Tapping reserves

The Biden administration is turning to some of the world's largest oil consuming nations to lower global prices after OPEC+ snubbed several requests to increase crude production. Reuters reports that the coordinated effort could include China, India, South Korea and Japan, and would involve releasing national crude stockpiles at a time when prices are rising at the pump. The U.S. and allies have coordinated strategic petroleum reserve releases before, with the last big effort coming during the 2011 war in OPEC member Libya.

Quote: "We're talking about the symbolism of the largest consumers of the world sending a message to OPEC that 'you've got to change your behavior,'" a source told Reuters. Crude futures (CL1:COM) -0.7% to $77.03/bbl, after dropping nearly 3% on Wednesday.

Reports also suggest that President Biden asked the Federal Trade Commission to probe possible criminal conduct in the U.S. gasoline market. He specifically pointed to gasoline prices that rose about 3% from a month earlier, even as the price of unfinished gasoline was down more than 5%. "This unexplained large gap is well above the pre-pandemic average," Biden said in a letter to FTC Chair Lina Khan. "Meanwhile, the largest oil-and-gas companies in America are generating significant profits off higher energy prices."

What is the SPR? The U.S. created the Strategic Petroleum Reserve in 1975 after the Arab Oil Embargo led to a spike in gasoline prices that scarred the U.S. economy. The reserve currently holds enough oil to meet U.S. demand for more than a month, including about 606M barrels in dozens of caverns across the Louisiana and Texas coasts, as well as small heating oil and gasoline reserves in the U.S. Northeast. Presidents have authorized several emergency sales from the SPR (Gulf War in 1991, Katrina in 2005 and Libyan Civil War in 2011), but oil swaps take place more frequently, with the last exchange happening after Hurricane Ida in September. (63 comments)

Vaccine mandate

The Occupational Safety and Health Administration (OSHA) has been told to suspend enforcement of the Biden administration's COVID vaccine mandate for private businesses with 100 or more employees, after a federal appeals court upheld a stay on the order. The rules would have required firms to develop a roster of vaccinated and unvaccinated employees by Dec. 5, and compelled the companies to ensure unvaxxed workers wear masks at the workplace and submit to weekly testing as of Jan. 4. In terms of execution, the OSHA regulation would have been enforced through company record-keeping and some in-person inspections (with penalties of up to $13,653 for each reported violation) and covered 84M workers nationwide.

How did we get here? Many legal challenges to the mandate popped up across the country, resulting in a judicial lottery to consolidate the lawsuits before a single appeals court. Under the unusual system mandated by Congress, officials placed the name of each of the judicial circuits with an active challenge on a ping pong ball that was placed in a solid wood raffle drum. John Nichols, clerk on the DC-based Judicial Panel on Multidistrict Litigation, then drew a ball, which ended up having the name of the 6th Circuit Court of Appeals in Cincinnati.

Critics of the mandate were hoping for a strong conservative court, like the 5th Circuit, while proponents were pushing for an appeals court with a more liberal stance such as the 9th Circuit. More than twice as many judges have been appointed by Republican presidents than Democrats to the 6th Circuit, with a three-judge panel (yet to be determined) set to hear the first case. To note, the order being discussed by the court does not include other vaccine mandates, like the one on healthcare providers that receive Medicaid and Medicare payments, or the directive on employees of federal contractors.

Next steps: "Whatever the 6th Circuit decides, I think this [vaccine-or-test mandate] is going to be resolved at the Supreme Court," declared Dan Meyer, managing partner at law firm Tully Rinckey. (11 comments)

The Chobani Way

It's been a red-hot year for IPOs and the party is not stopping. Chobani just filed for a listing on the Nasdaq Exchange under the symbol "CHO," becoming the latest food company to hit public markets. There's been mixed reaction from investors in the space, with oat milk rival Oatly (OTLY) slumping 50% since its May debut, while shares of coconut water maker Vita Coco (COCO) have climbed 24% since last month's IPO.

By the numbers: Chobani revenues grew 5.2% to $1.4B in the fiscal year that ended on December 26, 2020, though its net loss triple over that time frame to $58.7M (as it invested back into the company). However, for the nine-month period that ended on September 25, the firm's net sales growth outpaced its widening net loss, suggesting that its investments may have been successful. The majority of Chobani's sales come from North America, with international markets accounting for roughly a tenth of its revenue.

Founded in 2005, Chobani has been credited for popularizing Greek yogurt, though it has recently been expanding into other product categories. Those include launches of oat milk, coffee creamer, ready-to-drink coffee and plant-based probiotic beverage product lines.

Differentiation outlook: "We challenge the old, staid and conventional status quo represented by our legacy competitors by creating food that is delicious, natural, nutritious and accessible. Throughout our history, we have paired our innovative mindset with deliberate investments in people, plants and our sales and distribution platform (our 3Ps) that, coupled with unparalleled in-house execution capabilities, allow us to innovate rapidly and build scale across categories seamlessly. As a result, we believe we can move from concept to shelf more quickly than our competition and, importantly, with better quality, more natural and nutritious food options." (17 comments)

Right to repair

For anyone who has ever owned an iPhone and needed it repaired, their options have been to either go to an Apple Store, or to a repair shop which Apple (AAPL) has given access to the specific parts and specialized tools necessary to complete any gadget fixes. That's all about to change, with a new Self Service Repair program that will launch in early 2022.

Snapshot: The program will initially provide individual consumers with access to "genuine Apple parts and tools" for the mobile-phone displays, batteries and cameras in the iPhone 12 and iPhone 13 lineups. Apple will follow that up with parts, supplies and manuals for Mac computers using the company's M1 processor. The program will be offered first in the United States, and to other countries over the next year.

Giving consumers the ability to do their own product repairs is a major change of policy for Apple. In addition to being highly secretive about its product pipeline, the company has often gone out of its way to make it as difficult as possible for people to make product repairs in their own home. Few examples of that have been more visible than Apple's use of a "pentalobe" screw that Apple has used on iPhones and Macs since 2009, and for which a screwdriver or replacement screw is close to impossible to find at any hardware store.

Pressure is building: It's a big U-turn for the iPhone maker, which was fighting a shareholder proposal in support of "right to repair" as recently as last month. However, the Biden administration unveiled an executive action in the summer, ordering the Federal Trade Commission to address "unfair anti-competitive restrictions on third-party repair or self-repair of items." Environmental advocates separately filed a shareholder resolution in September, stating that the high costs of repairs often prompt consumers to buy new products, resulting in a buildup of electronic waste. (30 comments)

Today's Markets

In Asia, Japan -0.3%. Hong Kong -1.3%. China -0.5%. India -0.6%.
In Europe, at midday, London -0.2%. Paris +0.2%. Frankfurt flat.
Futures at 6:20, Dow +0.2%. S&P +0.3%. Nasdaq +0.5%. Crude -0.5% at $77.13. Gold -0.3% at $1864.60. Bitcoin -1.5% at $59713.
Ten-year Treasury Yield -1 bps to 1.59%

Today's Economic Calendar

7:30 Fed's Bostic Speech
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
9:30 Fed's William Speech
10:00 E-Commerce Retail Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
2:00 PM Fed's Evans Speech
3:30 PM Fed's Daly Speech
4:30 PM Fed Balance Sheet