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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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Tesla was forced to reimburse Full Self-Driving in arbitration after failing to deliver

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47 mins ago

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July 7, 2025

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Tesla was forced to reimburse Full Self-Driving in arbitration after failing to deliver

Tesla Self-Driving

Tesla has been forced to reimburse a customer’s Full Self-Driving package after an arbitrator determined that the automaker failed to deliver it.

Tesla has been promising its car owners that every vehicle it has built since 2016 has all the hardware capable of unsupervised self-driving.

The automaker has been selling a “Full Self-Driving” (FSD) package that is supposed to deliver this unsupervised self-driving capability through over-the-air software updates.

Almost a decade later, Tesla has yet to deliver on its promise, and its claim that the cars’ hardware is capable of self-driving has been proven wrong. Tesla had to update all cars with HW2 and 2.5 computers to HW3 computers.

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In January 2025, CEO Elon Musk finally admitted that HW3 also won’t be able to support self-driving and said that Tesla will have to upgrade the computers. 6 months later, Tesla has yet to communicate a plan for retrofits to owners.

Tesla is now attempting to deliver its promise of unsupervised self-driving on HW4 cars, which have been in production since 2023-2024, depending on the model. However, there are still significant doubts about this being possible, as the best available data indicate that Tesla only achieves about 500 miles between critical disengagements with the latest software on the hardware.

The situation is creating a significant liability for Tesla, which already needs to replace computers in millions of vehicles, and it may need to do so in millions more.

On the other hand, many customers are losing faith in Tesla’s ability to deliver on its promise and manage this computer retrofit situation. Some of them have been seeking to be reimbursed for their purchase of the Full Self-Driving package, which Tesla sold from $8,000 to $15,000.

A Tesla owner in Washington managed to get the automaker to reimburse the FSD package, but it wasn’t easy.

The 2021 Model Y was Marc Dobin and his wife’s third Tesla. Due to his wife’s declining mobility, Dobin was intrigued about the FSD package as a potential way to give her more independence. He wrote in a blog post:

But FSD was more than hype for us. The promise of a car that could drive my wife around gave us hope that she’d maintain independence as her motor skills declined. We paid an extra $10,000 for FSD.

Tesla’s FSD quickly disillusioned Dobin. First, he couldn’t even enable it due to Tesla restricting the Beta access through a “safety score” system, something he pointed out was never mentioned in the contract.

Furthermore, the feature required the supervision of a driver at all times, which was not what Tesla sold to customers.

Tesla doesn’t make it easy for customers in the US to seek a refund or to sue Tesla as it forces buyers to go through arbitration through its sales contract.

That didn’t deter Dobin, who happens to be a lawyer with years of experience in arbitration. It took almost a year, but Tesla and Dobin eventually found themselves in arbitration, and it didn’t go well for the automaker:

Almost a year after filing, the evidentiary hearing was held via Zoom. Tesla produced one witness: a Field Technical Specialist who admitted he hadn’t checked what equipment shipped with our car, hadn’t reviewed our driving logs, and didn’t know details about the FSD system installed on our car, if any. He hadn’t spoken to any sales rep we dealt with or reviewed the contract’s integration clause.

There were both a Tesla lawyer and an outside counsel representing Tesla at the hearing, but the witness was not equipped to answer questions.

Dobin wrote:

He was a service technician, not a lawyer or salesperson. But that’s who Tesla brought to the hearing. At the end, I genuinely felt bad for him because Tesla set him up to be a human punching bag—someone unprepared to answer key questions, forced to defend a system he clearly didn’t understand. While I was examining him, a Tesla in-house lawyer sat silently, while the company’s outside counsel tried to soften the blows of the witness’ testimony.

He focused on Tesla’s lack of disclosure regarding the safety score and the fact that the system does not meet the promises made to customers.

The arbitrator sided with Dobin and wrote:

The evidence is persuasive that the feature was not functional, operational, or otherwise available.”

Tesla was forced to reimburse the FSD package $10,000 plus taxes, and pay for the almost $8,000 in arbitration fees.

Since Tesla forces arbitration through its contracts, it is required to cover the cost.

Electrek’s Take

This is interesting. Tesla assigned two lawyers to this case in an attempt to avoid reimbursing $10,000, knowing it would have to cover the expensive arbitration fees – most likely losing tens of thousands of dollars in the process.

It makes no sense to me. Tesla should have a standing offer to reimburse FSD for anyone who requests it until it can actually deliver on its promise of unsupervised self-driving.

That’s the right thing to do, and the fact that Tesla would waste money trying to fight customers requesting a refund is really telling.

Tesla is simply not ready to do the right thing here, and it doesn’t bode well for the computer retrofits and all the other liabilities around Tesla FSD.

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BYD says its about to launch the ‘largest-scale’ smart driving software update in history

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July 7, 2025

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BYD says its about to launch the 'largest-scale' smart driving software update in history

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After hitting a major milestone on Monday, BYD claimed it’s about to unleash “the largest-scale smart driving OTA in history.”

BYD preps for the largest-scale software update

BYD announced on Weibo that there are now over 1 million vehicles on the road with its God’s Eye smart driving system.

The milestone comes after it upgraded 21 of its top-selling vehicles with the smart driving tech in February, at no extra cost. Even its most affordable EV, the Seagull, which starts at under $10,000 (69,800 yuan), got the upgrade.

BYD didn’t reveal any specifics, only promising “it is safer and smarter.” The Chinese EV giant has three different “God’s Eye” levels: A, B, and C.

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The highest, God’s Eye A, is typically reserved for BYD’s ultra-luxury Yangwang brand, which utilizes its DiPilot 600 smart cockpit with three LiDARs.

God’s Eye B is used for other luxury and higher-end models, including those under Denza, which utilize DiPilot 300 and one or two LiDARs.

BYD-largest-scale-software-update
BYD-largest-scale-smart-driving-update

The base God’s Eye C system, used for BYD brand models, includes 12 cameras, five wave radars, and 12 ultrasonic radars, all supported by DiPilot 100.

Last week, BYD’s luxury off-road brand, Fang Cheng Bao, launched a limited-time offer for Huawei’s Qiankun Intelligent Driving High-end Function Package. The discount cuts the price from 32,000 yuan ($4,500) to just 12,000 yuan ($1,700).

BYD-new-affordable-EV
BYD Seagull EV testing with God’s Eye C smart driving system (Source: BYD)

After selling another 382,585 vehicles in June, BYD now has over 2.1 million in cumulative sales in the first half of 2025, up 33% from last year.

With the “largest-scale smart driving” update coming soon, BYD’s vehicles are about to gain new functions and safety features. Check back soon for more details.

BYD claims it’s “capable of leading the transformation and popularization of intelligent driving” with over 5,000 engineers dedicated to the field. As the world’s largest NEV maker, BYD said it’s committed to transforming the auto industry with safer and more sustainable solutions for global markets.

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The Kia EV3 takes the crown as the most popular retail EV in the UK so far this year

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July 7, 2025

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The Kia EV3 takes the crown as the most popular retail EV in the UK so far this year

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Kia’s electric SUV is a hit in the UK. The EV3 was the most popular retail EV through the first half of 2025, pushing Kia to become the UK’s third top-selling car brand so far this year.

The EV3 is Kia’s fastest-selling EV in the UK and a massive part of the brand’s success this year. Kia said the compact electric SUV contributed to its best-ever June, Q2, and first half EV registrations so far this year.

In January, the EV3 “started with a bang,” racing out to become the UK’s most popular retail EV. The EV3 was the best-selling retail EV in the UK and the fourth best-selling EV overall in the first quarter, including commercial vehicles.

Through the first half of the year, the Kia EV3 maintained its crown as the UK’s most popular EV with 6,293 registrations.

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The EV3 starts at £33,005 ($42,500) as the ‘brand’s most affordable EV yet.” It’s available with two battery packs: 58.3 kWh or 81.48 kWh, providing a WLTP range of up to 430 km (270 miles) and 599 km (375 miles), respectively.

Kia-EV3-most-popular-EV
Kia EV3 (Source: Kia)

Kia sold 31,643 electrified vehicles in the first half of 2025. Although this includes fully electric vehicles (EVs), plug-in hybrids (PHEVs), and hybrids (HEVs), it still accounts for over half of Kia’s total of 62,005 registrations.

Kia's-low-cost-EVs
Kia EV3 (Source: Kia)

After opening orders for the EV4 last week, Kia’s first electric hatchback, the brand expects to see even more demand throughout 2025. With up to 388 miles WLTP range, it’s also the longest-range Kia EV to date.

Next year, Kia will introduce the entry-level EV2, which will sit below the EV3 in Kia’s lineup. Kia is looking to add an even more affordable EV to sit below the EV2. It will start at under $30,000 (€25,000), but we likely won’t see it until closer toward the end of the decade.

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