Morris Beschloss 2013-12-10 08:50:05
On the mend In the wake of the arm wrestling between President Obama and Senate Majority Leader Harry Reid on one hand and House Speaker John Boehner and the GOP on the other, this exaggerated government “shutdown crisis” will have little, if any influence on the 2014 U.S. economy. It’s safe to say America’s world-leading gross domestic product of goods and services will post a modest 2.6% economic growth next year, aggressively led by energydevelopment exports and improvement in residential, commercial and industrial construction. With the Federal Reserve Board shaken up by the partial shutdown and the amateurish tug-of-war by the executive and legislative leaderships, it’s likely that the Fed’s purchase of $85 billion-a-month of treasury bonds and mortgage derivatives held by major banks will continue till year’s end, with slight tapering off at best, if at all, until then. Unquestionably, the fracking-inspired oil and natural gas super-expansion has provided the unexpected surge that has brought an overall 2.6% annual growth for the U. S. economy as a whole with it. But growth in such traditional major economic segments as construction home prices and discretionary consumer spending will improve only moderately as independent businesses’ growth and consumer confidence will continue to be in a watchful mode. This will result in modest hiring increases from a 2013 average of 180,000 to 200,000 persons a month. This number hardly is adequate in bringing down today’s rampant unemployment, which would require monthly hires in excess of 250,000. There also is grave concern that Obamacare, as well as strangulating Dodd- Frank and new EPA regulations will usher in a major advent of part-time employment of those working less than 30 hours a week without the benefit of companypaid insurance and retirement payout participation. Despite the loss of a major Japanese airline commercial aircraft contract from Boeing to the European Airbus consortium, overall U.S. exports are expected to exceed 2013’s record $2 trillion-plus peak, with developing nations providing the thrust and ailing Europe the reverse. Less dependence on crude oil imports from OPEC and associated producers will continue to substantially lessen. The greatest concern facing the U.S. economy as a whole will be the ever-tightening regulations by the Environmental Protection Agency, which is hell-bent on curtailing fossil-fuel production and forcing renewables as substitutes, including greater uses of ethanol. The urgent need for fossil-fuel pipelines and a power- generating national infrastructure are past overdue. A massive national government-supported program facilitating these urgent needs would do wonders in manifesting economic growth, plus recalibrating the national infrastructure needed into the 21st century. But based on the current political decision-making government control, such an obvious turn of events is unlikely to happen. Exports keep crude prices at lofty levels It seems quixotic that prices at the pump keep dropping to near economic recession levels, while U.S. domestic light West Texas Intermediate hangs in at more than $100 per barrel, roughly $5 under the worldwide Brent crude level used everywhere else. The answer to this riddle lies in the fact that gasoline, heating oil, jet fuel, diesel and various product derivatives are set by retailers who buy these end-use products from the nation’s 140 refineries. Like all businesses, refineries sell their wares to the highest bidder. While this is not wellpublicized, an accelerating percentage of U.S. refineries’ finished products have moved into the export sector. This Is confirmed by the fact almost two-thirds of Mexico’s driving population depends on America’s Houston- and Louisiana-based refineries, which also are shipping increasingly larger amounts to Central and South America. Although no major new refineries have been built in the U.S. in 30 years, their capacity has been increased by 20% through expansion and on-site upgrades. Since world prices of oil derivatives are based on Brent crude, U.S. refineries gain a significant profit incentive from exports. The 140-plus U.S. refiners get the benefit of light, easier-to-process and cheaper WTI light crude while exporting at the world price. Remarkably, the entrepreneurial genius of refinery builders has literally made new grassroot full-scale refineries unnecessary at this time and has made U.S. refineries the beneficiaries of the fracking evolution, making domestic crude increasingly available. It’s also a major reason why large refineries located in the greater Houston and Louisiana areas are frustrated by the indiscriminate dodging tactics that the administration has used to block approval of the Trans-Canada XL oil pipeline, which would facilitate immediate shipment from Canada’s Alberta province straight to the Southern refineries. Currently, shipments from the ever-expanding Athabasca regional oil sands are starting to wend their way to Vancouver, British Columbia where China, India and other Southeast Asian nations eagerly await the completion of the Canadian pipeline, which will divert multi-million barrels of North American oil to the world’s fastestdeveloping region. This is another example of the economically destructive “climatological purists,” who are utilizing unproven theories to throw a monkey wrench into an accelerated U.S. energy program that rapidly is transforming the U.S. into the world’s No. 1 energy development position. Masters of distribution It has become readily apparent during the ongoing post-“Great Financial Recession” aftermath that America’s magnificent nationwide infrastructure of large, medium-sized and small plumbing-heating-cooling- piping distributors is courageously facing the challenges of selective growth in an economic environment making this task increasingly burdensome. While having played a focal and indispensable role without which many manufacturers and end users could not have achieved their current growth, this 50-state and U.S.-territorial mainstream distribution system now is facing a post-recession growth of providing immediate service. As America’s technological evolution places evergreater inventory demands on an incomparable distribution system that always has kept in lockstep with the needs of its end users, installers and OEMs, etc., it is an indispensable segment of America’s industry that has evolved into an unparalleled world-class system That never has let its customers or prospects down no matter what obstacles were faced. However, with the literally hundreds of thousands of types of products comprising this constantly expanding business sector, this intensely reactive marketing infrastructure rapidly is experiencing mounting difficulty in providing the inventory necessary to maintain the superb delivery service for which it has become noted for. This is increasingly difficult as the types, sizes and new products keep evolving with greater intensity and urgency. It has become even more complex as products from foreign sources have entered the equation. This requires larger orders and longer lead times to service such additional offerings to their end-use customers. This is a mainstream distribution system that has so deservedly established admiration in the eyes of the nation’s hundreds of thousands, if not millions, of end users. Fortunately, the emergence of master distribution committed to unflinchingly supporting the plumbingheating- cooling-piping mainstream is fulfilling the support role where needed. These “masters” have performed admirably in closing the gap that America’s phenomenal growth industries such as energy, whose demands for backup especially from the PVF sector have become increasingly urgent. This master distribution involvement is proving especially helpful as many of the nation’s finest distribution entities have cut back inventory levels. This has come about in light of the uncertain economic growth circumstances which have permeated today’s economic environment. This distribution support system has come into place within the mainstream distribution system. The score of years within which this phenomenon has occurred has proven the cooperation and loyalty that today exists. This master distribution system, which has grown in number, regional location and the growing variety of specialty products, generally has proven its merit and loyalty as service providers, rather than competitors, to the PHCP industry’s mainstream distribution system, adding strength to its extensive growth potential. By-and-large, these master distributors have earned their rightful place in the nation’s industry mainstream marketing channels. They have done so by their total support of the U.S. PHCP distribution system for now and into an ever-brighter future. Veteran industry analyst and writer Morris R. Beschloss is the industrial PVF columnist for Supply House Times and the American Supply Association’s industry analyst. Beschloss, whose career in the industrial pipe, valve and fittings sector spans more than five decades, was the recipient of the 2012 ASA << Fred V. Keenan Lifetime Achievement Award.
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