(NEW YORK) — Kellogg has announced that it will separate into three different companies to create “greater strategic, operational, and financial focus” for each of the new firms that will be named at a later date.
Under the plans announced on Tuesday, Kellogg will separate its North American cereal and plant-based foods business — which represent an estimated 20% of Kellogg’s net sales in 2021 — from its global snacking brands, cereal and noodle brands and frozen breakfast brands.
“Kellogg has been on a successful journey of transformation to enhance performance and increase long-term shareowner value,” said Steve Cahillane, Kellogg Company’s Chairman and Chief Executive Officer in a statement announcing the company’s plans. “This has included re-shaping our portfolio, and today’s announcement is the next step in that transformation.”
“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities,” Cahillane continued. “In turn, each business is expected to create more value for all stakeholders, and each is well positioned to build a new era of innovation and growth.”
Kellogg expects these moves to be completed by 2023 and the headquarters for the three companies set to focus on their global snacking brands, their cereal brands and their plant-based food brands will remain unchanged.
Said Kellogg: “After several years of transformation and improving results, the Company believes it is the right time to separate these businesses so they may pursue their particular strategic priorities.”
After the announcement, Kellogg rose more than 6% in pre-market trading on Tuesday.
The global snacking company, which earned $11.4 billion in revenue last year, will be made up of well-known brands such as Pringles, Cheez-It, Pop-Tarts, Kellogg’s Rice Krispies Treats, the Kellogg said. Sales at the snacking company last year also came from some cereal brands as well as frozen breakfast brands and the Eggo brand, the company added.
The cereal company accounted for $2.4 billion in sales last year through business in the U.S., Canada, and Caribbean, Kellog said. The cereal company sells brands such as Frosted Flakes, Froot Loops, Mini-Wheats, and Special K.
The plant-based company, which earned $340 million in revenue in 2021, will be anchored by the MorningStar Farms brand, which features an array of plant-based items such as chicken nuggets and sausage links, Kellogg said.
The cereal company and plant-based company will both remain headquartered in Battle Creek, Michigan, Kellogg said. The global snacking company will maintain dual campuses in Battle Creek and Chicago, Illinois, with its corporate headquarters located in Chicago.
(WASHINGTON) — The Federal Reserve’s strongest weapon in its fight against skyrocketing inflation is raising interest rates.
In March, the Fed raised its target federal funds rate by 0.25%, the first rate hike in more than three years. At its May meeting, the central bank hiked rates by 0.50%, and in June it got even more aggressive, raising rates by 0.75%, the largest increase since 1994. The Fed is warning of potentially more rate hikes to come as it tries to cool consumer demand and drive prices down from a 40-year high.
That has resulted in higher interest rates on credit cards, home and auto loans, home equity lines of credit and small business loans. For borrowers, that means those products are only getting more expensive. But the Fed’s rate hike campaign is not all bad news. There is a silver lining for savers.
“Rising interest rates represent a turn of fortunes for savers as interest earnings are finally on the rise, and eventually those higher interest rates will help reduce inflation,” Greg McBride, Bankrate’s chief financial analyst, told ABC News. “This is the opposite of what savers have endured the past three years when interest rates fell and then inflation took off.”
Early in the pandemic, when the Fed was cutting interest rates to stimulate the economy, the average rate for a typical savings account was around 0.06%, according to the FDIC. Now, with the Fed’s benchmark rate rising, banks are starting to follow suit, but don’t expect them to mirror those rate hikes exactly. What the Fed does with interest rates is only one factor banks consider when setting rates. They also take into account how much money customers have deposited and how much their competitors are offering.
Some banks, especially online banks, are starting to offer interest rates on savings accounts of 1% or more. But not all bank interest rates are created equal. McBride recommends doing some comparison shopping and considering switching banks to take advantage of the latest rate increase.
“You want to put your money where it will be welcomed with open arms and higher yields,” he said. “Online banks, smaller community banks, and credit unions offer higher yields than the large banks that already have a mountain of deposits.”
Fed Chair Jerome Powell predicts the central bank could raise rates another 1.75% over the remainder of the year to bring inflation down from its current 8.6% to the Fed’s target goal of 2%. Experts say if the Fed proves to be as aggressive as they’re expected to be, the top-yielding online savings accounts could top 3% by year-end.
In addition to high-yield savings accounts, McBride said if you’re willing to commit your money for a few years, then a certificate of deposit or I-bond, which are also seeing rates rise, could be better suited to your financial goals.
“Evaluate the time horizon for when the money is needed and then pursue the appropriate savings instrument,” said McBride. “Don’t chase the yield and end up locking yourself into something incompatible with your liquidity needs. If you’re evaluating where to put your emergency savings, then you’ll need a liquid account above all else.”
Wherever you choose to keep your money, experts agree you should always make sure you’re dealing directly with a federally-insured financial institution.
“There are plenty of online savings accounts that offer competitive yields, federal deposit insurance, access to the money when needed, and do not require a large balance in the account,” said McBride. “There is literally something for everyone.”
(NEW YORK) — While June 19, 1865, is widely regarded as a day of liberation, its celebration for some simultaneously brings into question just how far that freedom goes.
For real estate entrepreneur Jude Bernard, Juneteenth is a reminder of generational wealth deprived.
“The whole story behind Juneteenth was that we were technically free, but we didn’t know it and it was years before we actually truly got our freedom,” Bernard told ABC News.
Bernard said Juneteenth can be used to highlight financial equality, which is the type of freedom many, like him, have fought for.
He used student loan funds to buy his first property 25 years ago with the goal of earning extra income on the side. Now, with an extensive portfolio, the investor is the founder and CEO of The Brooklyn Bank–a nonprofit focused on financial literacy and development for people of color.
“My mission is equality,” he said. “The goal of the Brooklyn Bank is to pretty much bring the information to those that don’t have it. So many times, us as a people, we miss out on opportunities. Not because we’re not willing to learn, but because we don’t even know what we don’t know.”
Reflecting on his upbringing as a first-generation Haitian-American in Flatbush, Brooklyn, Bernard said he feels “lucky” to have come across the information that has brought him to where he is today. He said that not having a “formal financial education” during his childhood encouraged him to share what may not be readily available in their communities with others.
Bernard said education is key to resolving economic inequality.
On Juneteenth, The Brooklyn Bank will be holding its first annual Black Money Forum in collaboration with personal finance app Stash. The free event will focus on “financial freedom, financial education, financial empowerment, and most importantly, changing the financial mindset,” Bernard said.
“A lack of information keeps people on a treadmill,” he said. “A lack of education, has people not saving and not passing wealth down to the next generation.”
According to Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020, the white to Black per capita wealth ratio is six to one. The paper, by researchers Ellora Derenoncourt, Chi Hyun Kim, Moritz Kuhn & Moritz Schularick, drew information from census data and tax records to analyze racial economic disparities over time and what steps should be taken to equalize them.
“So the average white American has six times the wealth of the average Black American. That’s equivalent to Black Americans holding about 17 cents for every white dollar of wealth,” co-author Derenoncourt, an economic historian and assistant professor of economics at Princeton University, told ABC News.
She said while much of the work on the racial wealth gap focuses on recent years–from the 1980s onward–, she sought to show the evolution of the gap since the Civil War to examine “the importance of American history for where the wealth gap is today.”
In 1860, the white-to-Black per capita wealth ratio was 56:1, translating to the average Black American owning less than 2 cents to the dollar of every white American. Legal prevention of enslaved peoples to accumulate wealth exacerbated this gap and continues to severely constrain the ability to close it, she said.
Contrarily, in opening up the possibility for Black Americans to possess and bequeath capital, “emancipation was the single biggest closer of the racial wealth gap.” Policies enacted afterward, however, did not go far enough to continue to resolve this disparity, according to Derenoncourt.
“One major thing that was lacking was any sort of reparations or provision of some form of capital to the formerly enslaved,” she said. “W.E.B. DuBois called this a reckless experiment in emancipation, one that you’ve never seen in the history of humanity–to emancipate a people, but not provide them with any means for providing for themselves while the other group has had the opportunity to accumulate wealth and pass that wealth on to future generations.”
“… I like to regard Juneteenth as not just a day off, but it’s a freedom day,” Bernard said. “A financial freedom day, where it’s an opportunity to learn a little bit more about things that you need to gain the equality that we’re supposedly entitled to.”
(NEW YORK) — A difficult year for many homebuyers became even tougher when the Federal Reserve dramatically raised borrowing costs this week in an effort to tame sky-high inflation, experts told ABC News.
For months, homebuyers have faced the dual challenges of skyrocketing mortgage rates and continued growth in home prices.
Since mid-March, when the Federal Reserve instituted its first rate hike of the year, the average 30-year, fixed-rate mortgage has jumped from 4.45% to 6.11%, according to Mortgage News Daily. Meanwhile, the median price for existing single-family homes rose 15.7% over the first three months of 2022 compared with the same period last year, according to data from the National Association of Realtors.
The Fed’s decision on Wednesday to raise interest rates by 0.75%, its largest hike since 1994, will further increase mortgage rates and push many homebuyers out of the market, slowing home price increases but intensifying demand in the rental market, experts said.
“It’s got a huge impact,” Mark Stapp, a professor of real estate at Arizona State University, told ABC News. “It’s going to bump a lot of people out of homebuying.”
To be sure, rates for 30-year, fixed-rate mortgages do not move in direct correlation with the Fed’s benchmark interest rate. Instead, mortgage rates trace the ups and downs of the yield on 10-year Treasury bonds, which responds to a host of indicators such as inflation and the outlook for the economy as well as interest rates.
Over the past week, as new inflation data showed a reacceleration of price hikes and observers expected the Federal Reserve to escalate its fight to dial back cost increases, mortgage rates increased more than they have over any week since 1987, according to a Freddie Mac survey released on Thursday.
Steep mortgage rate increases significantly elevate the monthly cost of homes, shutting out many buyers, decreasing overall demand, and affording leverage to the buyers who remain, experts said.
Mortgage rates will continue to increase at least moderately and could reach as high as 7%, some experts said.
“A month ago, I would’ve thought that 7% would be outlandish and it would be delusional to think they could go that high,” Holden Lewis, a housing expert at personal-finance site NerdWallet, told ABC News. “Now I think okay, well, 7% might be possible.”
“Every time I think they’ll stop, they keep going up,” he added.
At the outset of the year, when the rate for a 30-year fixed mortgage stood at 3.25%, buyers who could afford a $1,500 per month spend on the home principal plus interest, could borrow enough to afford a $345,000 home, Lewis said. At the current rate, roughly 6%, the same homebuyers can borrow about $250,000, reducing borrowing capacity by about $95,000, he added.
“As mortgage rates increase, the monthly payment you can afford can buy less house,” he said.
The mortgage rate hikes disproportionately impact buyers on the fringe of the housing market, such as people seeking their first home, said D. Sam Chandan, a professor of finance and director of the Center for Real Estate Finance at New York University’s Stern School of Business.
“We’ve seen a significant deterioration in housing affordability over the course of this year,” he said. “In particular for the aspirational first-time home buyer in many markets around the country.”
Forecasters expect a decline in home purchases this year, which should slow price increases, experts said. Total home sales are expected to drop 13.5% to 5.96 million units in 2022, according to Fannie Mae data released this month.
But the supply of homes will also likely decline, as sellers wait for a more favorable market, moderating the price relief expected from waning demand, Chandan said. Further, declining interest in the market for home purchases will spike demand and potentially raise prices in the rental market, he added.
In the short term, a possible rental price hike would coincide with a persistent rise in prices for essentials like fuel and groceries, straining household budgets, Chandan said.
“We find ourselves in a place where apartment rents are increasing faster than many families’ incomes are growing,” he said. “The deterioration in affordability for many income-constrained families is forcing a very tough choice in having to spend less on education, clothing, healthcare and food in order to pay rent.”
(NEW YORK) — Revlon has officially filed for bankruptcy.
The 90-year-old cosmetics giant announced on Thursday that the company voluntarily petitioned for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.
Like many other companies, the company has been faced with ongoing global challenges that specifically point to supply chain and rising inflation issues, in addition to the brand’s continued obligations to its lenders.
This legal proceeding was filed with the intention to allow Revlon to strategically reorganize its legacy capital structure and improve its long-term outlook.
“Today’s filing will allow Revlon to offer our consumers the iconic products we have delivered for decades, while providing a clearer path for our future growth,” said Debra Perelman, Revlon’s president and chief executive officer, in a statement. “Consumer demand for our products remains strong — people love our brands, and we continue to have a healthy market position. But our challenging capital structure has limited our ability to navigate macro-economic issues in order to meet this demand.”
With court approval, the company said it could receive $575 million in debtor-in-possession financing from its existing lender base. In addition to its existing working capital, this will provide the company with more financial support for day-to-day operations, it said.
“By addressing these complex legacy debt constraints, we expect to be able to simplify our capital structure and significantly reduce our debt, enabling us to unlock the full potential of our globally recognized brand,” said Perelman.
Revlon was founded in New York City in 1932 by brothers Charles and Joseph Revson and chemist Charles Lachman. In 2016, it was acquired by Elizabeth Arden and its portfolio brands.
Today, Revlon has grown to include cosmetics, skincare, fragrance and personal care. Some of the company’s sister brands include Almay, Creme of Nature, celebrity fragrances from Britney Spears, Christina Aguilera and more.
(NEW YORK) — A number of forces are putting pressure on the economy right now and that has Wall Street betting on a recession sometime in the next 12 to 18 months.
Consumer prices are at a 40-year high, the ongoing global health crisis continues to disrupt supply chains and Russia’s invasion of Ukraine threatens to create a world food crisis.
The war has also helped to push gasoline prices to record levels, taking an even bigger bite out of household budgets.
Add to the mix a tight labor market and a volatile stock market and those recessionary warning signs are starting to flash yellow.
The Federal Reserve is responding by hiking interest rates to combat stubbornly high inflation. The Fed is making it more expensive for businesses and consumers to borrow money in the hopes that it will reduce consumer demand and push prices lower.
But the Fed is walking a tightrope. It wants to slow the economy just enough to bring down inflation, but not so much that it tips the economy into a recession.
The textbook definition of a recession is a significant decline in economic growth that lasts months, even years. During a recession, a country’s overall economic output declines, the unemployment rate goes up, retail sales fall, businesses cut their spending and manufacturers produce less goods.
There is a self-fulfilling aspect to recessionary psychology. If everyone believes a recession is coming, then consumers and businesses will drastically cut back their spending, sending the economy into a tailspin.
Economists say the best way to prepare for a recession is not to retrench, but instead build resilience to protect your finances from an economic shock.
You can do that by ensuring a steady stream of income. Lock in a new job or ask for that raise now. With unemployment at its lowest level in nearly half a century, it’s a job seeker’s market. A recession could quickly change all that.
Build up your cash cushion. Try to have at least six months of living expenses covered in case you lose your job or for unexpected emergencies or anticipated expenses like college tuition.
That may mean changing your buying habits and spending more on the things you “need” versus the things you “want.”
If you’re invested in the stock market, now may be a good time to rebalance your portfolio. If you need your money in the next one to three years, you might want to consider moving some of your investments into cash or the relative safety of the bond market, a money market fund, or dividend paying stocks.
If your time horizon is three years or longer and you have a diversified portfolio, experts agree that the best thing you can do is ride it out.
They say the most effective way to meet your long-term financial goals is to stay invested, stay disciplined and don’t let your emotions get the best of you.
If there’s a silver lining, it’s that recessions don’t last forever and they’re usually followed by a period of strong growth. The so-called Great Recession, which was triggered by the housing collapse in 2007, lasted 18 months. It was followed by the longest economic expansion in U.S. history.
(NEW YORK) — The Consumer Product Safety Commission announced Thursday the recall of more than 407,000 over-the-counter pill bottles, citing the products do not meet the child resistance packaging required by the Poison Prevention Packaging Act (PPPA).
Aurohealth recalled nearly 137,300 units of the Walgreens brand Acetaminophen. Consumers can contact Aurohealth for information on how to return the product to their nearest Walgreens store to receive a full refund.
Aurohealth also recalled about 25,660 units of Kroger brand arthritis pain acetaminophen. Time-Cap Labs recalled nearly 209,430 units of Kroger brand aspirin and ibuprofen. Further, Sun Pharma also recalled about 34,660 units of Kroger brand acetaminophen.
Consumers can contact Kroger for information on how to properly dispose of the product and receive a full refund.
The pill bottles have been sold at supermarkets nationwide.
(NEW YORK) — The Federal Reserve on Wednesday dramatically escalated its fight to dial back historic inflation, raising its benchmark interest rate by 0.75%, the largest rate hike since 1994. The move offers hope that sky-high prices for essentials like fuel and groceries will eventually come down.
The decision will impact the average American and the economy as a whole in profound and largely negative ways, experts told ABC News.
An increase to the benchmark interest rate raises borrowing costs for consumers and businesses, which in theory should slash inflation by slowing the economy and eating away at demand. That means borrowers will likely soon face higher costs for everything from car loans to credit card debt to mortgages, the experts said.
Plus, the rate hike could exacerbate the ongoing stock market decline — a fear validated by early trading on Thursday as all three major stock indexes fell at least 2%. A sustained further decline would hammer portfolios, including 401(k)s that are often pegged to the S&P 500.
On top of that, the strategy all but guarantees an economic slowdown and risks tipping the economy into a recession, the experts added. The hot job market will likely cool, leading to fewer openings for job seekers, slower wage growth and possible layoffs, they said.
“Everybody’s income statement and balance sheet will look a little less attractive here,” said Mark Zandi, the chief economist at Moody’s Analytics. “They need to buckle in.”
What the rate hike means for you
In general, an interest rate hike makes borrowing more expensive. So any purchase that requires a loan — for a home, car, or higher education — could be affected. Credit card rates are also highly sensitive to Federal Reserve moves, so card holders should expect higher payments in the coming months.
Purchasing a home, for example, will likely involve higher mortgage rates. Since mid-March, when the Fed instituted its first rate hike of the year, the average 30-year fixed mortgage has jumped from 4.45% to 6.03%, according to Mortgage News Daily.
That rate could reach as high as 7% or 8%, Derek Horstmeyer, a finance professor at George Mason University’s School of Business, told ABC News. Each single percentage point increase in a mortgage rate can add thousands or tens of thousands in additional cost each year, depending on the price of the house, according to Rocket Mortgage.
“Any sort of asset that you need to borrow money to acquire,” Horstmeyer said. “Will be much more expensive.”
Alongside the heightened cost of loans, investors will face the prospect of a further downturn in the markets for assets like stocks and cryptocurrency. As economic prospects dim and companies face higher borrowing costs themselves, traders may turn elsewhere for safer investments. In addition, the excess income that some put into the stock market during the pandemic will likely be harder to come by.
But economists disagree about how much of the market downturn so far this year has come in anticipation of further hikes from the Fed.
Since many investors already expected rate hikes like the 0.75% increase on Wednesday, the strategy at the Fed may have little effect on the market. But a further market downturn would move stock portfolios, 401(k)s, and likely cryptocurrency holdings even lower, and could delay an eventual market recovery.
The S&P 500 fell deeper into bear market territory in early trading on Thursday, and the tech-heavy Nasdaq Composite is down more than 30% since its last all-time high.
“A lot of the drop is priced in already,” said Horstmeyer, the finance professor, before the stock market fell early on Thursday. “Maybe 5% more to go but knock on wood we don’t go much lower than that.”
What the rate hike means for the economy
By design, the rate hike intends to slow the economy, which should cut demand for goods and labor and in turn reduce inflation.
Despite a contraction of the economy over the first three months of the year, the labor market remains tight and consumer spending has proven resilient. But the rate hike on Wednesday should cool off the labor market and consumer demand, experts said.
As people face higher borrowing costs, their spending will decrease and businesses will see revenue decline. When business performance slows, companies will freeze hiring or even impose layoffs, which will loosen demand for workers and slow wage growth, experts said. In turn, people will have even less money to spend, reinforcing the economic slowdown.
Eventually, the slowdown should ease inflation, providing relief for households struggling to afford gas, groceries, and other necessities.
“At this point, a hard landing is unavoidable,” Eric Sims, a professor of economics at the University of Notre Dame, told ABC News. “There will be some short-term pain.”
But the most recent rate hike — and the additional ones signaled by the Fed on Wednesday — should eventually restore the economy to a healthy rate of inflation, said Jeremy Siegel, a professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business. The central bank’s target inflation rate is 2%, well below the rate of 8.6% recorded in May.
“You need medicine to cure inflation,” Siegel said. “The sooner you give the medicine, the quicker the patient will recover.”
But the strategy of rate hikes risks slowing down the economy so much that it brings about a recession, the experts said. A recession, however, would likely be mild, they said.
And the upcoming months are crucial in determining whether the economy tips into a recession, said Zandi, the chief economist at Moody’s Analytics.
“All the negatives for the economy are at their apex right now,” he said.
“If we can weather this immediate storm of high interest rates, high inflation and slowing growth, I think we’ll make our way through without a recession,” he added.
(NEW YORK) — The pain at the pump is getting worse and has motorists asking, is there any relief in sight?
The average nationwide price of a gallon of gas surpassed an all-time high of $5 last week, according to GasBuddy. In California, the state with the highest average gas price, drivers are paying an eye-popping $6.43 per gallon, AAA data showed.
The price surge owes to the fundamental economic principle of supply and demand, experts told ABC News. Summer travel has sent Americans to the pump at a time when the global market is experiencing a shortage of crude oil supply after the Russian invasion of Ukraine, which pushed millions of barrels of oil off the market.
And the current crisis exacerbates a supply crunch that has endured from a pandemic-induced production slowdown that hasn’t caught up with the renewed surge in demand, the experts said.
The sky-high prices with no relief in sight have set off sharp disagreement among public officials over what should be done in response. Republican members of Congress have faulted President Joe Biden for the price increases, citing what they’ve described as his “war on American energy.” At the same time, Biden has blamed the price surge on the Russian invasion of Ukraine, repeatedly calling it “Putin’s price hike.”
Government policy cannot meaningfully relieve the price increases in the short term, besides an additional release of oil from the strategic reserve or a gas tax holiday, each of which would likely reduce just a fraction of the cost, experts told ABC News. But steps taken now could help foster decreases over the long term and insulate the market from future disruptions, they added.
“There are not the overnight kind of solutions,” said Stewart Glickman, an energy analyst for CFRA Research. “In the longer term, they might make a difference.”
Here are some potential policy solutions to the gas price crisis and whether the experts think they would work.
Releasing more oil from the Strategic Petroleum Reserve
In March, the U.S. announced a commitment to release about 1 million barrels per day from its Strategic Petroleum Reserve, or SPR, over the ensuing six months — a move that aimed to alleviate some of the supply shortage and blunt price increases. The decision came alongside similar announcements from some U.S. allies.
The release of oil from the U.S. SPR is offering slight relief for the rise in the price of gasoline, some experts told ABC News. “The price of oil would be even higher without those stockpiles being used,” said Pavel Molchanov, a senior energy analyst at Raymond James.
If the U.S. decided to release even more oil from its reserves, the move could marginally slow the rise in gas prices even further, the experts said. But the Biden administration should think twice about expanding its release of reserve oil because it could drain the 700 million-barrel stockpile, enough to release 1 million barrels per day for nearly two years, Molchanov said.
“We need to be responsible about it,” Molchanov said. “We cannot use all of those stockpiles in one fell swoop.”
Encouraging domestic oil production
On Wednesday, Biden sent a letter to major oil refinery companies calling on them to take “immediate actions” to increase output. The letter accused the companies of taking advantage of the market environment to reap profits while Americans struggle to afford gas, and it mentioned the possibility of Biden invoking the Defense Production Act, which requires companies to produce goods deemed necessary for national security.
Glickman, the energy analyst at CFRA, said the move from Biden is unlikely to increase supply and lower gas prices, since the domestic industry is already operating at as high as 96% capacity. The refineries cannot add capacity in a short period of time, Glickman added.
Biden is “missing the point a little,” Glickman said. “These are industrial systems that move like battleships, not dinghies.”
U.S. oil refinery capacity stands 1 million barrels per day lower than pre-pandemic levels because several refineries have been closed or converted since early 2020, according to the U.S. Energy Information Administration, or EIA. Refinery inputs for the second and third quarter of this year will average 16.7 million barrels per day, the agency said.
One approach to incentivizing an increase in U.S. production includes a potential tax on oil company profits. But such a move wouldn’t remove the impediments to greater oil production capacity, Glickman said.
“Whether you do something like taxing the industry or not, it isn’t going to change how much capacity you bring back,” he said.
Some Republican members of Congress have criticized Biden for drilling permit restrictions and the shuttering of the Keystone XL Pipeline last year. But oil production in the U.S. last year was nearly identical to that seen over the final year of the Trump administration, in 2020, and greater than the amount produced in 2017 or 2018, according to data from the EIA.
U.S. oil production increased throughout the years of the Trump administration until a sharp, pandemic-induced drop that began in 2020, according to EIA data.
Loosening restrictions on oil drilling would yield long-term gains in oil supply, said James Coleman, an energy policy expert at the conservative-leaning think tank American Enterprise Institute.
“If you were to reform those, it would take a while to have an impact on oil and gas markets,” Coleman said. “On the other hand, if you’re in a hole, maybe the first step is to stop digging.”
Overall, increased U.S. oil production would help reduce gas prices over the next five or 10 years, and protect the industry from future supply shocks, the experts said. However, some experts noted that the sector’s reluctance to aggressively expand production owes to fiscal discipline imposed by shareholders as well as the continued rise of renewable energy. “We know the energy transition is coming at some point,” said Glickman, the CFRA analyst.
Gas tax holiday
A handful of states — led by both Democratic and Republican governors — have suspended their gas taxes as a means of delivering some financial relief for drivers. But the moves only reduce costs by a fraction of the price. In New York State, for instance, Gov. Kathy Hochul this month suspended a roughly 16-cent-per gallon tax. With the average price of a gallon of gas in New York standing at $5, according to AAA, the tax relief amounts to a 3.2% cost reduction.
The federal government could move forward and suspend its gas tax, which amounts to 18.4 cents per gallon. But such a move would also reduce the cost of a $5 gallon of gas by less than 5%. Still, consumers would likely prefer some relief to no relief.
But suspending the gas tax would take away a key policy tool for discouraging the use of gasoline for other purposes, and it would remove a funding source targeted specifically for infrastructure, Adam Hersh, senior economist at the liberal-leaning Economic Policy Institute, told ABC News.
“The gas tax plays a role in disincentivizing the use of gasoline for other energy sources and transportation methods, as well as being tied to funding sources for infrastructure investment,” he said.
(STURGIS, Mich.) — Less than two weeks after restarting production at its Sturgis, Michigan plant, Abbott said it has once again been forced to halt baby formula production after thunderstorms flooded part of the facility.
“These torrential storms produced significant rainfall in a short period of time, overwhelming the city’s stormwater system in Sturgis, Michigan, and resulting in flooding in parts of the city, including areas of our plant,” an Abbott spokesperson told ABC News. “As a result, Abbott has stopped production of its EleCare specialty formula that was underway to assess damage caused by the storm and clean and re-sanitize the plant. We have informed FDA and will conduct comprehensive testing in conjunction with the independent third party to ensure the plant is safe to resume production.”
Abbott’s plant was offline for roughly four months after serious quality control and contamination concerns. Its massive recall and plant shutdown in February exacerbated the nationwide formula crisis American families are still experiencing.
Food and Drug Administration Commissioner Robert Califf said he has personally spoken with Abbott’s CEO, Robert Ford, saying they discussed their “shared desire to get the facility up and running again as quickly as possible.”
Califf added that the storms are a “reminder that natural weather events can also cause unforeseen supply chain disruptions.”
“I want to reassure consumers the all-of-government work to increase supply means we’ll have more than enough product to meet current demand,” Califf said in a series of tweets.
Abbott had promised to start putting out its hypoallergenic formula EleCare to consumers around June 20. Infants with particular nutritional needs will have to wait longer for an infusion of formula from Abbott, the largest domestic manufacturer of infant formula prior to its recall.
“Once the plant is re-sanitized and production resumes, we will again begin EleCare production, followed by specialty and metabolic formulas,” the spokesperson told ABC News. “In parallel, we will work to restart Similac production at the plant as soon as possible.”
Meanwhile, Abbott said it still has “ample existing supply of EleCare and most of its specialty and metabolic formulas to meet needs for these products until new product is available.”
It said these products “are being released to consumers in need in coordination with healthcare professionals.”
“Abbott will have produced 8.7 million pounds of infant formula in June for the U.S., or the equivalent of 168.2 million 6-ounce feedings. This is 95% of what we produced in January, prior to the recall and does not include production from Sturgis,” the company spokesperson said.
