We’ve been having some internet issues in recent days — all of a sudden, we’d lose our connection. Then, a few minutes (or maybe many minutes) later, it would return as suddenly as we lost it. So, we called Verizon, which provides our fiber-access connection to the Internet.
Michael, the Verizon technician, came by this afternoon. After he did his work, he asked if I thought gas prices might drop anytime soon. My answer, sadly, was no. In fact, I think they are likely to go up a bit because Russia cut natural gas supplies to Europe, saying it had to make repairs to compressor units by Siemens, a German company. That’s likely to lead to efforts by the U.S. to ship more natural gas to Europe at a time when a rapid rise in American fuel exports this year helped push gasoline prices to a record $5 a gallon, the highest level in over a decade.
Those shipments are draining U.S. inventories that were already at low levels because output was cut during the pandemic. Seaborne shipments of gasoline, diesel and jet fuel from U.S. Gulf Coast ports in March, April and May were 32% higher than the same three months a year ago and 11% higher than the same period in 2019. Natural gas exports in March represented about 22% of U.S. gas production.
For Mike, our Verizon technician, that wasn’t good news. He had just paid $97 to fill up his small Verizon truck. Larger trucks, he told me, are now costing as much as $160 to fill up. His own truck, the one he normally drives as a personal vehicle, used to cost maybe $45 to $50 to fill up. Now it’s costing $75 to $80.
“I was thinking about going to dinner with my wife tonight,” he said. “But the restaurant is 22 miles from our house, and dinner with drinks would cost maybe $50 each, or $100 total, and filling up the truck would be another $100. I think we’ll be eating at home tonight.”
That may not have a major impact on bev/al sales. After all, he can buy a nice bottle of wine or have a couple of cocktails while eating at home. But as gas prices rise, they will affect the cost of everything, because gas and diesel power the delivery of just about everything from a small package delivered by Amazon to skids of foodstuffs delivered to a grocery store or restaurant.
As those higher costs kick in, and prices of staples rise, to say nothing of the cost of borrowing on a credit card or a new mortgage, we expect to see more consumers making the same choice as Mike, the Verizon repairman. They’ll be foregoing trips to restaurants (“if its not in walking distance, I’m not going,” he said), and triaging products between what’s essential, what’s nice to have, and what can easily be passed over.
Inflation will go higher even as a recession induced by the Federal Reserve’s interest rate increases and higher energy costs kicks in. . . . our estimate.
Of the 19 bev/al stocks we follow, only two — Duckhorn Portfolio and Willamette Valley Vineyears finished the day in positive territory. The biggest loser was Winc Inc., down 21.88% to $1.50, followed by Eastside Distillers, down 9.3% to 60 cents a share.
Indicative of the broader market, the Dow Jones 30 stock average was down 2.42%, the S&P 500, down 3.25%, Nasdaq was down 4.08% and the Russell 2000 was off 4.7%.