Gas Prices, TSMC, Small Business Confidence, and Lab-Grown Meat
Editor’s Note: Happy Wednesday, dear reader!
Would you eat lab-grown meat? That’s a question with a lot of money riding on the answer. Let’s get to it.
Oil Prices Are Headed North
Tensions between Israel and Iran are pushing the price of oil up, just in time for the summer driving season.
Last week, West Texas Intermediate crude futures for May delivery rose by 1.36% to $86.59 per barrel. Meanwhile, Brent futures for June delivery rose by 1.45%, to $90.65 per barrel. This is the highest increase in oil futures since last fall.
So far this year, geopolitics in the Middle East have pushed U.S. crude prices up by roughly 21% and Brent up by more than 18%.
If Israel and Iran were to start a larger conflict in the Middle East, it could hamper oil supplies.
Meanwhile, Ukraine’s drone attacks on Russia’s energy infrastructure are having a big effect too.
“The Ukrainian strikes against Russian infrastructure really registered with the market,” Again Capital’s John Kilduff said. “We have damaged refining infrastructure in Russia and other infrastructure, and it has impacted their production capacity.
“For the first time since this war started, we may end up finally having material amounts of Russian supply off the market.”
At the end of last week, the average cost for a gallon of “regular” gasoline hit $3.57. That’s the highest price since October, according to the American Automobile Association (AAA).
Meanwhile, Bank of America (NYSE: BAC) expects members of OPEC + (the Organization of the Petroleum Exporting Countries and their allies, including Russia) to lower production in the second quarter of 2024. The bank projects that the cartel will affect a deficit of 450,000 barrels per day.
It’s typical for gas prices to rise in advance of summer, when folks typically take road trips. However, this year, the geopolitical crises occurring in the Middle East and Eastern Europe threaten to push prices up even higher.
TSMC to Receive Up to $6.6 Billion in CHIPS Act Funds
There’s a new U.S. CHIPS and Science Act recipient.
This week, the White House reported that it will give the Arizona subsidiary of the Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) — commonly referred to as “TSMC” — up to $6.6 billion in funds.
The award is intended to help TSMC invest more than $65 billion in three new factories in Phoenix, Arizona. That’s the most money a foreign company has ever invested in the Southwestern state.
In addition, TSMC could receive roughly $5 billion in CHIPS Act loans.
U.S. Secretary of Commerce Gina Raimondo said that $50 million of the award money is earmarked to train factory employees in Arizona.
Based in Taiwan, TSMC is currently recognized as the maker of some of the world’s most cutting-edge computing products, including “logic chips” that are used for artificial intelligence (AI) technologies.
The company’s upcoming Arizona facilities are expected to make the chips for “fabless” companies — which design chips and other components but don’t make them themselves — such as Apple (NSDQ: AAPL) and Advanced Micro Devices (NSDQ: AMD)
“These are the chips that underpin all artificial intelligence, and they are the chips that are the necessary components for the technologies that we need to underpin our economy,” Raimondo said on a call with the press. She added that TSMC’s chips are also critical to “21st-century military and national security apparatus.”
Passed in 2022, the CHIPS and Science Act is intended to provide as much as $280 billion to put the U.S. back on the map as a semiconductor source. The U.S. once held a dominant position in this market; currently, roughly only 12% of global semiconductor production happens in the U.S.
The act is also supposed to help the U.S. security-wise; the U.S. claims that Chinese-produced technology poses a threat to national security.
“Semiconductors — those tiny chips smaller than the tip of your finger — power everything from smartphones to cars to satellites and weapons systems,” President Biden said in a White House statement. “TSMC’s renewed commitment to the United States, and its investment in Arizona, represent a broader story for semiconductor manufacturing that’s made in America and with the strong support of America’s leading technology firms to build the products we rely on every day.”
TSMC has already begun building the first of three facilities in Arizona. According to Raimondo, all three facilities should be producing microchips by the end of 2029. She remarked that this will set the U.S. on track to produce about 20% of the world’s leading-edge chips by the end of the current decade.
Small Business Confidence Is Plummeting
New survey data from the National Federation of Independent Businesses (NFIB) indicated that small business confidence has plummeted to the lowest level in more than 11 years.
The group’s March survey showed a reading of 88.5. That’s nearly a full-point drop from February and the lowest level of small business confidence since December 2012.
According to the survey, rising prices are behind the concerns.
“Small business optimism has reached the lowest level since 2012 as owners continue to manage numerous economic headwinds, the NFIB’s chief economist, Bill Dunkelberg, said.
“Inflation has once again been reported as the top business problem on Main Street, and the labor market has only eased slightly.”
According to the NFIB, 25% of small business owners surveyed said that inflation was the most important problem. That’s a two-point increase from February’s survey.
In addition, 28% of respondents said that had to raise their own prices to combat higher costs. That’s a seven-point increase from the previous month.
And 33% said that they are planning to implement further price increases.
The survey jibes with the price increases we’ve been seeing at both the wholesale and the consumer levels.
Later this morning, the Commerce Department will report on its Consumer Price Index (CPI) reading for March. The CPI is expected to show a 0.3% monthly increase — a bit of a slowdown from February’s 0.4% gain, but an increase nonetheless.
However, on a year-over-year basis, the CPI is expected to show a 3.4% increase for March — higher than February’s 3.2% year-over-year growth.
Investors are losing hope that the Federal Reserve will follow through with the projected three rate cuts from its dot plot. The swap markets are now betting that the Fed will cut interest rates by only 0.68 percentage points by the end of the year — versus the Fed’s own projections of 0.75 percentage points.
In addition, the futures markets have now lowered expectations of a June interest rate cut to roughly 56%. Last week, the CMEGroup’s Fed Watch Tool showed a likelihood of more than 90%.
Lab-Grown Meat, Anyone?
Would you eat meat that’s been grown in a laboratory?
Apparently, the world is divided on this question.
According to a recent Statista Consumer Insigns survey, 16% of U.S. respondents said that they would be willing to try cultivated meat that had been produced from animal cells.
Respondents in India — which has the world’s largest vegetarian population (38%) — are slightly more likely to try lab meat, at 20%. And 17% of U.K. respondents said they’d give it a go.
France remains skeptical of cultivated meat, with only 9% of respondents in the land of beef bourguignon answering in the affirmative.
Take a look:
You will find more infographics at Statista
According to ZMR, the cultured meat market is expected to see a compound annual growth rate (CAGR) of 13.11% between 2023 and 2030. That means it will expand from an estimated $221.47 million in 2022 to $592.69 million by 2030.
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