Daily SA: GAO: DOE Has No Plans for Transformer Shortage (Fri, 04 August 23) – Forward Observer

Daily SA: GAO: DOE Has No Plans for Transformer Shortage (Fri, 04 August 23)

Good morning. Here’s your Daily Situational Awareness for Friday, 04 August 2023.


  • READ TIME: 5 Minutes, 40 Seconds
  • Inside the Beltway
    • (1) Biden Allies Move to Counter Third-Party Candidates
    • (2) DeSantis and Newsom to Debate on Fox News
    • (3) GAO: DOE Has No Plans for Transformer Shortage
  • Domestic INTSUM
    • (4) Saudi Arabia Extends Oil Supply Cuts
    • (5) Ackman: Expect Higher Interest Rates
    • (6) TripAdvisor: Strong Demand for Experiences
  • Mexico SITREP
    • (7) AMLO Confirms Chile Trip Marking Coup Anniversary
  • Russia-NATO SITREP
    • (8) Ukrainian SBU: Putin Wants to Draw Belarus into War
  • China & Indo-Pacific SITREP
    • (9) Two PRC Spies Serving in the USN Arrested


  • (1) BIDEN ALLIES MOVE TO COUNTER THIRD-PARTY CANDIDATES: Democrat lawmakers and operatives are moving to preempt third-party runs from Cornel West and the self-described bipartisan No Labels political group over concerns of a repeat of 2016 when Green Party candidate Jill Stein was accused of siphoning votes from Hillary Clinton in key states.
    • Senator John Fetterman (D-PA) said, “Can you just imagine what a second term of Trump would be? It’s all going to be about revenge.” 
    • Why It Matters: Democrats are concerned Cornel West could siphon off younger progressive voters, and they are probably right. Polling shows Biden’s approval rating is lower among likely voters under 30, and the student loan debt issue is likely to depress turnout among young Democrats. There may not be much state Democratic parties can do to prevent West from appearing on the ballot if Republicans move to fund ballot access as they have in the past for Green Party candidates. – R.C.
  • (2) DESANTIS AND NEWSOM TO DEBATE ON FOX NEWS: Florida Governor Ron DeSantis, the current runner-up in the Republican primary race, is set to participate in a televised debate with California Governor Gavin Newsom on Fox News with a tentative date in early November.
    • “DeSantis should put up or shut up. Anything else is just games,” a Newsom aide said.
    • Why It Matters: This is a tryout for Gavin Newsom to potentially run in 2024 as an alternative to President Biden, who is dealing with his scandal-ridden son Hunter and a Democrat base who doesn’t want him as the candidate. The differing response by Biden allies between third-party and primary challengers and Newsom could indicate that Democrats are making way for Newsom as an alternative going into 2024. – R.C.
  • (3) GAO: DOE HAS NO PLANS FOR TRANSFORMER SHORTAGE: According to a Government Accountability Office (GAO) report released this week, the Department of Energy (DOE) identified issues with power transformer supply chains in 2017 but has not developed plans to address supply chain issues.
    • The GAO report said DOE officials “hoped” that growing demand would encourage manufacturers to expand production capacity and capital investment.
    • Why It Matters: The transformer supply chain is hindered by lead times of up to five years in some cases, primarily driven by shortages of specialized steel used to manufacture transformers. Most of this specialized steel is imported, and the few domestic producers remaining say the low price of imported steel undercuts their profitability. The idea that domestic producers will see demand and “just make more” when cheap imports outcompete them is dangerous wishful thinking. – R.C.


  • (4) SAUDI ARABIA EXTENDS OIL SUPPLY CUTS: Yesterday, Saudi Arabia and Russia announced more crude oil export cuts.
    • Saudi Arabia will extend its cut of one million barrels per day through September, and the Kingdom could deepen or extend this cut.
    • Meanwhile, Russia will cut its exports by 300,000 barrels per day in September.  
    • Why It Matters: Saudi Arabia is the world’s second-leading crude oil producer, and Saudi, Russia, and the rest of OPEC+ together supply about 40% of the world’s crude. The OPEC+ Monitoring Committee is unlikely to change its policy of supply cuts at today’s meeting, meaning if global demand remains strong, then oil prices should climb. – H.B.
  • (5) ACKMAN: EXPECT HIGHER INTEREST RATES: Bill Ackman, a billionaire investor and founder of Pershing Square Capital Management, is shorting the U.S. Treasury market.
    • Higher defense costs, the energy transition, and workers’ improved leverage on wages all point to higher inflation, Ackman noted.
    • If long-term inflation remains above 2%, as Ackman expects, then the 30-year Treasury yield could rise from 4.3% – the rate on 4 Aug – to 5.5%. 
    • Why It Matters: Bill Ackman is known for making investment bets that have an asymmetric payoff. In 2020 and 2021, he made early bets about the COVID crisis and the economy’s re-opening and turned $204 million into nearly $4 billion. This latest Ackman investment call should be correct. As the U.S. Treasury issues $1 trillion in new bonds in this quarter and oil prices continue to rise, higher inflation should return this fall, and interest rates should also climb. – H.B.
  • (6) TRIPADVISOR: STRONG DEMAND FOR EXPERIENCES: In yesterday’s Q2 earnings call, TripAdvisor’s management said that while their comparison-shopping websites business was stable, customers’ spending on experiences increased.
    • Viator, the world’s largest online marketplace for tours, activities, and attractions that TripAdvisor acquired in 2014, posted a 59% year-over-year growth – accounting for 43% of TripAdvisor’s revenue.
    • Why It Matters: Last week, we noted that Alaska Airlines’ flight demand indicated that a recession isn’t immediately ahead, and this latest TripAdvisor earnings report confirms the trend. This spring and early summer, there was pent-up demand for experiences. But as inflation returns this fall, which I expect, services spending could fall. – H.B.



  • (7) AMLO CONFIRMS CHILE TRIP MARKING COUP ANNIVERSARY: Mexican President Andres Manuel Lopez Obrador (AMLO) confirmed that he’s headed to Chile in September to mark the 50th anniversary of the Pinhochet-led coup against Salvador Allende.
    • “I am going to Santiago de Chile because it is the 50th anniversary of the coup d’état in Chile and of the regrettable death of Salvador Allende, a man I admire very much. He is one of the political leaders in the world that I admire the most,” AMLO said.
    • Why It Matters: AMLO praised Allende for being a pacifist but also a socialist revolutionary who was attempting to “transform” Chile by peaceful means. AMLO’s admiration of Allende reflects his attempts to transform Mexico under the so-called “Fourth Transformation,” which AMLO has vowed will continue after he leaves office. The reality of Chile under Allende included socialist reforms that crippled the Chilean economy and fueled runaway inflation, food shortages, and workers’ strikes. – M.S.


  • (8) UKRAINIAN SBU: PUTIN WANTS TO DRAW BELARUS INTO WAR: Ukraine’s SBU security service says that Russian President Vladimir Putin wants to draw Belarus into the Ukraine war through a “false flag” at a Belarusian oil refinery.
    • SBU officials say Russia will carry out the attack and then blame Ukrainian saboteurs.
    • Why It Matters: Ukrainian intelligence has a spotty track record in the war and is given to making false accusations, such as accusing Russia of planning sabotage against Ukraine’s Zaporizhzhia nuclear power plant. Putin undoubtedly considers Belarusian involvement as an option, but the move would be unpopular in Belarus. Belarusian President Aleksandr Lukashenko has for the past year repeatedly warned against possible terror attacks inside his country, going so far as bolstering counterterror forces and holding drills. – M.S.

China & Indo-Pacific SITREP

  • (9) TWO PRC SPIES SERVING IN THE USN ARRESTED: Two enlisted U.S. Navy Sailors were arrested on espionage charges this week. Between the two, espionage has been ongoing since August 2021.
    • One of them is confirmed to have a security clearance. The other remains unconfirmed.
    • Compromises include radar systems, damage control and weapons technical manuals, ship and unit movements, large-scale exercise specifics (probably this exercise), Marine Corps Training regiments, and much more.
    • Why It Matters: Despite years of Sailors raising the alarm that the PRC is obviously infiltrating the enlisted ranks, the DOD and DOJ have done very little about it. Diversity policies routinely hamper efforts by concerned Sailors despite probable cause to investigate potential spies. While the efforts this week are a good thing, they only underscore the failures of the background checks and the need to reject foreign-born enlistees. – J.V.

Low Intensity Conflict SITREP (Next 48 hours)

  • Madison, AL – Far-left activists plan a protest against Kirk Cameron and a Moms 4 Liberty children’s story hour at the Madison Public Library. The City of Huntsville is attempting to either move the event or cancel it altogether for lack of a proper event permit. Far-left activists plan to protest at the public library if organizers attempt the story hour anyway. The event is planned for Saturday, 05 August, at 1000 EDT.
  • Long Beach, CA – Far-left activists plan a March for Queer Solidarity at Bixby Park. The march will begin at 30 Junipero Ave, Long Beach, CA, at 1330 PDT on Sunday, 06 August.


M.S. indicates analyst commentary from Mike Shelby

M.M. indicates analyst commentary from Max Morton

J.V.  indicates analyst commentary from Jared Vaughn

R.C. indicates analyst commentary from Robert Cook

H.B. indicates analyst commentary from Harrison Burge

Leave a Reply

Your email address will not be published. Required fields are marked *

Name *