 14.5% of global production. (This is helping keep costs low.) Unfortunately for consumers, the energy windfall is unlikely to end up back in our pockets or paychecks.  

Three Things                                

Is Musk Already Out as CEO at Twitter? 

In typical Elon fashion, the billionaire CEO of Twitter (and several other high-profile companies) used a Twitter poll to query the public on whether he should stay as chief executive or go. When the votes were tallied, 57.5% of respondents said he should resign and let someone else run the company. The process is obviously unscientific and results could be impacted by bots and other factors, but Mr. Musk did say he “expects to reduce his time at Twitter and find somebody else to [lead] the company.” He also noted in a tweet on Sunday, “No one wants the job who can actually keep Twitter alive.” 

Declines in Office Building Values Could Stress Municipal Budgets 

As home prices correct across the country, tax valuations and collections are feeling slight pressure. But, given the speed and methods at which most are computed, those declines could take a while to hit city budgets. The bigger risk for municipalities is likely the sharp drop in high-value office building assessments across the nation. With property tax the largest single expense for landlords nationwide, many are fighting to revalue their assets as companies scale back office utilization, while fewer new businesses are there to fill the void. Experts believe that the rise we are seeing in owner appeals of tax assessments is likely to impact school, police, fire and other service budgets and could rattle the $4 trillion municipal bond market. 

Is American Economic Pessimism a Good Thing? 

There have been a bevy of recent surveys suggesting the majority of Americans believe the economy will continue to deteriorate into 2023. The latest poll from the Wall Street Journal revealed that roughly two-thirds of the population believe the economy is headed in the wrong direction. The pessimistic trend has been increasing throughout the year, suggesting consumers’ economic confidence is mostly declining. And while this sounds like a bad thing, perhaps increased awareness around potential recession will trigger changes in behaviors that help both drive down inflation quicker and prepare the average household for less abundant times. Downturns can feel more devastating when our economic sentiment shifts too quickly from euphoria to despair as evidenced by the start of the Great Recession.  

In the Know                                

More on the Strategic Petroleum Reserve 

The SPR is the largest known emergency stockpile of crude oil in the world. Originally created in response to the energy crisis of 1973, the SPR is actually a network of underground salt caverns spread across the Texas and Louisiana coastline. The salt caverns were chosen as they were the least expensive (and still safe) means of storage. Each cavern can hold between 6 and 37 million barrels of oil with one cavern taller than Chicago’s Willis (Sears) Tower to fit inside with room to spare. To get the oil out, water is actually pumped in at high pressure. But retrieving oil is limited as the maximum removal rate, due to physical constraints, is 4.4 million barrels per day.