Daily SA: Higher oil prices ahead, Yellen warns on debt limit

Good morning. Here’s your Daily Situational Awareness briefing for Monday, 26 July 2021. You can receive this daily intel brief by signing up at https://forwardobserver.com/daily-sa

  TODAY’S BRIEFING:

• Higher oil prices to fuel inflation
• Diplomatic engagement with China falls flat
• Wildfires wreaking havoc in the American West
• Yellen against warns Congress on looming debt limit

SITUATIONAL AWARENESS

OIL: Fracking giant Halliburton announced they’re expanding operations, adding that they see a “multi-year upcycle” in consumer demand. Meanwhile, Goldman Sachs sees oil prices rising another 10% from here, to $80/barrel this summer, while other traders still expect $100/barrel by the end of next year. (Analyst Comment: If higher oil prices are sustained, expect the cost of just about everything to continue increasing. The US Postal service recently announced they’re increasing prices on mail, in addition to decreasing delivery times due to higher operating costs. Typically, price hikes aren’t rolled back, making the Fed’s “transitory” inflation argument questionable at best. – M.S.)

CHINA: Deputy Secretary of State Wendy Sherman met with Chinese Vice Foreign Minister Xie Feng in China today and not much was accomplished. The Chinese gave a list of demands to the US including “wrongdoings that must stop,” and accused the US of seeing Beijing as an “imagined enemy.” According to a State Department release, the US seeks a competitive advantage against China, but is not pursuing war. (AC: China’s position largely signaled that they’re not serious about negotiations, referring to the US relationship as a “stalemate.” Meanwhile, the US Department of Justice recently dropped espionage charges against five Chinese nationals with ties to the PLA. – D.M.)

WILDFIRES: Currently, 86 active large wildfires are burning across 12 U.S. states. Around 2.7 million acres have burned so far, largely impacting western states. Extended drought conditions, high winds and fire-induced weather systems make battling blazes particularly tough. The fires are more widespread compared to 2020 and are impacting air quality across the entire US with advisories issued for states from California to New York. So far, 2021 is on pace to be a record setting year for wildfires with more than 36,000 since January. (AC: Some healthcare professionals are recommending use of masks outdoors due to the high concentration of carcinogens in the atmosphere. – D.M.)

DEBT LIMIT: Treasury Secretary Janet Yellen is again warning Congress to make some progress on raising the debt limit. Yellen said that the U.S. Government will be forced into “extraordinary measures” past 31 July, and fully unable to pay its bills past September. (AC: The Congressional Budget Office reports that the Treasury can probably last until October. This level of uncertainty over government funding does bring back memories of 2011, when Moody’s, Fitch, and S&P downgraded U.S. credit ratings. Considering today’s even worse fiscal shape, another downgrade could be catastrophic. – M.S.)

HAZARDS WARNING

HURRICANE SEASON: A low pressure disturbance off the coast of Georgia and Florida has a low chance of forming a tropical depression over the next 24 hours. Localized flooding and high winds are expected to begin Monday evening as the weather systems are moving slowly west-northwestward.

In today’s Early Warning briefing, Dustin outlines the Navy’s concerns in the Arctic, Africa, and China in today’s In Focus and Max details Far Left unrest over the weekend. Upgrade your Situational Awareness to Early Warning here: https://forwardobserver.com/subscribe