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Saul loeb

Energy prices are surging, and the economy is already feeling the pinch of higher fuel costs though it is far from stalling out.

There is an unusual coincidence of much higher oil, natural gas and coal prices, combined with other rising commodities and supply chain disruptions. That perfect storm of shortages and higher prices begs the question of whether the economy could go into a serious tailspin or even a recession.

Economists say, for now, the jump in prices is not the type of oil shock that will turn U.S. growth negative, but there will be economic consequences of higher energy costs, particularly in places like Europe where natural gas prices have skyrocketed.

“Periods of trending oil prices tend not to be a problem,” JPMorgan chief economist Bruce Kasman said. “The periods of spiking oil prices tend to be what gets you into trouble. They tend to be largely supply driven, and they tend to have disruptive elements that are more broad in terms of their potential drags on growth.”

“We do have a rise in energy that will be a drag on fourth quarter growth,” he added. “It’s not at a point where we’re warning about recession, but it’s at the point where you have to worry about it hurting growth in a material way.”

American consumers have already been paying up for gasoline, and heating and electricity costs could rise more this winter. Oil prices are up more than 65% this year so far, while natural gas prices have jumped more than 112% since January.

“We’re looking at GDP growth in the 4% to 6% range … We would have to see massive doubling and tripling of oil prices for it to have such a bad effect that we go … to negative growth,” said Anwiti Bahuguna, head of multi-asset strategy at Columbia Threadneedle.

Since last October, gasoline prices have risen about $1.10 per gallon, and are now at $3.27 per gallon of unleaded, according to AAA. Oil prices were depressed and even turned negative when the pandemic shut down the economy in 2020. Now, forecasts for $100 oil are getting more common, as West Texas Intermediate oil futures trade above $80 per barrel for the first time since 2014.

“What’s different about this is normally it’s oil that leads an energy crisis, but in this case it’s the tail that’s being wagged by natural gas, coal and renewables,” said Daniel Yergin, vice chairman of IHS Markit. “Oil is filling in to make up for the fact that [liquified natural gas] is maxed out and wind in Europe has been a lot lower than normal.”

Trouble brewing in energy markets

Yergin said oil will likely remain under pressure, and within several months about 600,000 to 800,000 barrels a day could be used as a substitute for natural gas in Europe and Asia, where supplies are short. Oil can be substituted for electricity generation and in some manufacturing.

Citigroup forecasts a winter price shock that could see natural gas prices in Europe average over $30 per one million British thermal unit in the fourth quarter and over $32 in Asia. But Citi energy analysts also say if there is a very cold winter that could spike as high as $100 mmBtus, the equivalent of about a $580 barrel of oil. By comparison, U.S. natural gas futures are currently trading at $5.25 per mmBtu.

Coal prices have also been rising and supplies are short, creating a power supply crunch in China. The country burns coal to generate electricity, but the inventory at its power plants faced a 10-year low in August. That has also increased the demand for natural gas.

“While China unambiguously needs as much coal as it can get its hands on to avert a [fourth-quarter] slowdown due to the tyranny of rolling power shortages, geopolitical tensions with Australia have waylaid the most convenient source of high-calorific coal from Down Under,” Vishnu Varathan, head of economics and strategy for Asia and Oceania treasury department at Mizuho, said in a recent note.

Economists say the rise in energy prices would have to be sharper and much more prolonged to cause a recession.

Bernstein energy analysts looked at past periods where prices rose sharply, and found that recessions followed periods where energy costs were at 7% of global GDP, as they reached in October.

They note the probability of recession rises when the energy costs stay above that level for a period, greater than a year.

“While the recent spike in energy costs may prove transient, a protracted period of energy costs [greater than a year] or further rise in oil to over US$100/bbl could trigger a slowdown in global economic growth as disposable income gets squeezed,” Bernstein analysts wrote.

Even though the share of energy costs is the highest in nearly a decade, on an annual basis it is still 5.2% of GDP so far in 2021, and that is not yet a dangerous level, they added.

“Annual energy costs as a percentage of GDP are above the 30-year average of 4.4%, but below that of 1979 or 2008 when annual energy costs reached over 7% of GDP,” the Bernstein analysts wrote. “If energy prices rises prove to be transient, then the risk of an energy induced recession remains low.”

U.S. as a producer

Changes in the U.S. energy industry over the past two decades have provided some insulation from some of the current global energy crisis.

Mark Zandi, chief economist at Moody’s Analytics, said the hit from an energy price surge would not be all negative, since the U.S. is now a large energy producer. The U.S. produces about 11.3 million barrels a day, and exports oil and refined products.

Even with its huge production, the U.S. remains an importer of crude, bringing in an average 3.8 million barrels a day over four weeks, according to the latest Energy Information Administration weekly data.

The U.S. is providing natural gas to Europe and Asia, in the form of LNG exports, but U.S. gas prices are tied more to the domestic market and have been elevated because U.S. supplies remain lower than normal for this time of year.

Zandi said the dominance of the U.S. energy industry also has a positive impact on energy-producing parts of the economy as prices rise.

“That doesn’t mean that higher energy prices under certain scenarios wouldn’t cause a recession,” he said. “It’s just much less likely, and it would take much higher prices than it has in the past.”

Zandi said every penny increase in the cost of a gallon of gas costs U.S. consumers $1 billion. When it rises $1, as it has in the last year, that’s about $100 billion.

Another $1 jump would be harmful.

“That’s $100 billion, just a half percent of GDP. It would do damage. It would ding the economy, but I don’t think it would derail it,” he said. “If it went to $5.25, that’s $200 billion. That’s a percent of GDP. If energy prices are rising like that it’s likely other prices are rising.”

The immediate impact of higher energy costs is higher inflation, which creates a drag on consumer spending.

Kasman said the increase in energy prices, as of last week, would add about 2.5% to the consumer price index in the fourth quarter, if prices remain at that level. That could translate to a drag of a half percentage point or more on GDP, he noted.

“That is not small, but it’s not a recession,” he said. Kasman said he expects a pretty strong global economy next year, but the higher energy costs do raise concerns there could be an even big enough drag on purchasing power and that could chip away at growth.

Kasman said the impacts gets worse, the higher prices go. JPMorgan economists ran an analysis where they projected another 50% jump in energy prices.

“In this scenario, in which crude oil prices move quickly above US$100/bbl, the shock to US incomes is very large — as CPI inflation is pushed up by 10%-pts annualized — nearly twice the impact we estimate for the Euro area,” they said in a note. “While this scenario does not appear likely, it is important to recognize the threat posed by the combination of supply shocks now buffeting the global economy.”

JPMorgan forecasts fourth-quarter gross domestic product growth of 3.5%, and now expects the third quarter grew at a 4% pace, down from an earlier forecast of 8%. The firm expects average growth of 3.5% next year. They also forecast CPI gains to average more than 4% during the second half of the year.

CNBC’s Michael Bloom and Saheli Roy Choudhury contributed to this report.

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Genesis wants a bigger slice of the US luxury market with new EVs en route

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Genesis wants a bigger slice of the US luxury market with new EVs en route

If you haven’t noticed, Genesis is quickly making a name for itself in the US. The luxury automaker now has 60 sales outlets as it expands into new US states. With new EVs launching, Genesis is eyeing a bigger share of the US luxury market.

Hyundai Motor Group’s Genesis brand is quietly emerging as a powerhouse in the US luxury market. Genesis marked its entry into the luxury segment in 2008 as a Hyundai-branded model.

In 2015, Hyundai announced Genesis would become an independent luxury brand. Since launching its first vehicle in the US, the luxury brand’s sales have surged from 7,000 in 2016 to over 69,000 last year. It even outsold Nissan’s Infiniti.

According to Genesis, this is just the start. The Korean luxury brand wants an even bigger slice of the market as it eyes rivals like Porsche.

A big reason behind the brand’s confidence is its new lineup of stylishly electric models. Genesis sells three EVs in the US: The GV60, Electrified G80, and Electrified GV70.

After introducing the Electrified GV70 just last year, the electric SUV is already Genesis’ top-selling EV in the US. According to Kelley Blue Book, Genesis sold 2,343 electric GV70 models in the US through September.

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2026 Genesis Electrified GV70 update (Source: Genesis)

Genesis eyes a bigger share of the US luxury market

Altogether, the luxury brand’s EV sales reached over 4,600 through the first nine months of 2024, topping Porsche (4,291) and Volvo (3,644).

Genesis made a statement at the LA Auto Show, unveiling the updated 2026 Electrified GV70. The luxury electric SUV now includes more range and an NACS port so drivers can charge at Tesla Superchargers. It will go on sale in the first half of 2025.

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Genesis at the 2024 LA Auto Show (Source: Hyundai Motor Group)

Meanwhile, Genesis showcased its new GV60 Magma Concept at the event, its first dedicated high-performance EV. The brand sees its Magma performance brand rivaling that of Geman luxury brands like Mercedes AMG, BMW M, and Audi RS.

The Genesis GV60 Magma EV will launch next year, spearheading the brand’s “expansion into the realm of high-performance vehicles.”

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Genesis GV60 Magma EV concept global debut at Goodwood (Source: Genesis)

Genesis enhanced the battery and motor while fine-tuning the chassis, thermodynamics, and profile for more power and efficiency.

It also features an aggressive new design, sitting much lower and wider than the current GV60 model. Genesis added a Magma-exclusive sound system to give it a sports car-like feel in the cockpit.

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Genesis G80 EV Magma Concept (Source: Genesis)

In April, we got our first look at the G80 EV Magma concept, which could be a potential challenger to Tesla’s Model S Plaid and the Porsche Taycan GT Turbo.

The luxury brand is expected to launch its flagship electric three-row SUV next year, the GV90. Genesis previewed the ultra-luxury EV in March after unveiling the Neolun concept.

Genesis now has 60 sales bases in the US, with new stores in Washington, Minnesota, New York, and Florida. It’s also building 30 in Canada as it expands its presence in the North American luxury market.

The luxury brand is opening a new dedicated design center in California. The “Genesis Design California” will open in the first half of 2025 as it builds out its US network.

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No, BYD is not taking over NIO as fake rumors claim

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No, BYD is not taking over NIO as fake rumors claim

A rumor spreading like wildfire on social media claims BYD will be taking over NIO (NYSE: NIO) as the EV giant gobbles up market share in China. The rumor was posted by a suspected BYD employee, but NIO is denying the claim.

BYD acquiring NIO would be a massive move as China’s leading EV maker continues to dominate the market. But that’s not going to happen.

According to CnEVPost, NIO’s assistant vice president for branding and communications, Ma Lin, denied the rumors that BYD is taking over the company on Friday.

Ma posted a screenshot on social media asking BYD’s general manager of branding and PR, Li Yunfei if the person who posted the fake rumor was an employee.

Earlier today, the suspected employee claimed BYD and NIO were setting up a joint venture. In a Weibo post, the suspect said BYD would have majority control of the partnership with a 51% share while NIO would get the remaining 49% ownership.

Ma told Li that if it was, in fact, a BYD employee, he needed to issue an official clarification and apologize. If not, they can get the police involved together. Li also denied the rumors, saying the claim was seriously untrue.

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NIO Onvo L60 electric SUV at the 2024 Guangzhou International Auto Show (Source: NIO Onvo)

NIO denies rumors that BYD is taking over the company

This is not the first time rumors surfaced that BYD will be taking over NIO, but because it is a suspected employee, the post has garnered more attention.

BYD is on a major hiring spree as it ramps up production to meet the higher demand. The EV giant now has over 900,000 employees, making it by far the largest A-share listed company in China.

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BYD Dolphin (left) and Atto 3 (right) Source: BYD

After selling over 500,000 vehicles for the first time in a single month in October, BYD’s surge is heating up as the EV giant expands overseas for growth.

October was BYD’s fifth consecutive record sales month as it closes in on auto leaders like Ford in global deliveries.

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Onvo L60 electric SUV models (Source: NIO Onvo)

NIO is also gaining momentum, with sales topping the 20,000 mark for the sixth straight month in October. With output of its new lower-priced Onvo L60 electric SUV ramping up, NIO expects to continue seeing higher demand.

Ma said on Friday that NIO’s “recent situation is quite good.” The company’s head of PR added, “Cash flow turned positive in the third quarter, gross profit improved in October, earning an extra RMB 100 million, and Onvo (deliveries) will exceed 10,000 in December.”

NIO is launching its third brand, Firefly, with deliveries kicking off in the first half of 2025. The company expects sales to double next year as it works to become profitable by 2026.

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Hyundai recalls more than 145,000 EVs

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Hyundai recalls more than 145,000 EVs

Hyundai Motors is recalling 145,235 EVs and other “electrified” vehicles in the US, citing concerns about a loss of driving power, the National Highway Traffic Safety Administration (NHTSA) said on Friday.

The NHTSA announced this morning that the recall affects selected IONIQ 5 and IONIQ 6 EVs, as well as certain luxury Genesis models, including the GV60, GV70, and G80 electrified variants, from the 2022-2025 model years, Reuters reported.

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2025 Hyundai IONIQ 5 (Source: Hyundai)

It looks like the issue stems from “the integrated charging control units in these vehicles, which may become damaged and fail to charge the 12-volt battery. This malfunction could lead to a complete loss of drive power, posing safety risks for drivers,” the NHTSA stated.

If you’re an owner of one of these Hyundai models dating 2022-2025, stay tuned. Hyundai has not yet provided a timeline as to when affected vehicles will be repaired.

To make that happen, the company’s dealers will inspect and replace the charging unit and its fuse if necessary, NHTSA said. Free of charge, of course.

Importantly, no crashes, injuries, fatalities, or fires due to this issue have been reported in the US, Hyundai reported.


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