Daily SITREP: Power Industry: U.S. Grid Not Ready for Future Demand (Mon, 30 October 23) – Forward Observer

Daily SITREP: Power Industry: U.S. Grid Not Ready for Future Demand (Mon, 30 October 23)


Good morning. Here’s your Daily SITREP for Monday, 30 October 2023.


  • READ TIME: 6 Minutes, 46 Seconds
  • Inside the Beltway
    • (1) Israel Aid Could Draw U.S. Further into Regional War
    • (2) Phillips Enters Primary Race Against Biden
    • (3) Federal Court Orders Georgia to Redraw Election Map
  • Domestic INTSUM
    • (4) U.S. Food Insecurity Defies “Bidenomics”
    • (5) Savings are Down, but Consumers Still Spending
    • (6) Power Industry: U.S. Grid Not Ready for Future Demand
    • (7) Supply Chains Regionalizing, Moving Away From Single Sourcing
    • (8) Exxon and Chevron Mega Deals Reveal Falling Oil Supply
    • (9) Colorado Trial to Disqualify Trump Begins Today
  • Global SITREP
    • (10) Global Middle-Class Rising, Commodities Demand to Soar
    • (11) Former TSMC VP: U.S. Can’t Stop China Chips
    • (12) Israel Commences Ground Assault into Gaza


  • (1) ISRAEL AID COULD DRAW U.S. FURTHER INTO REGIONAL WAR: House Speaker Mike Johnson (R-LA) said the House will pass an Israel military aid bill this week, which will not include money for Ukraine.
    • Johnson said he is also open to a new Continuing Resolution to continue funding the government until 15 January 2024 that could include a 1% across-the-board spending cut to incentivize the Senate to pass GOP spending bills.
    • Why It Matters: Israel began its offensive over the weekend, and Israeli officials are saying the offensive could take six weeks to six months. Iran and its proxy Hezbollah said they would open a new front in the war with Israel, and American support could see the U.S. dragged into a regional conflict that could grow into a global war. – R.C.
  • (2) PHILLIPS ENTERS PRIMARY RACE AGAINST BIDEN: Representative Dean Phillips (D-MN) announced that he will challenge President Joe Biden in the Democratic primary race, saying he would represent “America’s exhausted majority.”
    • Phillips cited Biden’s age and voter dissatisfaction with Biden’s handling of the economy, saying, “it’s time for a new generation.”
    • Why It Matters: Biden allies are accusing Phillips of running a vanity campaign, but Phillips’ entry into the Democratic primary race is a sign that some Democrats are losing cohesion behind Biden for 2024. Biden’s polling is tanking, and his primary campaign message, “Bidenomics,” is failing to catch on with American voters. – R.C.
  • (3) FEDERAL COURT ORDERS GEORGIA TO REDRAW ELECTION MAP: The U.S. District Court for the Northern District of Georgia ordered the state to redraw its Congressional district maps to include more black-majority districts after the court found the current district map violated the Voting Rights Act.
    • Georgia Governor Brian Kemp called for a special legislative session on 29 November to redraw district maps.
    • Why It Matters: The fight for the House in 2024 is becoming more competitive as Democrats are likely to pick up multiple House seats in the new Georgia district map. – R.C.


  • (4) U.S. FOOD INSECURITY DEFIES “BIDENOMICS”: The U.S. Department of Agriculture (USDA) reported that Americans’ household food insecurity in 2022 climbed to the highest level since 2014.
    • “Food-insecure households (those with low and very low food security) had difficulty at some time during the year providing enough food for all their members because of a lack of resources,” according to the USDA report.
    • 13% of American households were food insecure last year, up from about 10% in 2020 and 2021.
    • Why It Matters: Bidenomics is not working for the average American family. Inflation has chipped away at Americans’ disposable income, forcing more households to rely on credit card debt. Wall Street analysts like Morgan Stanley’s Mike Wilson have warned that consumer spending may soon fall off a cliff, which would lower sentiment and pose a big challenge for President Biden and Democrats going into an election year. – H.B.
  • (5) SAVINGS ARE DOWN, BUT CONSUMERS STILL SPENDING: The U.S. Commerce Department said on Friday that Americans’ spending increased more than expected in September despite another drop in the savings rate.
    • September consumer spending was 40% higher than economists polled by Reuters expected, fueled by spending on new light trucks, recreational goods and vehicles, international travel, healthcare, and prescription medication.
    • “U.S. consumers still had some gas left in the tank last month that risks carrying into the current quarter,” said Sal Guatieri, a senior economist at BMO Capital Markets.
    • Why It Matters: This consumer spending kept the latest gauge of inflation elevated. The Federal Reserve meets tomorrow and Wednesday to debate interest rate policy. Major U.S. banks expect that the Fed will keep rates unchanged at this meeting, which will keep credit card interest rates high for big-spending U.S. consumers. – H.B.
  • (6) POWER INDUSTRY: U.S. GRID NOT READY FOR FUTURE DEMAND: National Rural Electric Cooperative Association CEO Jim Matheson said energy demand is increasing and supply is not keeping up, and Oglethorpe Power Corporation Senior VP Heather Teilhet said output from the recently completed Vogtle nuclear plant in Georgia is still not enough to meet demand.
    • Reps. Scott Peters (D-CA) and Bob Latta (R-OH) said permitting issues are also stopping energy demand from being met, and there is bipartisan support for pushing the Environmental Protection Agency (EPA) to withdraw a rule that is set to close fossil fuel power plants.
    • Why It Matters: The power industry and lawmakers are now sounding the alarm on future power generation capacity. As we previously pointed out, U.S. generation capacity has been generally flat since 2011, and the push to bring electric vehicle infrastructure online at the same time the EPA is set to run fossil fuel power plants out of business will greatly increase grid instability. – R.C.
  • (7) SUPPLY CHAINS REGIONALIZING, MOVING AWAY FROM SINGLE SOURCING: According to an Accenture survey of 1,230 companies in 14 countries, 72% of companies are planning multi-sourcing strategies in the next three years, up from 42%, and 65% are shifting to regional sourcing up from 38%.
    • Norfolk Southern Executive VP Ed Elkins said geopolitical instability makes “the U.S. a compelling place to be” for supply chain sourcing.
    • Why It Matters: Companies are trying to secure supply chains after COVID demonstrated that “just-in-time” logistics were severely vulnerable to disruption. The possibility of global conflict and the supply chain disruptions that come with it in a global economy organized around free trade is pushing regionalization and multi-sourcing strategies. – R.C.
  • (8) EXXON AND CHEVRON MEGA DEALS REVEAL FALLING OIL SUPPLY: According to earnings reports released by oil giants Exxon Mobil and Chevron, Exxon’s oil production is hovering near a two-decade low, and Chevron revealed multiple problems affecting oil production in the Permian Basin and overseas projects.
    • Pickering Energy Partners founder Dan Pickering said production issues in the Permian Basin were an “example of the maturing of the basin,” and investors “don’t believe this business can be sustainable.”
    • Halliburton CEO Jeff Miller said, “The reality is you have to do more work to stay flat.” 
    • Why It Matters: The revelations from Exxon and Chevron earnings reports appear to indicate that the Permian Basin could be nearing peak production, as Goehring and Rozencwajg predicted in June would happen within the next twelve months. – R.C.
  • (9) COLORADO TRIAL TO DISQUALIFY TRUMP BEGINS TODAY: A lawsuit by Citizens for Responsibility and Ethics in Washington seeking to disqualify former President Donald Trump from the 2024 ballot in Colorado is set to begin today.
    • District Court Judge Sarah Wallace denied five separate motions to dismiss from Trump’s legal team, which argued that courts do not have the power to determine eligibility for office.
    • Why It Matters: Democrat-aligned groups and activists are attempting to bar Trump from running in 2024 using the argument that section 3 of the 14th Amendment disqualifies Trump from office. This is one lawsuit of multiple working their way through state courts, and a decision against Trump will very likely see an appeal possibly to the Supreme Court, considering the novelty of the case. – R.C.


  • (10) GLOBAL MIDDLE-CLASS RISING, COMMODITIES DEMAND TO SOAR: An estimated 113 million people will join the global middle class in 2024, according to World Data Lab.
    • World Data Lab defines the “global middle class” as someone who spends at least $12 per day.
    • China and India are projected to each have about 30 million people join the global middle-class next year, followed by 5 million from both Indonesia and Bangladesh.  
    • Why It Matters: As of June 2023, 4 billion people – about half of the world’s population – were in the global middle class or higher, and 1 billion more will be in the middle class by 2031. More spending power will mean greater demand for commodities when the world still has disrupted supply chains from government responses to COVID-19, the nearshoring/onshoring/friendshoring trend is accelerating, and military conflicts could increase resource nationalism. This all points to higher commodity prices next year and possibly for the rest of the 2020s. – H.B.
  • (11) FORMER TSMC VP: U.S. CAN’T STOP CHINA CHIPS: Former Taiwan Semiconductor Manufacturing Company (TSMC) Vice President Burn J. Lin said, “it’s just not possible” for the U.S. to prevent China’s Semiconductor Manufacturing International Corporation (SMIC) and Huawei Technologies from creating a more advanced generation of chips.
    • The Biden administration tightened sanctions on the Chinese tech sector after Huawei unveiled new advanced chips despite previous sanctions on Chinese chip makers.
    • Why It Matters: The Biden administration’s attempt to hamstring the Chinese tech sector through sanctions looks like it is failing. According to Lin, Chinese chip makers are already able to make even more advanced chips using current machinery and techniques. – R.C.
  • (12) ISRAEL COMMENCES GROUND ASSAULT INTO GAZA: Israeli Defense Forces entered Gaza with heavily armored forces under cover of artillery and air strikes over the weekend.
    • Israeli ground forces clashed with Hamas terrorists in the north of Gaza as well as near Khan Younis in the south.
    • Fighting also took place in the West Bank as Israeli commandos conducted raids on suspected Palestinian terrorist groups.
    • Why It Matters: The Israel-Hamas war will likely widen as Turkey’s President Recep Tayyip Erdogan pledged his country’s support to Hamas and appeared to begin mobilization of Turkey’s military. Israel had begun drawing down its embassy personnel in Turkey last week over its increasingly hostile announcements in support of Hamas. Iran and its proxy militia Hezbollah are still expected to enter the fight against Israel despite warnings not to from the Biden administration. A wider Middle East conflict will likely impact global oil markets and could create shortages of refined petroleum products here in the U.S. – M.M. 


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

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