Oil pump jacks in the Inglewood Oil Field in Los Angeles.
Getty Images
President Joe Biden’s announcement that the U.S. and other countries will release strategic crude reserves was designed to force oil prices lower. Instead, they rose sharply Tuesday.
West Texas Intermediate crude futures fell slightly early Wednesday after initially rising above $79 per barrel. So, why did Biden’s move appear to have the opposite effect?
Well, the announcement had been anticipated and oil prices dropped by more than 10% over the three weeks before yesterday’s news. That in itself may be enough to suggest the plan has worked.
The total release, including reserves released by other countries, could end up being around the 70 million barrel mark. Goldman Sachs analysts said the market had been pricing in a release of more than 100 million barrels. They said the release would be worth less than $2 per barrel, lower than the $8 per barrel selloff in recent weeks.
China is expected to help by releasing its own reserves, but it is being presented as a favor by state media and one that the U.S. must return.
The amount itself is also fairly insignificant in the grand scheme of things. The U.S. release of 50 million barrels is around half a day of global demand.
Much more significant, however, will be the reaction of the Organization of the Petroleum Exporting Countries when it meets next week. The group, which will want to keep oil prices high, could even retaliate by slowing their planned production increases, driving prices higher.
Biden said gas prices won’t drop overnight and he’s not wrong. Whether they will in any meaningful way is perhaps the more pertinent question.
—Callum Keown
*** In observance of Thanksgiving, U.S. markets will be closed Thursday, and there will be no Barron’s Daily newsletter. The Barron’s Daily will return on Friday.
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With Oil Reserve Release, U.S. Maneuvers to Cut Prices
Biden is using every lever he has to reduce prices and increase the supply of fuel, the White House said. The U.S. will release 50 million barrels of oil from its Strategic Petroleum Reserve in a coordinated effort with China, India, Japan, South Korea, and the U.K. to lower gas and oil prices.
- Pump prices are up 61% from last year, averaging $3.40 a gallon for regular unleaded, according to Energy Department data. Gasoline and heating-oil prices are at their highest since 2014.
- It’s the biggest release from the reserve, which is four underground salt caverns in Texas and Louisiana with enough oil to meet weeks of U.S. demand. “It will take time, but, before long, you should see the price of gas drop where you fill up your tank,” Biden said.
- The Energy Department will release 32 million barrels over the next several months to companies that will eventually return it to the SPR within two years. The remaining 18 million barrels is an acceleration of a sale Congress has already authorized.
- Eleven Senate Democrats, including Elizabeth Warren (D., Mass.), urged Biden to consider tapping the reserve. But critics say it’s to protect national energy security, and that the U.S. should increase domestic production.
What’s Next: OPEC and its allies are meeting Dec. 2 to discuss production plans, after earlier refusing Biden’s calls to raise production beyond modest increases.
—Janet H. Cho
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Retailers Closed on Thanksgiving Amid Labor Shortage
Many retailers that closed last Thanksgiving to discourage crowds and push sales online will stay closed again this Thanksgiving after positive feedback from shoppers and employees. Walmart is closing 5,000 U.S. stores to thank employees for their hard work and to retain workers amid a labor shortage.
- At Target , where workers repeatedly petitioned not to open on Thanksgiving, all 1,915 U.S. stores will close on the holiday for good. CEO Brian Cornell told workers Thanksgiving hours are something “we won’t ‘get back to.’’’
- Black Friday started creeping into Thanksgiving Day a decade ago, as stores competed to open earlier to attract shoppers. But Thanksgiving purchases seemed only to cannibalize Black Friday sales, and never became one of the biggest in-store shopping days.
- Simon Property Group will close its 168 malls and outlets, as will Best Buy , Kohl’s , Macy’s , and Foot Locker . Sacrificing a day of in-store sales comes as retailers such as Nordstrom reported rising labor costs, and Gap said factory closures during the most recent quarter delayed products. This sent their respective shares down 26.8% and 18% in the premarket on Wednesday.
- Retailers staying open on Thanksgiving include Big Lots , CVS Pharmacy , and Walgreens , although some may have reduced hours. Dollar General stores will also open, except in Maine, Rhode Island, and Massachusetts.
What’s Next: Many stores will open early for Black Friday, including Bass Pro Shops, Best Buy, Dick’s Sporting Goods , Kohl’s, and Walmart at 5 a.m. Bath & Body Works , Bed Bath & Beyond , Big Lots, Home Depot , Lowe’s , Macy’s, and Ulta all open at 6 a.m.
—Janet H. Cho
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Macy’s Promoting 95th Thanksgiving Day Parade With NFTs
Macy’s is dipping its toe into nonfungible tokens, auctioning off 10 digital images of vintage Thanksgiving Day parade balloons, including a spaceman from the 1950s and a toy soldier from the 1920s, to mark the parade’s 95th anniversary for a new generation.
- NFTs are digital collectibles authenticated with blockchain technology and can be saved, shared or sold. More celebrities are joining the NFT wave. Martha Stewart is selling holiday-related digital images, and K-pop megastars BTS will sell collectible digital cards that play music.
- Demand for NFTs has exploded among digital collectors. An NFT of Twitter CEO Jack Dorsey’s first-ever tweet sold for $2.9 million in March. A collage by a digital artist named Beeple fetched $69.3 million when it was auctioned online by Christie’s.
- Macy’s NFT auction runs through Nov. 30, with all proceeds going to the Make-A-Wish Foundation of America. The bid for the spaceman balloon was up to $6,300 Tuesday around 6 p.m. Macy’s configured the NFTs so a 10% donation will automatically go to Make-A-Wish if they are sold in the future.
- Macy’s is also giving away 9,500 NFTs featuring former parade designs, while supplies last, to those who log onto its macys.com/NFT website starting at 10 a.m. Eastern Time on Thanksgiving.
What’s Next: This year’s Macy’s Thanksgiving Day Parade will feature 15 character balloons and 28 floats, as well as performers, marching bands, and clowns. Spectators are allowed, but NBC and Telemundo are also broadcasting it from 9 a.m. to noon ET.
—Janet H. Cho
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Dimon Jokes JPMorgan Will Outlive China’s Communist Party
JPMorgan Chase & Co. CEO Jamie Dimon joked Tuesday that his bank would outlive China’s Communist Party, and said he hoped it would operate in China “for a long time.”
- Dimon noted that both JPMorgan and the ruling Chinese Communist Party were founded in 1921. According to reports of a panel discussion at the Boston College Chief Executives Club, he quipped, “The Communist Party is celebrating its 100th year. So is JPMorgan. And I’ll make you a bet we last longer”. JPMorgan was contacted for comment.
- Dimon also said he didn’t think the situation in Taiwan would deteriorate into an armed conflict, giving his opinion that it amounted to mere “saber rattling.” He added that a Chinese intervention in Taiwan “could be their Vietnam.”
- His comments came just as Beijing voiced its anger at the U.S. invitation to Taiwan for a “Summit for Democracy” due to take place virtually on Dec. 9 and 10.
What’s Next: The U.S. banker risked the joke—for a second time, he said, after he had made it once in Hong Kong—even though he may have known that Beijing doesn’t take lightly pleasantries or perceived slights about the regime or the ruling party.
—Pierre Briançon
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Pharmacy Chains Want to Appeal Ohio Opioid Jury Verdict
Pharmacy chains CVS Health, Walgreens, and Walmart are vowing to fight a jury verdict Tuesday in a Cleveland federal court that said they contributed to the opioid epidemic in the two Ohio counties that had brought the case.
- A CVS spokesman told The Wall Street Journal the company looked forward to an appeals court review, while representatives of Walgreens and Walmart told the Journal they would appeal.
- Lawyers for the two Northeast Ohio counties argued the chains didn’t stop pain pills from flooding their communities and didn’t stop fake prescriptions, saying they enabled the crisis that cost each of the counties $1 billion for police, social services, and courts.
- The defense said others were responsible for the crisis, saying the pharmacy chains tried to stop pills from being illegally diverted. Rite Aid and Giant Eagle reached settlements with the two counties before but terms haven’t been made public. They denied wrongdoing.
- Of the nearly 841,000 drug overdose deaths since 1999, more than 70% involved opioids, said the Centers for Disease Control and Prevention. In the year through April, there were more than 100,000 fatal overdoses, three-quarters involving opioids.
What’s Next: The Cleveland jury only decided liability. U.S. District Judge Dan Polster, who has consolidated lawsuits filed by more than 3,000 communities against drugmakers, distributors, and pharmacies, will decide how much the companies should pay.
—Liz Moyer
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Dear Quentin,
My mother has four children. She is a wonderful mother, and my siblings and I are very close.
She has a reasonably comfortable retirement, and is preparing her estate plan. She co-owns a lake cabin with my brother. It was originally my grandparents’ cabin and after their death, my mother and my brothers and sister and I purchased it together, with my mom owning 50% and the remaining four of us owning 12.5% each.
Ultimately, three siblings (including myself) needed to leave the ownership structure of the cabin for various reasons. My brother chose to buy us out. The stipulation of leaving the cabin required us to pay a 10% penalty, so he bought us out at our appraised share. He and my mom now own the cabin 50/50.
When my mother dies, our brother has first right of refusal to buy her share. Our question is, does he get her share at a 10% discount—which was our family’s estate attorney’s advice—or given that my mom’s share is actually part of her estate should he have to buy out her share at the fair market value?
It is my mom’s money/cabin and we all feel that she can do anything she wants with it, and preserving family relationships is the most important thing to all of us, as we have all remained very close throughout this process. However, my mom wants to do what is right and fair. Can you please give your opinion?
—Cabin Fever
Read The Moneyist’s response here.
—Quentin Fottrell
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—Newsletter edited by Liz Moyer, Camilla Imperiali, Rupert Steiner
