Wednesday, November 16, 2011

CPI Factoid of the Day: Natural Gas Prices -2.2%

Interesting factoid from Table A above (click to enlarge) in today's CPI report:

Compared to one year ago, every category of goods and services has increased except for one deflationary item: "Utility (piped) gas service," which has decreased by 2.2% from October 2011.  As I reported recently, natural gas futures prices for the month of November are the lowest in ten years, so the decline in natural gas prices for consumers is likely to continue through the winter.   

Welcome to America's shale gas revolution.


At 11/16/2011 10:11 AM, Blogger morganovich said...

nat gas prices will be low for a long time.

there is an enormous amount of "stranded gas". pipelines are already full and will not take your gas if you have some small wells.

i've actually looked at some business plans for mobile gas liquification facilities to turn stranded gas into LNG for use in vehicles (which will likely wind up going LNG, not CNG in the long run as the energy density is much better).

on the other hand, that 6.2% hike in "food at home" leaves me questioning that cheap thanksgiving argument from the other day.

further, barring big changes in the other inputs, this makes the november number look like it will be up big.

the thing holding oct down was fuel, mostly driven by the drop in oil prices.

oil is up in 13-14% from october.

food is going to be the other big driver as the harvests were small (again) and stores are at low levels.

look for cpi to break over 4% in the nov number even using the BLS methodology that defines most inflation out of existence.

you cannot print your way to real growth.

we are already seeing this in the retail sales numbers which have been stalled all year in chained dollar terms (even using their low estimates of inflation).

use CPI to deflate GDP, and we are similarly dead in the water.

take out the subjective quality adjustments and wrongheaded geometric weighting that assumes that all price action is driven by the supply side, and we are still in recession.

all we are getting is price hikes, not growth.

At 11/16/2011 12:07 PM, Blogger Benjamin Cole said...

This comment has been removed by the author.

At 11/16/2011 12:09 PM, Blogger Benjamin Cole said...

CPI down, PPI was down, and unit labor costs are falling. This is inflation? Only to the Chicken Inflation Littles. Cluck, cluck, cluck and squawk. The inflation scare has laid an egg.

The Fed needs to crank it up big time.

Japan is not a role model.

At 11/16/2011 1:07 PM, Blogger morganovich said...


just out of curiosity, how many times do you need to be told that unit labor costs cannot be used as an inflation proxy?

seriously, do you have any medium term memory at all?

unit labor costs are a function of inflation. you cannot use them make claims about CPI. CPI is already included. if you underestimate CPI, you over-estimate productivity and thus get unit labor costs that are too low.

the fact that you cannot grasp such a simple fact even after a dozen explanations explains why you cannot grasp the concept of inflation overall.

CPI was at multi year highs in sept, as was PPI.

it was only down in oct due to low oil prices, which have since surged.

it will make new highs in november.

funny how you like core when oil is up and headline when oil is down.

i used to think you were a charlattan, but it's clear that in fact you are just a dolt.

i'll end by asking the same question i always do and to which you never reply:

using apples to apples CPI, inflation was either high in the 70's and high now or is low now and was never over 5% in the 70's.

so which is it?

prices are moving like it's 1974.

do you deny 70's inflation?

unless you do, there is no case that there is inflation now.

and for the love of god, don't send me another link to boskin et al until you have actually read it and found me even one piece of empirical data in it as opposed to the subjective baseless blather you always cite.

At 11/16/2011 1:47 PM, Blogger Benjamin Cole said...

Morgan from UFO-land:

Prominent economists, including those with peer-reviwed papers in the American Economic Review, contend that the CPI overstates inflation.

Economists at several Fed regional banks have published papers to the same effect.

You, and some crackpot-cranks and lulu's at Twilight-Zone stats, believe inflation is under-reported.

Whatever manner the CPI is measured has drawbacks and advantages, and no measure is right for every single business or consumer. You extrapolate from the your limited personal experience and some crackpots to reach an unwarranted conclusion.

But then, you went short on the Dow at 7000.

At 11/16/2011 2:04 PM, Blogger morganovich said...


what a shock.

an appeal to authority with no factual data.

that seems to be all you are capable of.

more prominent guys (like gross and voelcker) have said that CPI is a sham and vastly understated.

the data is actually very clear.

but hey, so is the case against keynes, and that maintains a huge following too. this is not because it has any factual basis, just that its conclusions suit the predispositions of those in power, just like CPI.

further, your whole appeal to and reliance upon this appeal to authority meme is self defeating.

my grounding in economics far exceeds yours.

thus, if you believe in appeals to authority, i am clearly a better authority on who is an authority than you are. (as well as the subject matter as a whole where you repeatedly demonstrate a failure to grasp basic concepts even after having them explained a dozen times)

thus, you should be listening to me.

you really are about as smart as a box of hair bunny.

i have yet to see you make even one lucid argument about inflation.

i note you have ducked the question again as well.

do you believe there was high inflation in the 70's?

just one simple yes or no will do.

the fact is that you are the one with the flying saucer thinking.

your view of CPI is the literal equivalent of taking global temperature graphs in Fahrenheit pre 1992 and Celsius post, grafting them together, and claiming temperature has dropped.

the fact that you cannot see that this is inconsistent would seem to indicate some severe problems with your ability to reason.

At 11/16/2011 2:06 PM, Blogger morganovich said...

"But then, you went short on the Dow at 7000."


more febrile imaginings. where on earth did you get such a ludicrous notion?

you really do just make this stuff up, don't you?

At 11/16/2011 3:09 PM, Blogger Benjamin Cole said...


Mars is calling you--stop by there on your way to Saturn.

At 11/16/2011 3:12 PM, Blogger Benjamin Cole said...

In an article in the June 2010 issue of the American Economic Review, economists Christian Broda and David E. Weinstein estimate that the Consumer Price Index overstates inflation by 0.8 percent per year.

UFO Man Morgan, who is also an expert on meteorology, high technology, energy the Vince Foster murder and farts, says the CPI understates inflation.

Who you goin' to call?

At 11/16/2011 5:08 PM, Blogger Junkyard_hawg1985 said...

Scott Grannis has a great chart on natural gas prices relative to oil prices $Here. Natural gas prises have fallen from a 20:1 ratio at several spikes to less than 4:1 today. This is a huge shift.

At 11/16/2011 6:18 PM, Blogger JPINTX said...

If natgas prices stay where they are, shale gas drilling money will dry up. Decline curve (steep) and low price make life tough.

At 11/16/2011 7:04 PM, Blogger JPINTX said...


I looked at the blog you refferred to, at best his analysis of NG to WTI price is difficult to understand if you in fact know anything about crude and natural gas. I can't for the life of me understand his chart which refers and may be based on a 10,000 btu measurement. The natgas contract is the price for 1,000,000 btus, the crude contract is a price per barrel and a barrel of crude oil contains ROUGHLY, rule of thumb, (before anyone jumps on me I know it is not a precise number and varies with each grade of crude and is closer to 5.8 million) 6,000,000 btus. so to compare prices on a btu basis you either multiply ng price by 6, or divide crude price by 6. It is ABSOLUTELY correct to say that ng has declined in price dramatically. For instance, at the peak ng price for 2003 was the equivalent of $55.20 per barrel of crude and crude in the same month peaked at $39.99. So far in 2011 the peak ng price was $29.88 per barrel equivalent versus crdue at the same time at $103.31 per barrel.

At 11/16/2011 8:43 PM, Blogger OBloodyHell said...

>>> Welcome to America's shale gas revolution.

About ephing time!

We've been waiting for this since the mid 1970s!!


At 11/16/2011 8:46 PM, Blogger OBloodyHell said...

>>> seriously, do you have any medium term memory at all?

Dude, he's a total libtard. He got his Liberal Midnight Reset Button installed at the factory, and he's trying like hell to wear it out. Won't happen, though, that sucker is rated for 10 trillion pushes.

At 11/17/2011 10:02 AM, Blogger morganovich said...


another appeal to authority without a single piece of empirical evidence.

you really are the biggest of rubes.

try actually reading it.

see if it has any data at all that is not purely assumption based and utterly subjective.

when you can find even one actual datapoint grounded in fact as opposed to assumption, post it and i'll begin to listen to you.

until then, you are just another ignoramus too stupid to add anything to the discussion.

seriously, try it.

read the reports you cite. the lack of any actual data in them will stun you (or would if you had any brains, a clearly faulty assumption).

it's all subjective assumption about quality adjustments and product substitution that has never been empirically verified in any way.

that's not science, it's religion. they start with a policy goal like reducing COLA and then make up assumptions, plug them into a model, and pretend they have verified something.

At 11/17/2011 4:44 PM, Blogger VangelV said...

Welcome to America's shale gas revolution.

Given the fact that most of the shale gas producers need $7.50 gas to break even and that many are abandoning shale gas in favour of liquids just how do you expect the production to continue? In your world don't economics matter?

At 11/17/2011 5:50 PM, Blogger VangelV said...

nat gas prices will be low for a long time.

Perhaps if you think that the economy will stay weak. But if you listen to the conference calls you find that many of the shale gas producers have to stop because they can't keep taking the huge losses. Many of them talk about 'funding gaps' and resorting to 'asset sales.' But there is no way that they can all find willing buyers or that those buyers will continue to keep drilling so that they can keep losing money. For shale gas to be viable most of the players need $7.50 gas at a minimum. Unless we get prices much higher than they are now the producers will have to stop drilling.


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