US Hiring Stays Strong, Complicating Fed’s Inflation Fight

Boston Herald – The nation’s employers kept hiring briskly in November despite high inflation and a slow-growing economy — a sign of resilience in the face of the Federal Reserve’s aggressive interest rate hikes.

The economy added 263,000 jobs, while the unemployment rate stayed 3.7%, still near a 53-year low, the Labor Department said Friday. November’s job growth dipped only slightly from October’s 284,000 gain.

All year, as inflation has surged and the Fed has imposed ever-higher borrowing rates, America’s labor market has defied skeptics, adding hundreds of thousands of jobs, month after month.

With not enough people available to fill jobs, businesses are having to offer higher pay to attract and keep workers. In November, average hourly pay jumped 5.1% compared with a year ago, a robust increase that is welcome news for workers but one that makes the Fed’s efforts to curb inflation potentially more difficult. On a month-to-month basis, wages jumped 0.6% in November, breaking a streak of smaller gains that had suggested that pay growth might be cooling.

The strength of the hiring and pay gains raised immediate concerns that the Fed may now have to keep interest rates high even longer than many had assumed. The stock market reacted with alarm, with the Dow Jones Industrial Average sinking nearly 200 points in mid-morning trading Friday.

Europeans Cut Spending, Pointing to Recession Ahead

Wall Street Journal – Europeans cut back sharply on their spending on goods during October, a sign that high prices at the start of a period of increasing energy usage are pushing the region’s economies toward recession.

Consumer prices have surged since Russia’s invasion of Ukraine, and the Kremlin’s decision to weaponize the country’s vast stores of energy to undermine European support for Kyiv.

Earlier in the year, the extra savings accumulated during the pandemic and falling unemployment helped households to offset these higher costs, buttressing economic growth.

That changed in October, typically the first month of the year in which many European households begin to heat their homes. This year, the cost of doing so was significantly higher, with household energy prices up 41.5% from a year earlier despite government efforts to shield consumers.

In response, households cut their spending on other goods, with the European Union’s statistics agency Monday recording a 1.8% drop in retail sales from September, the largest fall since July 2021.

By contrast, U.S. retail sales were up 1.3% in October, as shoppers shelled out more on discretionary items such as cars, furniture and restaurant meals. U.S. home energy prices were 17.6% higher than a year earlier in October, less than half the scale of the increase in Europe.

Hennes & Mauritz AB last week became the first major European retailer to announce payroll reductions in response to high inflation and weakening demand, saying it would cut around 1,500 jobs from its global workforce.

Separate surveys released Monday by S&P Global indicate that a decline in spending is also hitting providers of consumer services. S&P’s Purchasing Managers Index for the eurozone’s services sector fell to 48.5 in November from 48.6 in October, reaching a 21-month low. A reading below 50.0 points to a decline in activity.

“With the surveys also bringing signs of inflation having peaked, the headwind on demand from rising prices should also start to ease in coming months, barring severe weather over the winter, hinting that any recession may be both brief and relatively mild,” said Chris Williamson, chief business economist at S&P Global.

The decline in household spending on goods and services is a sign that the eurozone economy is likely already contracting. The European Commission last month forecast that the economy would shrink this quarter and during the first three months of next year, thereby meeting a widely used definition of recession.

One reason for that forecast is weakening household consumption, which the commission expects to stagnate in 2023, having grown by 3.7% this year. Its economists estimate that much of the 1 trillion euros, equivalent to $1.054 trillion, in additional savings built up during the Covid-19 pandemic have already been eaten away by higher consumer prices, and are no longer supporting spending.

Households also face rising interest costs as the European Central Bank raised its key interest rate more aggressively than at any time in its history to try to cool the surge in consumer prices.

One upside for Europe is the jobs market, which continues to show resilience. The eurozone’s unemployment rate fell to 6.5% in October from 6.6% in September, its lowest since records began in 1998.

As long as unemployment doesn’t rise very sharply over the coming months, many economists expect the decline in consumer spending and Europe’s recession to be short-lived, with growth returning as the temperatures rise in late Spring of next year.

“Consumer and business balance sheets are healthy and the financial system functions well,” economists at Germany’s Berenberg Bank wrote in a note to clients. “Under such circumstances, recessions should not last much longer than the shocks that caused them.”

Berenberg’s economists expect consumer spending to rebound as this winter fades, driving a rebound in broader economic growth. But Europe likely faces a similar problem in late 2023, with high energy prices again set to take a big bite out of household spending power as temperatures fall.

Office, Lab Developers Lose Leverage Heading into 2023

Banker & Tradesman – Greater Boston’s office market faces a year of reckoning in 2023 amid a wave of lease expirations and dwindling lab conversion activity, commercial real estate brokers predict.

“A lot of [office] tenants have kicked the can during COVID, and next year will separate out the winners and losers in where the market is headed,” said Tyler McGrail, executive managing director at Newmark, during NAIOP-MA’s annual market forecast.

Recessionary indicators and inflation pose hazards for most commercial real estate classes in 2023, with industrial properties likely to be the most durable asset, according to panelists at the NAIOP forum.

Class A office vacancies are currently 15 percent in Boston’s Financial District and more than 16 percent on Route 128. Another 8 million square feet of office sublease space is on the market in Boston, Cambridge and the suburbs.

Concessions offered by office landlords have risen 20 to 30 percent in the form of free rent and tenant improvement allowances, McGrail said.

Massachusetts Enacted its Most Ambitious Housing Law in Decades. Now the Hard Part is Enforcing It.

Boston Globe – John Gollinger is scrambling.

Two months ago, Gollinger, the executive director of the Waltham Housing Authority, learned that the state is cutting its contribution to his budget next year by more than $300,000.

That will almost certainly mean a reduction in services for people who live in public housing in Waltham, many of whom are disabled, elderly, or extremely low income. Maintenance requests could go unheeded. Much-needed renovations could fall to the wayside.

Even more perplexing than the cuts, Gollinger says, is the reason for them: Waltham’s failure to comply with early procedural requirements of the state’s new MBTA Communities law, an ambitious effort to tackle Massachusetts’ housing crisis by mandating new multifamily zoning in communities served by the MBTA.

Zoning issues are typically a matter for planning departments and city councils, not housing authorities. If anything, Gollinger’s agency — which administers public housing and voucher programs for low-income renters — exists to deal with the fallout of Massachusetts’ sky-high housing costs, which have been fueled by restrictive local zoning rules.

MassDOT, Amtrak, CSX Seek $108 million in Rail Improvements between Springfield and Worcester

MassLive – The state Department of Transportation and rail companies Amtrak and CSX Corp. applied this week for $108 million in federal transportation money to help fund improvements along the 53 miles of railroad between Springfield and Worcester.

Once the improvements happen, the plan is to add two daily Amtrak trips between Boston, Worcester and Springfield as a first phase of east-west rail, the Massachusetts Department of Transportation said Friday in a news release following its application.

“It means it’s happening,” said U.S. Rep. Richard E. Neal, D-Springfield, in an interview Friday. “We think this is another significant milestone.”

According to the release, travel times will be improved for the existing Amtrak Lake Shore Limited. The state also says these improvements are a necessary first step for further increased train frequency and speed between Boston and Albany, New York.

“These improvements are starting to happen,” Neal said. “I think it highlights that this is an immediate step toward improved rail service.”

The Next Fight over the Massachusetts Driver’s License Law

WBUR – The Massachusetts law allowing undocumented immigrants to get a driver’s license has survived a gubernatorial veto and a repeal effort at the ballot box. And yet, it still isn’t completely settled.

With less than seven months to go before the new rules take effect on July 1, the law’s authors are speaking out against parts of the Registry of Motor Vehicles’ implementation plans. During a hearing Friday, several Democratic state lawmakers who were involved in the long fight to pass the law said that identity verification provisions in the RMV’s draft regulations were “undercutting” their intentions:

First: Typically, legal residents have to provide their Social Security number to get a license. But the RMV’s proposed regulations would give those unable to prove their legal status — and only them — the option to submit a signed letter saying they don’t have an SSN. The law’s writers argue this effectively creates a permanent internal record showing who is undocumented — which is something they explicitly did not want to do. State Sen. Brendan Crighton said it raises the risk that federal immigration officials could get information on undocumented immigrants through the RMV, which has happened in other states.

Second: The RMV is proposing that those unable to prove their legal status would have to show “at least two documents” establishing their identity, such as a foreign passport, driver’s license, marriage licenses, etc. The problem, according to the law’s authors, is the words “at least.” State Rep. Tricia Farley-Bouvier said those two words technically give RMV employees a “blank check” for even more documents. And in the 16 other states with similar laws, all require a set number of documents so nothing is left up for interpretation. (Farley-Bouvier also said foreign birth certificates should be added to the list of allowed documents.)

What’s next: The law’s backers say a few simple tweaks to the language of the regulations would make a big difference — but RMV officials made no indication as to whether they were amenable to the changes. A MassDOT spokeswoman said they will “carefully and thoroughly” review all feedback before filing final regulations.

Years in the Making, South Coast Rail Arriving Soon

State House News – South Coast lawmakers all had a single word in mind when they gathered Monday to cut the ribbon on a brand-new Freetown commuter rail station: “surreal.”

Passenger rail service to Taunton, New Bedford and Fall River is not here yet but is visible on the horizon, set to begin by the end of 2023 after decades of discussion and debate. And for Rep. William Straus of Mattapoisett, Rep. Carole Fiola of Fall River and Sen. Michael Rodrigues of Westport, the progress is both overdue and a bit disorienting.

All three called it “surreal” to visit a fully constructed station, proof that the long-promised ability to take an MBTA commuter rail train from one of the South Coast hubs to Boston is finally approaching.

“They said that the royal visit was probably the most exciting event to happen in Massachusetts this year, but for me and for us here, it is this day,” Fiola said.

MBTA General Manager Steve Poftak, who like Gov. Charlie Baker will leave his post in early January, said the ribbon-cutting marks “substantial completion” of a $159 million contract for South Coast Rail’s Fall River branch.

Another $403.5 million contract is ongoing for the New Bedford line, and MBTA officials expect service on both will begin late next year.

Health Care

Worcester Medical Expert Critical of $75 Gift Card to Entice COVID-19 Vaccination

Telegram & Gazette – A “Hail Mary” is how Dr. Michael Hirsh, the city’s medical director, described a state program to give a $75 gift card to anyone who gets a COVID-19 vaccine or booster shot at certain clinics.

The sports reference usually means a last-second, desperate attempt to win on the field or court, but Friday Hirsh applied it to Get Boosted, a vaccination program rolled out by the state Department of Public Health that is offering the gift cards.

“I think it reflects a level of frustration the public health community has with the response of the public to these vaccination offerings including the new bivalent booster,” said Hirsh, who stressed his views do not reflect those of the city’s Department of Public Health.

“(The $75) is a little of a Hail Mary, I think. We’ve tried just about everything.”

The aim of Get Boosted is to increase COVID-19 vaccination access in the state’s 20 vaccine equity communities, identified by the state Department of Public Health as those hardest hit by COVID-19 due to social and economic factors. Worcester, Fitchburg and Leominster are among the 20 communities.

“I don’t like the ($75) approach, personally,” said Hirsh. “I don’t like those kinds of enticements.

Commission Exploring Ways to Bridge Behavioral Health Workforce Gap

The Center Square – With a little more than a month to go before Massachusetts’ next legislative session, a commission with members across different specialties in the behavioral health field is exploring ways of bridging gaps in the profession.

Mirroring a scenario experienced across many areas of the U.S., Massachusetts has recorded worker shortages throughout a number of health-care professions since the onset of the COVID-19 pandemic nearly three years ago.

Mental health services, in particular, have been in growing need as the ripple effects of the pandemic have taken hold in the last several years.

The Massachusetts Behavioral Health Advisory Commission, which was established through an act of the state Legislature, held its second meeting Monday. State Sen. Julian Cyr, D-Truro, and State Rep. Adrian Madaro, D-Boston, co-chair the panel, which is rounded out by a number of state professionals in the health-care field.

Throughout the meeting, professionals urged state lawmakers to enact policy to bolster workforce recruitment and retention across the various jobs in the behavioral health field.

Taxation and Budget

Passage of Surtax Has Higher Ed Leaders Seeking Expanded Access

MassLive – Energized by the passage of Ballot Question 1, education leaders and a handful of lawmakers gathered at the Massachusetts State House Thursday to outline an urgent path to bolstering access to public colleges and universities across the commonwealth, particularly for marginalized communities and first-generation students.

Question 1, is poised to generate between $1.3-$1.9 billion for public education and transportation investments.

But with funding decisions under the discretion of the Massachusetts Legislature, the Higher Ed for All campaign unleashed a slate of concrete legislative priorities as members lobby for debt-free college tuition and living expenses, improved salaries for faculty and staff to reflect steep cost of living increases, wage equity for adjunct professors that incorporates health insurance, expanded staffing for student advisors and other support personnel, and revamped funding for debt-saddled and aging campus infrastructure, among other pressing needs.

“We set the table by winning Question 1, and now it is time to make sure this reinvestment in high-quality, debt-free public higher education happens,” Max Page, president of the Massachusetts Teachers Association, told activists, students and elected leaders Thursday morning. “You can’t achieve a racially and economically just commonwealth without high-quality, debt-free public higher education.”

Sustainability and Climate

Above-Average Temperatures Factor into Energy Forecast

State House News – The region’s electric grid operator does not anticipate calling for controlled power outages this winter and predicts New England should have adequate electricity supplies under mild and moderate weather conditions, while prolonged cold snaps would pose system reliability risks.

In rolling out its forecast, ISO-New England said Monday that the National Oceanic and Atmospheric Administration is projecting above-average temperatures in New England this winter, while cautioning that climate change is “making weather more volatile and harder to predict, while stimulating more severe weather.”

“If long periods of severely cold weather develop, we’ll lean on our forecasting tools to identify potential problems early enough to take proactive measures, such as calling for increased fuel deliveries or asking for public conservation,” Gordon van Welie, ISO-New England’s president and CEO, said.

ISO-New England estimated total resources at 34,103 megawatts (MW), and pegged this winter’s peak demand at 20,009 MW under normal winter weather conditions (10 degrees) and 20,695 MW under below-average conditions (5 degrees). Those demand levels are up about 2 percent over last winter.

Last winter’s demand peaked at 19,756 MW on Jan. 11 when temperatures averaged 10 degrees. All-time winter peak demand was set at a high of 22,818 on Jan. 15, 2004, the grid operator said, and all-time peak demand of 28,130 MW was set on Aug. 2, 2006.

While estimated total resources far exceed the forecast of peak demand, the question mark hovering around the equation is the availability of pipeline gas this winter. And the pressure point there is the volatility created by global demand for liquefied natural gas in response to the war in Ukraine.

To try to manage that risk, ISO-New England uses 21-day forecasts of energy availability, weather and consumer demand to identify energy shortfalls weeks in advance and to deliver “early warning” signals to wholesale energy market participants to contract for additional fuel deliveries.

The rolling three-week energy supply forecast is also part of the procedures and plans that ISO-New England has to manage and mitigate system reliability risks in the event of prolonged periods of very cold weather.

If emergency conditions develop, mitigation procedures include importing emergency power from neighboring regions, calling on power system reserves, and asking businesses and residents to voluntarily conserve energy. The grid operator pointed to the role conservation measures played in September, when a heat wave sent electricity demand to record highs in California and put that state’s grid under tremendous stress.

“Only in the most severe events, if conservation and other measures were insufficient to balance energy supply and consumer demand, would the ISO call for controlled power outages,” the grid operator said.

It called controlled outages a “drastic step” that would only be taken “to prevent a collapse of the power system that would take days or weeks to repair.”

The grid operator also shared a look at what might transpire during a long cold snap.

“ISO New England modeling anticipates that generators using stored fuels, such as oil and LNG, would operate around the clock during prolonged periods of extremely cold weather,” ISO-New England said. “Conservation requests during these periods would be made to extend these fuel supplies until either the weather warms or additional deliveries make it to the region. Rather than moving consumer demand into different parts of the day, the public may be asked to limit their energy use during all hours, perhaps for several days.”

Advice for Europeans: Bundle Up and Get Ready for Outages

New York Times – Life in some European cities may soon look like this: Staggered electricity outages to save energy. Temporary cuts in mobile phone and internet service. Schools closed for a lack of lighting and heat. Even traffic lights could briefly be powered down.

Europe has spent months preparing for a winter without Russian gas, stockpiling fuel and pushing conservation measures in hopes of maintaining enough energy to keep power grids running.

But as an unseasonable streak of mild weather gives way to freezing temperatures, governments are starting to brace people for the possibility of controlled power cuts in the event that energy supplies are stretched — with a wide-ranging impact on daily life.

The French government last week started instructing officials around the country to plan for potential rolling electricity outages as soon as next month. Britain’s National Grid operator has warned households of possible blackouts from 4 p.m. to 7 p.m. if gas used to produce electricity runs short. Electric car owners in Finland are being advised not to heat their plugged-in vehicles on freezing mornings to avoid straining the grid.

And in Germany, the country that has been most dependent on Russian gas, people are taking no chances: Sales of candles have soared.

A few hours without power in a French cafe or in a German supermarket would be nowhere as painful as the situation being faced by people in Ukraine, where Russia’s systematic bombing of the energy grid has left millions facing a freezing winter without electricity, heat and water supplies day and night in subzero temperatures and snow.

Still, the prospect of homes, schools, businesses and even trains that rely on power and electric signals going dark, however briefly, will be Europe’s first major test of resilience as it turns away from Russian fuel.

European officials are insisting that the rationing plans are only a last resort, to prevent uncontrolled blackouts if domestic electricity production and imported power aren’t enough to keep power systems from crashing.

“We’re not in a catastrophe film,” Olivier Véran, the French government spokesman, said on French television last week. “We are not announcing that cuts will happen, but if we have a particularly cold and energy-intensive winter, there could be situations of tension and we are preparing for all scenarios.”

Any scheduled power cuts in France would be telegraphed days in advance and would hit small sections of the country at different times, the government said. The cuts, which would last for two hours in the mornings or in early evening, when power use is at a high, would not apply to so-called sensitive sites, including hospitals, nursing homes, fire and police stations and prisons.

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Europe has made a concerted effort since Russia’s invasion of Ukraine in February to avoid a worst-case situation by topping up natural gas reserves and even restarting coal-fired power plants to generate electricity. A near-total embargo on Russian oil begins Monday, one of many actions the bloc has taken to deny the Kremlin revenue from fossil fuel sales and limit its ability to wage war in Ukraine.

Unseasonably warm weather during October and November allowed households and businesses to keep their furnaces turned off, helping gas stocks last longer than expected and bringing down skyrocketing gas prices.

But Europe is now facing its first major cold snap, with an Arctic air blast from Greenland expected to send temperatures plunging in coming days. Governments have already been dipping into some of the emergency gas reserves, driving European natural gas prices back up to their highest levels in six weeks.

France, once Europe’s biggest exporter of electricity thanks to its 56 nuclear power plants, is struggling to repair a series of problems that have left nearly half of its atomic fleet offline, depriving its neighbors of a vital power source. Électricité de France, or EDF, which runs France’s nuclear power plants, announced the restart last week of a mammoth reactor in northern France, although further delays are expected at other nuclear sites.

A recent report by the European Network of Transmission System Operators showed that electricity supplies in France, Sweden and Finland, among others, were at risk of outages.

All of which has prompted the flurry of not-so-subtle signals for Europeans to start hunkering down for disruptions to their electricity-enabled lives.

Germany has issued advisories on what to expect in a blackout. “The telephone is dead, the heating doesn’t come on, there is no warm water, the computer goes on strike, the coffee machine stays off, there is no light,” the Office of Civil Protection and Disaster Assistance said on its website.

“You will soon notice how dependent you are on electric power,” added the agency, which translated the site into English, Turkish and Ukrainian.

The office urges households to stock up on battery-powered flashlights and candles, and even suggests camp stoves to prepare small meals. “Warm clothing can be used as a substitute for heating for a while,” the agency said, but advised households to think about installing alternative heating sources.

As in France, German officials have insisted that a power crisis is unlikely, but one “cannot be completely ruled out,” the finance ministry acknowledged. The authorities have taken no chances, with Chancellor Olaf Scholz’s government making the politically divisive decision to cancel plans to shut down the country’s last three nuclear reactors this month, and to fire up coal power plants in hopes of making up for the loss of Russian gas.

In Switzerland, which has long depended on French nuclear power for its winters, citizens have been urged to prepare for outages lasting up to several hours. The Federal Electricity Commission urged people to have enough firewood, flashlights and batteries.

Even electric cars aren’t immune. Finland’s power grid operator, Fingrid, warned that electricity production has come under strain because of European sanctions on Russia, and the delayed opening of Finland’s Olkiluoto 3 nuclear power reactor, built by EDF.

In a country where almost a third of all vehicles are electric, Fingrid is urging owners to forgo the luxury of turning on the plugged-in car’s heater to melt ice off windows in the morning, when power demand is at a peak.

“That ice can be scraped off using elbow grease,” the company said.

President Emmanuel Macron’s government in France has set up a nationwide alert system to telegraph any rolling power cuts well in advance. Three days before electricity would be shut off anywhere, officials will make a public announcement and alert people on their cellphones via an app called EcoWatt that officials have urged everyone to download.

The government would confirm the power cuts at 5 p.m. the day before they are to take place. The outages would not last more than two hours, between 8 a.m. and 1 p.m., or 6-8 p.m.

While emergency sites would continue to receive power, plenty of other places won’t. Schools would not be spared: students will be instructed to stay home on mornings when classes are canceled because of lack of heat and light, and return in the afternoon. (The internet won’t work, either, making remote schooling difficult.)

Even trains could come to a standstill for a couple of hours in affected areas, because power needed to work signals would be shut off. The government said it would warn drivers to “limit their movements as much as possible” because traffic lights could be “inoperative.”

Cellphone towers will also stop working in areas where power is paused. Christel Heydemann, the chief executive of Orange, France’s top telecom operator, warned last week that emergency phone calls may not be possible if mobile networks lose electricity. The government said people could still dial 112, the Europe-wide number for emergencies.

Despite those assurances, Ms. Heydemann said, “It is illusory to imagine that we’ll be able to maintain service to all French people in the event of power cuts.”

Japan Looks to Build Buffer of Natural Gas in Case of Supply Crunch

Wall Street Journal —Japan’s government is planning to create a strategic buffer of liquefied natural gas, trying to build resilience against the kind of energy crunch that hit Europe this year.

The government is targeting imports of at least 840,000 tons of LNG a year under the program, according to a summary supplied by the Ministry of Economy, Trade and Industry.

The effort reflects concern in Tokyo about possible future cutoffs in LNG shipments. In Europe, prices of natural gas have in some cases soared to their highest levels ever after Russia halted most of its pipeline gas supply in the wake of its invasion of Ukraine.

Japan is the world’s biggest importer of LNG, which is natural gas supercooled into liquid form and carried by ship. This year it has done better than others in avoiding shortages or out-of-control prices because it relies mostly on long-term contracts that guarantee supply and are indexed to oil prices, which haven’t risen as rapidly as LNG spot prices.

Under Tokyo’s new policy, the Ministry of Economy, Trade and Industry would call on certain big commercial importers to bring into the country extra buffer cargoes starting in December 2023. In an emergency, the government could order those importers to direct the gas to locations with the greatest need, such as smaller regional power and gas companies.

In normal times, the importers could sell the buffer gas on the regular market, with a state-run energy corporation making up the difference if the importers suffered losses.

The policy calls for the buffer shipments to bring in about 70,000 tons of LNG each month, according to the ministry. Initially it would last until February 2024 and eventually, the government would aim to secure at least 12 cargoes of that size for its buffer strategy each year, it said.

In 2021, Japan imported 74 million tons of LNG, so the buffer in its initial years would represent only a fraction of total demand.

Japan imports nearly all of its oil, gas and coal, making it vulnerable to disruptions overseas. In 2021 the country bought about 9% of its LNG from Russia. It continues to purchase from Russia, and a disruption of that supply could force it to turn to the spot market, where prices are sometimes higher.

The buffer strategy is part of Tokyo’s broader effort to ensure access to energy. It has diversified the regions from which it procures LNG, and in recent years has particularly looked to the U.S. for supplies.

With many previous long-term contracts set to expire around 2030, major buyers in Japan are looking to conclude new deals with U.S. suppliers, industry officials have said. The U.S. overtook Australia and Qatar in the first half of this year to become the world’s largest exporter of LNG.

EXTERNAL:  Oil Price Rises After Russia Cap Kicks In

Wall Street Journal – Oil prices rose Monday, after the West imposed sanctions on Russian crude and hopes built that looser Covid-19 restrictions in China would boost demand.

The sanctions pitch the energy conflict with Moscow into an unpredictable new phase that could inject further volatility into global oil markets.

The European Union and U.K. barred inbound shipments of Russian crude Monday—a watershed for a continent striving to end its dependence on Russia’s fossil fuels after Moscow invaded Ukraine and weaponized supplies of natural gas. In tandem, the EU, the U.S. and allies placed curbs on shipping, insuring and funding Russian crude anywhere in the world.

Most-actively traded futures contracts for Brent, the benchmark for international crude sales, gained 1.9% as of Monday morning in London, rising to $87.16 a barrel. Analysts at ING Group ING 0.08%increase; green up pointing triangle

said prices got a boost from loosening Covid-19 restrictions in China, which are likely to boost demand in the world’s second-biggest economy.

The restrictions are the first major attempt to curb Moscow’s fossil-fuel revenue, which steadied the Russian economy after a barrage of sanctions on other industries. But there is a deliberate loophole, enabling companies to facilitate Russian oil shipments to countries outside of Europe if the price is no higher than $60 a barrel.

That carveout reflects angst that Russia, the world’s biggest exporter of crude and refined fuels, could wreak havoc through energy supplies even as its military campaign in Ukraine falters. It was designed by the U.S., where officials feared severing Russia from Western shipping and insurance entirely would ricochet back on the American economy via higher oil prices.

The untested nature of the sanctions makes the impact on energy markets hard to predict. Some analysts say the relatively high level of the cap means Moscow’s crude is likely to flow to buyers around the world, keeping a lid on the market. But Kremlin officials have said they would refuse to accept the cap, which could lead to a drop in exports, even though it is above the current price of Russian crude.

How Russia responds is the first big unknown for traders and officials. On Sunday, Deputy Prime Minister Alexander Novak said the Kremlin was considering ways in which it could ban companies from applying the price cap, and that output could fall.

“We will sell oil and petroleum products to those countries that will work with us on market terms, even if we have to slightly cut production,” Mr. Novak said in an interview with a state-owned broadcaster.

In spite of the U.S.’s aim to keep Russian oil flowing to the global market, uncertainty around the cap has dried up sales of crude from Russia in recent weeks.

Monthslong negotiations over the level at which the cap should be set went down to the wire Friday, leaving traders, shippers, refiners and insurers with little visibility until days before the sanctions took effect. Their wariness made it challenging for Russian producers to sell cargoes.

Prices for Moscow’s crude have tumbled. Estimates vary due to the increasingly opaque nature of the Russian market, but companies that assess prices agree that they have skidded over the past month to levels below the cap. Argus Media, one such firm, says the price of Urals crude exported from Primorsk on the Baltic, fell to about $49 a barrel, down by 29% from the start of November. S&P Global Commodity Insights pegged the price at about $53.50 a barrel. The prices don’t include the cost of insuring or shipping the crude, which isn’t included in the $60-a-barrel cap.

“It’s really the uncertainty that created the problem,” said Livia Gallarati, senior oil analyst at Energy Aspects. “If the price cap had been announced a few months ago we may not be in this situation, and some of the Asian buyers that are currently staying away from Russian barrels may have bought more.”

OPEC+, an alliance between the Organization of the Petroleum Exporting Countries, Russia and other producers, acknowledged the unsettled backdrop Sunday. The cartel locked in current production levels to give it more time to assess the market effect of the price cap at a virtual meeting.

The sanctions pose a stiff test to Russia’s giant oil industry. Losing most of the European market forces Russia to search for buyers for about 800,000 barrels of crude each day, analysts at OilX say. From February, the embargo will apply to refined fuels, too.

Finding new markets will be doubly hard if Russian producers lose access to Western shipping, insurance and banking, as they will do if the Kremlin refuses to abide by the price cap. Producers would likely tap tankers that previously moved sanctioned Iranian crude, known in the industry as the shadow fleet. The fleet has grown this year and pivoted to Russia, but it’s inefficient, comprising slow, aging tankers.

Russia is producing almost as much oil as it did before the invasion. Preliminary ship-tracking data suggest it exported 7.6 million barrels of crude and refined products each day in November, according to Kpler’s lead crude analyst Viktor Katona–just below February’s level.

But Russia is putting some oil onto boats unsold and sending them toward Asia in the hope of finding a buyer en route. Ms. Gallarati of Energy Aspects estimates that between 300,000 barrels and 400,000 barrels of Russian crude that set sail daily in November haven’t been sold. In total, Russia exported 4.5 million barrels of crude each day last month.

U.S. gas prices have been up and down throughout the year and now more uncertainty is on the horizon as a European Union embargo on Russian oil imports kicks in along with a price cap on crude out of Russia. WSJ explains how these moves could impact prices at the pump for Americans. Illustration: WSJ

A big problem has been the reluctance of banks to finance trades in Russian crude to independent refiners in China, Ms. Gallarati said. She said China and India are likely to step up purchases in the coming weeks, but that for now, fear of the sanctions is curbing Russian sales.

Mr. Katona of Kpler said Turkish refiners, which had scooped up Russian crude on the cheap this year, all but halted purchases for December. “A lot of buyers: They want to buy Russian oil…but right now they want to assess what is really happening,” he said.

Shipping companies and insurers also grew cautious. The cost of chartering tankers to transport Russian crude surged in recent weeks. Brokers said insurers in the West are hesitant to touch anything Russian.

Insurers might continue to steer clear of Russian oil trades due to the administrative burden of the cap, said Marcus Baker, global head of marine and cargo at the insurance broker Marsh Inc., a unit of Marsh & McLennan Cos. He said it’s difficult to predict whether insurers in other regions will fill the gap.

Lack of Wind Pushes Europe’s Power Prices Higher, Just as Cold Sets In

Wall Street Journal – Falling wind speeds in Europe are pushing power and gas prices higher, underscoring the heightened vulnerability of the continent’s energy system to weather conditions this winter.

Amid a sharp pivot from its reliance on Russian natural gas, Europe has built up large reserves of stored gas ahead of this year’s heating season. That has helped ease power and gas prices recently. A particularly mild spell of weather across the continent also helped by pushing back gas withdrawals and keeping stockpiles topped off.

Now, though, colder weather in many places is kicking in at the same time wind speeds have fallen, bolstering demand for gas while reducing the ability of wind farms to generate electricity. This week, wind speeds in Hamburg fell to around 5 meters a second, or about 11 miles an hour, according to the weather forecasting site windy.com. That is the minimum speed required for electricity generation. Speeds of around 15 meters a second, or 33 mph, are needed to produce maximum power generation.

The sort of high-pressure systems dominating Europe at the moment tend to result in less wind, said Evangeline Cookson, meteorologist and research analyst at Marex Spectron. Such anomalies in wind speed aren’t particularly unusual. But this one is coming at a time when European governments are observing energy use as they navigate their first winter largely without Russian gas.

Governments and energy companies have sought clues about the severity of this winter in longer-term weather outlooks. They are less precise than shorter-term forecasts: Two of the most closely watched have so far come up with different projections for the next three months.

The still spell also comes as France, a key power exporter in Europe, is struggling to get a big chunk of its fleet of nuclear power plants up and running after maintenance issues. Meanwhile, hydropower generation has also struggled. River levels dropped to multiyear lows after the continent experienced a scorching summer.

Day-ahead power prices in Germany for Friday were at 361 euros a megawatt hour, equivalent to $377, up from €108 in the middle of last month, according to data from European Energy Exchange AG. Natural-gas prices have also risen sharply given the extra demand, with benchmark Dutch TTF prices on Thursday sitting above €158 a megawatt hour, having sat at €123 a megawatt hour at the start of the week.

Ms. Cookson said that for wind power generation, low-pressure winds in a westerly direction over north Germany and France are ideal. That is where the highest concentration of wind turbines are installed in Europe, built there to take advantage of the typically prevailing wind direction.

Instead, the region has been seeing the exact opposite this week—high-pressure weather patterns bringing weak, northeasterly winds.

“This northeasterly wind flow is bringing weaker winds and colder temperatures, upping demand for heating,” she said, adding that this weather pattern is likely to continue over the next 10 days.

The spell of light wind is underscoring a key weakness in Europe’s energy infrastructure. While the continent has invested heavily in wind and solar power, it doesn’t yet have much capacity to store such energy and smooth out power generation over periods of little wind or sun. Battery storage technology for renewable power generation allows utilities to store excess energy produced from solar panels and wind farms, but it is still a developing field.

Before last year, with energy prices sitting at low levels, there had been little incentive to improve European storage facilities, Anna Darmani, lead energy storage analyst at energy research and consulting firm Wood Mackenzie. Modo Energy, an energy-storage data company based in the U.K., estimates Britain has just over 1.4 gigawatts worth of installed battery storage. The country’s National Grid, which manages its power network, has said it needs 13 gigawatts of storage by 2030 to help balance the volume of electricity generated from wind and solar projects.

“Historically, Europe has lagged behind China and the U.S.,” Ms. Darmani said, adding: “We need more storage to balance the supply and demand as we go forward, but these projects take three to four years to come online and there are no guarantees prices will stay high.”

During the summer, there were also curtailments in energy supplied by renewable sources to the grid in Europe, because even though conditions suited solar generation—a lack of battery storage meant that the energy had to go to waste since it wasn’t required by the grid at the time, Ms. Darmani said.

“You have to deploy more renewables but you also have to deploy more enabling technologies, like batteries,” said William Andrews, the chief executive of Infra Balance New Energy, a battery storage firm based in the U.K., echoing the point that storage acts as a steppingstone to a greener grid.

“You have to do it hand in hand,” he said.

Education

Schools Flush with Cash, but Need Better Plan on How to Spend It

Commonwealth Magazine – In 2010, a young Mark Zuckerberg partnered with a rising political star, then-Mayor Cory Booker, to donate $100 million dollars to Newark Public Schools. The idea was that a massive infusion of wealth could fundamentally alter learning within the community. New money led to modest change but did little to address major challenges in schools. Roughly a decade later, even before the onset of the COVID pandemic, two-thirds of young students in Newark were unable to read at grade level and more than a quarter of all students were chronically absent from school.

We all know money is critical to improving our schools. But, as we saw in Newark, money alone isn’t enough. How money is spent also matters. Long-term, large-scale improvements in education require coordinated, community-wide efforts and well-thought-out plans.

Massachusetts schools have now received an unprecedented influx of resources. Through federal Elementary and Secondary Schools Emergency Relief (ESSER) funding, the Commonwealth’s education system has received $2.9 billion, with the vast majority going directly to districts. Now it’s up to districts to invest wisely and avoid the fate of Newark.

This is proving to be a challenge. While almost all of the first round of funding (ESSER I) has been spent, 41 percent of the second round (ESSER II) and 83 percent of the third round (ESSER III) remain unused, leaving schools and districts with both unprecedented opportunity and burden to allocate and spend strategically.

My organization has spent the last several months tracking how schools are spending this money and working with districts on how they can best invest funds. We’ve seen firsthand the challenges they’re facing.

While schools have reopened, the trauma of the last few years is ever-present in classrooms and communities. School leaders and staff continue to face daily crises, a result of staffing shortages, lost learning time, and growing mental health needs. Many potential solutions require hiring new staff and, like in many industries right now, there just aren’t enough people to hire. How can district and school leaders think about overhauling our education system when they need to address the urgent challenges of today, tomorrow, and next week?