Biden Outlines Plan to Fight Inflation; U.S. May See Fuel Crisis Worse Than '70s: IEA | NTD Business

Coming up this evening, live from New York City. President Biden outlines his plan for fighting inflation. He calls it his top economic priority, but will his plan work? The EU agreeing to a partial ban on Russian oil. They're trying to deal a new blow to Moscow over its invasion of Ukraine. And it looks like U.S. gas prices are going to go even higher. How high are we talking? That and much more coming up on NTD Business. Great to have you with us. Paul Graney here for NTD Business. With inflation running at a 40-year high, President Biden met with Fed Chair Jerome Powell today to discuss how to keep a lid on rising prices. First meeting between the two since Biden re-nominated Powell. The president says he still trusts the Fed to do its job. My plan is to address inflation. It starts with a simple proposition. Respect the Fed. Respect the Fed's independence, which I have done and will continue to do. It's not long ago both the White House and the Fed assured Americans that inflation was, quote, transitory or temporary. But here we are months later with 8 percent inflation. The federal government and the Federal Reserve pumped trillions of dollars into the economy during the pandemic. Many blame that for causing the high prices we see today. The Fed has raised interest rates twice this year to fight inflation and is expected to hike more. But many are concerned that will slow the economy into a downturn. New data out today shows consumer confidence fell. Consumers also getting more cautious about buying big ticket items, which could slow down economic growth. The president had an op-ed published in the Wall Street Journal yesterday where he told us his plan for fighting inflation. He boasted of his accomplishments and criticized his opponents, in particular, Senator Rick Scott. In President Biden's Wall Street Journal op-ed titled My Plan for Fighting Inflation, Biden lists his accomplishments, tells us his plan, and criticizes Florida Senator Rick Scott. Biden says a Fed survey shows a higher percentage of Americans reported feeling financially comfortable at the end of 2021 since the survey's inception in 2013. This is true. 78 percent of Americans reported doing well financially. Biden also says manufacturing jobs are growing at their fastest rate in 30 years. True. That business investment is up 20 percent. True. And that he helped achieve the fastest decline in unemployment on record. Also true. Every economic boast Biden can make is inherently pinned on the fact that we were coming off such a horrid trough in an economic downturn that any degree of improvement, getting close to back to where we were with normal, would be an historic improvement worthy of record books. Nicholas Creel is a professor of business law at Georgia College and State University. Creel says even though these things are true, there should be an asterisk next to each one. And Biden's three-part plan involves not trying to influence the Fed, making things more affordable through actions like fixing broken supply chains, building more houses, and giving Medicare the power to negotiate with pharmaceutical companies and reducing the federal deficit. Biden or whoever wrote that editorial seems to be attempting to link greater tax collection powers to the reduction of the deficit. Pete Earle is an economist at the American Institute for Economic Research. Earle believes a better solution would be to restrict government spending, but instead they're asserting that the problem is not spending, it's insufficient tax revenues. And as for Rick Scott, Biden says his plan to raise taxes on people making less than $100,000 would make American families poorer. But Creel says Scott's plan could probably work. The biggest driver of inflation is aggregate demand. All of us going and buying new things. Creel says Biden's plan, unlike Scott's plan, focuses on raising taxes for billionaires and corporations, but... It's not going to have that big of an effect on inflation. The reason for this is most of those billions of dollars in corporate coffers or in billionaires' bank accounts aren't really doing anything, as opposed to the American public, which has actual money being spent on a regular basis. Chenny Wu, NTD News. Now with us to discuss the inflation outlook from a real-world perspective, not just numbers on a screen, is Andrew Chernland, American manufacturer of heating and cooling products, also a top Amazon seller with over a quarter billion dollars in sales. Andrew, is there anything the federal government can actually do to get inflation under control? You know, I'm afraid to say, Paul, my prediction is that there's going to be a major collapse, mostly probably related to housing, that's going to cause this inflation and this growth of inflation to go down a little bit. We have to keep in mind that as the numbers go down, usually the comparison is year over year. And so there's a much, much higher rate that, say, the numbers that come out over the next several months are comparing to, because of the high inflation over the last 12 and 18 months. Realistically, I see this ending most likely badly because there's still a lot of inflation happening in the system on the supply side that consumers haven't seen yet. So what are you seeing? I'm seeing some things stabilizing. So things like containers coming from overseas to the United States, those prices have gone down a little bit. They're still way higher than normal rates, but they've calmed down a little bit. Same with metal prices, things like that. But overall, what we have to keep in mind is a lot of major retailers have contracts where manufacturers are not allowed to increase pricing for 60 days, 120 days. They have to give a lot of notification. So the prices you see at a Costco or a Walmart, things like that, a lot of the new prices have been submitted, but they haven't taken a hold yet. So I still think that from a consumer standpoint, the lag is going to hit very, very hard and will only calm down about three to six months after the supply side inflation has relaxed a little bit. At this point, is it mainly the high energy costs that are keeping inflation high? That's part of it. I wouldn't say it's me. I think it's several different things. We are still suffering from supply chain issues. The whole basis behind a supply chain is that there's many parties involved. And so all of those parties are struggling. And if there's any weak link in that chain, the whole chain breaks. And so it's not just fuel, although that's definitely part of it, but it's all these different factors and all these different producers all trying to catch up at the same time. The reason that people are increasing pricing now, even though maybe they're not seeing immediate future effects, is they're trying to make up for lost time for months and months and months when they were losing money and not realizing that they didn't react fast enough. So we are still seeing from our suppliers on a regular basis price increases. We just had a price increase for our manufactured goods go in effect last month. And I can tell you that we have already probably seen because of our suppliers that we're not capturing the margin that we're used to, even with that price increase that just went into effect. Are you saying inflation could accelerate at some point in the near future? I think acceleration is unlikely because of the very, very high rates that we're already at, ones that we haven't seen this century. However, I will say that it will become normal to see a high rate of inflation. So we have to differentiate between the inflation percentage and the rate of inflation. So I think the rate is no longer going to accelerate to the same extreme. But I think all of a sudden we're going to see a normalization of, say, 5% over a year or 6% of the year when the Fed target rate is much closer to 2%. And so that's my prediction for the next six to 18 months. It's very high still. I've got about 30 seconds, Andrew. I think we always deal with inflation kind of as big aggregate numbers, 6%, 8%. Is there something or some particular product that is going to stay incredibly high that people should be aware of? I think over the medium term, so not the super long term, but over the medium term, I think you'll see it for things that are imported. Just because we think inflation, if you're taking a US-centric view, is difficult. But the United States can supply many of the different resources and inputs that they need. There's other countries that run into a lot of difficulties with that because they don't have the prevalence of resources the United States has. And so those places, to the extent that the US does use them as a preferred supplier, are seeing really severe increases. And they may continue to accelerate, and they may see higher rates for a long time. So if you see things that are imported goods, even from places like Germany, places like that, I think you'll see high inflation for many, many years. It could be an opportunity for American manufacturers like yourself. Andrew Chernolyn, Chernolyn Products. Appreciate it. Thank you, Andrew. Thank you. And down on Wall Street today, markets closed lower despite last week's rally. The Dow down 223 points, two-thirds of a percent. S&P fell 26.6 tenths of a percent. And the Nasdaq lost 50 points today, four-tenths of a percent. Oil prices remain high. WTI at $115 a barrel. Brent at 123, no letup. And to make things worse, the head of the International Energy Agency is warning of a gasoline shortage this summer. He says the U.S. and Europe could see fuel shortages that could be worse than the 1970s oil crisis, because the 1970s was just about oil. Now the agency says we have an oil crisis, a gas crisis, an electricity crisis, all at the same time. It says when summer comes, demand will be higher, and there could be bottlenecks for diesel or other types of fuel, especially in Europe. They're in 70s oil crisis in the U.S. Gas stations were rationing supply by selling gas an odd, even day basis. So if your license plate ended in an even number, you could buy gas at a certain day. And if it ended in an odd number, you'd be able to buy gas on other days. And despite earlier signs of division, the European Union has decided to ban most of Russia's oil, not all of it. Here's the president making the announcement. Yesterday, in the middle of the night, we decided then to have a ban now on de facto 90 percent of Russian oil imports to the European Union by the end of the year. The ban doesn't include oil that's delivered through pipelines. Instead, it focuses on oil delivered by ship. This way, countries that are highly dependent can still get some of the energy they need. Officials are expected to sign this Wednesday, which would be the sixth round of sanctions. Of course, in response, Russia says it'll look for other customers. Experts believe the ban won't have much of an effect since both the EU and Russia buy and sell oil in different parts of the world. Natural gas is what's truly important. And the EU pays Russia tens of billions of dollars a month for its energy, which Russia can use to potentially fund its military campaign in Ukraine. Over in China, Shanghai is finally lifting its strict lockdown measures. 25 million people have been under tight grip for two months. It officially ends tomorrow. Authorities are seen taking down fences, ripping off police tape. Locals are happy, but there is also a sense of weariness. Today is the first day we are permitted to go outside freely. I am delighted because we have been under lockdown for so many days. I would say that the vibe is truly unique and quite complex. Starting tomorrow, public transport will resume. Residents can go back to work. Shops can reopen at reduced capacity. But people still need to wear masks and take regular tests to enter public venues. Stock market got a boost after the news, but not too much. China's main indexes rose between one to two percent. Even with the reopening, the city has been scarred. Its economy has been hit hard. Residents staged rare protests, banging on pots and pans and venting on social media. One professor says the Shanghai government needs to make a public apology to the people. We'll wait and see. Now with cities in China starting to reopen, demand for gas is likely to go up too. Coupled with the EU agreeing to that partial ban on Russian oil, what does that mean for global prices? Don Ma speaks to the chief oil analyst at the Oil Price Information Service. I think this will help move oil demand higher, which has been kind of on a streak moving higher, and that's been lifting prices. If Chinese demand goes up, will they produce more or import more, do you think? I think they've almost reached a point where they probably can't import much more, at least oil. So how are they going to meet the demand? I think they have plenty of refining capacity there right now. They should be okay to meet demand. But again, supplies are pretty tight of products just about everywhere. The EU is agreeing to a partial ban on Russian oil. Do you think this will push up global oil prices? Yeah, we're seeing that happening in real time. The news over the past 24 hours that they are going through with that ban has pushed oil prices up a couple dollars today. WTI, the U.S. price is about $117 right now, while Brent, which is kind of the international number that everyone kind of relies on, is about $120 right now, a little bit more than $120. So yeah, prices are certainly moving higher on that news headline. Right. So peak summer driving season is right around the corner. Oil, sky-high prices, $120. How much higher can it go? Well, right now, the national average for gasoline in the United States is $4.62. I think we could probably get to about $4.75 in relatively short order, probably over the next week or two. At that point, when do you start to see a little bit of demand destruction? From some of our data and from talking to some folks out there who are retailers of gasoline, they're telling us that some people who are typically buying premium gasoline, now premium gasoline is over $5 a gallon, they're downgrading to regular gasoline. So I think that might be the first sign of some demand destruction. So do you think per barrel prices will hover around $120 or go higher or go lower? That's anybody's guess right now. I do think we'll probably be in this area, maybe biased a little bit lower, especially if there is a demand response from the consumer. But with that being said, there's a lot of geopolitical strife and a lot of tensions out there right now that could easily push prices much higher. So that was a very inconclusive answer to your question. Right. The head of the International Energy Agency is saying the U.S. could experience fuel shortages this summer worse than the 1970s oil crisis. Is this likely to you? So what we saw last year was certain parts of the country saw fuel runouts, gasoline stations run out and have to bag pumps. I do think we see a little bit of that here and there. But again, there's certain issues that are at play here. We still have a shortage of truck drivers. There's not enough drivers out there to meet demand. I think certain cities that are seeing their population grow and have always been a little bit maybe at the end of a pipeline, say, for example, those areas of the country might be experiencing some shortages this summer. And think about large geographic regions where the supply, the terminals that hold gasoline, there's large geographies between them. And around the national parks last year, we saw gasoline stations run out. I think that could happen again this year. But are we going to have to go back to the even license plates can buy gas on Monday and odd on Tuesday, et cetera? I'm not sure we're going to get back to that. But again, it's going to be a tight summer as far as gasoline supply is concerned. So oil prices at the pump are sky high. Denton, what's the solution? The Biden administration has been obviously has a task force on this. I think one of the things that is probably easily done is a gasoline tax holiday. The national tax on gasoline is 18.4 cents. Now, granted, that may not sound like a lot. But on your typical fill up, it probably saves you about anywhere between two to five dollars, depending on obviously how large your gas tank is. So there's a little bit of savings there. But there's really no magic bullet out there. One other thing that that's being might be considered is the restrictions on exports and not necessarily crude oil exports, but exports of gasoline and diesel, which the U.S. has been a pretty significant exporter of refined products over the past several months. Denton Cinquegrana, chief oil analyst at the Oil Price Information Service. Thanks for coming on. Thanks, Don. And India's top e-battery recycler, Etero, is spending one billion dollars to expand around the world as EV production grows. Going to invest in the states, too. Anthony Marshall has more. With governments and car manufacturers pushing towards electric vehicles, e-battery recycling is moving into the spotlight. India's largest electronics recycling firm, Etero Recycling, will spend one billion dollars in the next five years and add plants in Ohio, Poland and Indonesia starting this year. Industry expert Trent Mill, CEO of Electro Battery Materials, sees big first mover advantages in the industry. You know, it's permitting, it's expertise, it's capital intense. And so it's a small industry. I expect it'll get more competitive over the next four or five years as these battery plants start to take shape here in North America. Mill thinks battery recycling is going to become a huge part of our supply chain. I think you're going to see an evolution of the market where there's going to be a little bit of a fight for control of that battery to make sure it comes back into your supply chain once the cars are off the road. Etero's extraction rate is about 98 percent, and it uses chemical methods instead of the more expensive smelting process, which melts certain metals beyond recovery. Shadib Roy Chedhuri is an expert in sustainability technology and CEO of Eugenie AI. He says there's still a downside to chemical extraction. But the chemical process also has a side effect, right? So it leaks. It becomes a hazard for the health and safety of the people who are working on the chopper, but also people around their production unit. And that makes it complicated. Chedhuri says we should be looking ahead of lithium ion technology. We need to think about lithium ion and its recycling and beyond it. And beyond it means we need to find out alternatives to lithium ion because of the problem with the mining operations of lithium ion, recovery value and et cetera. Nitin Gupta, the CEO of Etero, co-founded the company in 2008 with his brother, and has finally made it profitable in the last two years. Sean Marshall, NTD News. If you have any news tips or feedback for the show, you can always email us at business at ntd.com. We'd love to hear from you. This evening, still to come, stay with us. Businesses are bracing for another summer of worker shortages. But one company says its technology can help fill the gap. That and more coming up on NTD Business. This summer season, there may be a little less fun in the sun. Not every shop is open for business. There apparently aren't enough workers. So what's a business to do? Did you feel Zoe is the story? There's a labor shortage across the country. That means your travel experience this summer might be different. For us, it's been great. There's enough places that are open for us and there's no crowds. Ira Wolf is a C-suite executive vacationing with his family in Ocean City, Maryland, popular for its beautiful beaches and boardwalk. This is pretty light for after Memorial Day. You know, it usually people would, you know, this was the start of summer season. And Wolf says some of his favorite spots aren't even open. Walking down the boardwalk last night, it was Memorial Day. And I'd say at least a third of the shops were closed. Some of the most popular ones, you know, where you get French fries and pizza and all those things, they were shut. They're closed. Summer hotspots like amusement parks and hotel resorts are also short on staff. So what is a business to do? Prioritizing based on the fact that you have less labor, prioritizing the work of the people that are working in your business is one of the key focuses there. Francois Guelo is the co-founder of Enzo Connect, a platform that uses smart home devices and AI technology to help businesses make up for their staff shortages. A lot of the property managers that we work with or hoteliers have been looking to essentially cut down on staff, not so much because they have the staff and they want to save money, but because they can't find the staff. They cannot find people who are going to work just for the season at the hotel. It's essentially just check-in guests. Technology like Enzo Connect aims to streamline the check-in process so workers can be more efficient while working remotely. What's the Wi-Fi password? How do I get in? Where's my key card? Can I get a mid-stay cleaning? These things can all be digitalized. It means now the new questions are more about experiences and what they can do at the hotel or the short-term rental rather than how do I get into my room. This summer, besides seeing fewer shops, travelers will likely see fewer people working in the places that are open. Take a look at this land yacht. It looks like a yacht but glides smoothly on land. It's powered by wind. Emirates Team New Zealand is attempting to set a wind-powered land speed record with it. The team named the vehicle Horonuku, which means gliding swiftly across land. After a week of successful testing, the land yacht has been able to reach speeds nearly 87 miles per hour. Current wind-powered land speed record is held by Richard Jenkins. He's able to reach 126 miles an hour in his land yacht named Greenbird. Emirates Team New Zealand will attempt to break Jenkins' record this July or August in Australia. As the latest in the NTD Business team, I'm Paul Graney. You can still follow me on Twitter until we see each other again though. For NTD Business, it's all for today. Thank you for watching. We'll see you tomorrow.