Oil ’emergency’: Work from home and drive slower, IEA says

The energy watchdog detailed a 10-point emergency plan that includes reducing speed limits on highways by at least 6 miles per hour, working from home up to three days a week where possible and car-free Sundays in cities.

Other steps in the emergency plan include increasing car sharing, using high-speed and night trains instead of planes, avoiding business air travel when possible and incentivizing walking, cycling and public transportation.

If fully implemented, the moves would lower world oil demand by 2.7 million barrels per day within four months — equal to the oil consumed by all the cars in China, the IEA said. And the impact would be greater if emerging economies like India and China adopted them in part or in full.

However, the emergency steps would disrupt or even slow down a world economy that remains largely addicted to fossil fuels, especially for transportation. The IEA is suggesting the headaches would be better than the alternative.

“As a result of Russia’s appalling aggression against Ukraine, the world may well be facing its biggest oil supply shock in decades, with huge implications for our economies and societies,” IEA Executive Director Fatih Birol said in a statement.

The proposals reflect a recognition that the world has few realistic options to quickly replace oil supplies from Russia, the world’s No. 2 oil producer in 2021.

OPEC has signaled it’s in no rush to ramp up production and the release of emergency oil stockpiles has done little to ease shortage fears.

“The US and other IEA countries now realize that the potential loss of Russia’s oil exports constitutes a bigger supply shock than either strategic stock draws or accelerated OPEC+ production hikes can solve,” said Bob McNally, president of consulting firm Rapidan Energy.

The Russia-Ukraine crisis has sent oil prices surging over the past month, driving up gasoline prices in the United States to record highs. Although oil prices have pulled back from their recent highs, oil soared back above $100 a barrel on Thursday on renewed concerns about the impact to Russian energy supplies.

Thinking of buying a home in 2022? Here’s what to expect

Heading into this year, just 26% of consumers thought it was a good time to buy a home, according to Fannie Mae’s Home Purchase Sentiment Index for December. That was a sharp decrease in sentiment from one year earlier, when 52% believed it was a good time to buy.

One big reason prices have skyrocketed is that there are so few homes on the market. Housing inventory hit an all-time low in December. And, as long as there are way more buyers than sellers, competition will remain fierce and prices will go up.

“Even though demand remains strong, a majority of consumers clearly have reservations about purchasing a home at current prices,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

But that hasn’t stopped people from house hunting. Here’s what to expect if you’re one of them.

Home prices will go up, just not as fast as last year

Home prices are widely expected to continue to rise this year, but not at the eye-popping pace of 2021.

“That kind of price increase was a shock. ‘Unprecedented’ is not strong enough. It was nuts,” said Skylar Olsen, senior director and principal economist at Tomo Networks, a buyer-focused mortgage and home-purchasing platform.

The median price of a home was $346,900 in 2021, up 16.9% from 2020, and the highest on record, according to the National Association of Realtors.
How much house can I afford?

A panel of economists convened by the NAR forecast median home prices will increase by 5.7% in the upcoming year, while a panel of housing experts polled by Zillow expect home values to rise 6.6% in 2022.

But exactly what happens next will depend largely on how both buyers and sellers react to the changing market.

“If buyers finally balk at unaffordable prices, sales volumes could fall,” said Jeff Tucker, senior economist at Zillow. “But if homeowners finally start listing their homes en masse, we could see a sales bonanza, cooling the pace of price appreciation.”

Mortgage rates will rise

Already in the first few weeks of the year, the average 30-year fixed rate for a mortgage has jumped significantly, rising to the highest rate it’s been since the beginning of the pandemic in March 2020.

That trend toward higher rates is expected to continue, although not necessarily at the pace seen in the past couple of weeks.

“We are expecting interest rates to rise this year and that directly impacts affordability for families and their ability to finance a home,” said Jeff Ruben, president of Wilmington Savings Fund Society Mortgage. “We don’t see it being a situation where it will choke off the home purchase market, but we project that the rise in interest rates will dampen activity a bit.”

The 30-year fixed-rate mortgage averaged 3.56% last week. The average was 2.77% this time last year.

Inventory will grow, but so will the number of buyers

While the availability of homes for sale often ebbs and flows, last year seemed to be all ebb.

“The last 18 months have been out of control — every time you turn around it’s been record-high prices or record-low inventory,” said Mike Miedler, president and CEO of real estate firm Century 21. “We have lost the cyclicality of the market.”

But this year, the housing market is expected to return to its normal seasonal cycle, with more homes coming on to the market in the spring, then tapering off throughout the summer. But competition will remain stiff: Experts say buyers — many of whom have been putting offers on homes since last spring — will continue to come in hordes, at least for the first part of the year.

“In the spring, you’ll see that demand come in strong driven by interest rates that are climbing,” Miedler said. “You’ll see people who were waiting on the sidelines — when they see a spike in inventory they will come back into the market.”

Some agents say a few buyers are starting early by looking now. The problem is, there’s not much to look at.

At the end of 2021, inventory was at the lowest levels ever, with just 910,000 homes available to buy nationwide, according to the National Association of Realtors.

The housing market was on a wild ride this year. Here's what to expect in 2022

The problem is even more pronounced in popular areas.

Jennifer Branchini, a Compass agent, was working with a couple looking to buy in Pleasanton, California, in the Bay Area, where there are currently just under 20 homes on the market.

“If you have only one property that comes on the market around the median price of $1.3 million, that has every homebuyer looking,” she said.

She’s seen prices rise so much during the winter months that she advised some clients to just put their search on hold.

“When I look at what some homes are selling for, I told my clients, ‘I can’t even get behind that number for you guys,'” Branchini said.

Homes will continue to sell fast

Those looking to buy will have to act fast. Many homes have been going into contract in a matter of days of first being listed.

Last summer homes were taking an average of just 17 days to sell, according to the National Association of Realtors. But it depends on the price. Even during November, which was relatively slower, homes priced in the most popular sweet spot of between $250,000 to $500,000 sold in an average of 10 days.

In the greater Washington, DC, area Gail Chisholm, an agent with Compass, said agents often put a home on the market on a Thursday, allow buyers to see it over the weekend during one open house, and then ask that offers are submitted by Tuesday evening.

What will my monthly mortgage payment be?

“It moves very fast, there is buyer’s fatigue for sure,” Chisholm said. “If you find the house you think is your dream house and offer $150,000 or more over ask and waive all contingencies and you still don’t get it? And you’ve lost five houses that way and paid $500 on pre-inspections each time? I have buyers who have taken a break. But many still have to find a home.”

In very competitive markets like hers, she said, the baseline for buyers to compete is to include an escalation clause and escalation cap in their offer, which spells out how much they are willing to top the next closest offer, up to a specific amount.

Beyond that she lays out all the levers that buyers can use, so they can adjust the offer to their risk tolerance.

“It is usually the offer with the fewest contingencies, the highest escalation cap, the most money down and the most accommodation of the seller’s needs that wins.”

In a market this competitive, buyers need to come with their agent and mortgage team in place and be ready to make decisions, said Olsen.

“If you’re in the search process, new listings are coming, but they sell so darn fast,” she said. “Your search for a home is a job.”

Still, Olsen said she’s fearful the pressure and fatigue will lead buyers to make rash decisions they may regret.

“I’m so worried that people will buy out of desperation to finally win a bid and not buy at a price they can afford sustainably,” she said. “Buy a home that is a good match.”

Taiwan, the world’s chipmaking factory and home of TSMC, is battling Covid and the climate crisis

Taiwan — which accounts for more than half of the world’s output of chips — has been grappling for months with its worst drought in more than 50 years, an event experts say could become more frequent due to the effects of climate change.

“There is clearly pressure in the semiconductor industry,” wrote Mark Williams, chief Asia economist at Capital Economics, on Thursday in a note that referenced the water shortages and coronavirus cases, along with rolling power outages.

The environmental disaster has already been a challenge for the island’s chipmakers, including industry leader Taiwan Semiconductor Manufacturing Company (TSM). TSMC has said it uses 156,000 tons of water per day to produce its chips, the equivalent of about 60 Olympic-size swimming pools.

The water is used to clean dozens of layers of metal that go into making up a semiconductor.

“In a chip, there are lots of billions of transistors, and we need a lot of metal layers to interconnect all the signals,” said Jefferey Chiu, an electrical engineer at National Taiwan University.

“We have to clean the surface again and again after every process is finished,” Chiu said.

Taiwanese authorities have limited the supply of tap water across the island in response to the drought.

TSMC has already tried to address the shortage by trucking in water and by boosting recycling rates. The company told CNN Business that production has so far not been affected.

“We have detailed response procedures to handle water shortages at different stages,” it said. “Through our existing water conservation measures, we are able to manage the current water usage reduction requirements from the government, with no impact on our operations.”

Indispensable technology

Semiconductor chips are an indispensable part of everything from smartphones and cars to washing machines.

Super advanced chips are tough to make due to the high cost of development and the knowledge required to manufacture them, meaning that much of the production is concentrated among just a handful of suppliers.

TSMC is the world’s largest contract manufacturer of chips, and its costly manufacturing facilities supply many companies — including Apple (AAPL), Qualcomm (QCOM) and Nvidia (NVDA)— that can design their own chips, but don’t have the resources to make them.

The Taiwanese company’s state-of-the-art technology has also made it a key player as the United States and China engage in a bitter rivalry over developing advanced technologies of the future, such as artificial intelligence, 5G and cloud computing.

“TSMC is key to many different companies,” said Alan Priestley, vice president analyst for Gartner. “Most of the high-performance electronics you are using today — like cell phones and tablets — all those chips are made by the TSMC.”

Constrained supply

The global semiconductor industry is under a lot of pressure right now. Chips have been in short supply lately, largely because of volatile demand caused by the pandemic, US sanctions on Chinese technology companies and extreme weather. A growing number of technology companies have reported trouble securing semiconductors, which analysts said could delay production or push up the prices paid by consumers.

That makes any threat to Taiwan’s production all the more important to contain.

Aside from the drought, officials have also expressed concern about the self-governing island’s coronavirus outbreak, which began last month and has since developed into its worst since the pandemic began.
James Lee, the director general of Taipei Cultural and Economic Office in New York, told Bloomberg last month that the industry could face “logistical problems” as he appealed to the United States to ship vaccines to Taiwan.
Supply chain interrupted: Here's everything you can't get now

“That’s why it’s urgent,” Lee said. “We hope the international community can help release vaccines as soon as possible to help control the outbreak.”

Lee’s office declined an interview request from CNN Business, citing his busy schedule.

TSMC said last month that two of its staff had been diagnosed with Covid-19, though it said operations have carried on as usual. And Chiu, the National Chengchi University engineer, said many firms will likely be able to mitigate risks, since the chip manufacturing process is highly automated and manufactures have segregated employees in groups to limit any spread of the virus.

Still, at least five semiconductor manufacturers southwest of the capital Taipei have been forced to suspend some operations as migrant workers fall ill.

King Yuan Electronics, a leading supplier of semiconductor testing and packaging services, had to suspend business for two days last weekend after more than 200 staff members tested positive, according to the Central News Agency, the island’s official news source. All migrant workers, or about 30% of the company’s 7,000 workers, were placed in quarantine for two weeks after a virus cluster was reported at their dormitories.

While King Yuan said it has deployed more Taiwanese workers to its production lines, it warned that factories are only able to operate at limited capacity.

April data on global orders for semiconductors suggests that “capacity constraints will persist,” Williams of Capital Economics wrote last month, noting there were a lot more orders than exports from Taiwan.

“This won’t continue indefinitely: orders for semiconductors last month were 74% higher than pre-pandemic which isn’t sustainable,” Williams said, adding that the order backlog “will take a while to clear.”

The Taiwan Semiconductor Manufacturing Company, based in the northwestern Taiwanese city of Hsinchu, currently produces the world's most advanced computer chips.

Long-term consequences

Experts say the water shortage problem, meanwhile, could worsen in the future. Climate change is likely to bring less rainfall to Taiwan in the coming decades, which could result in more frequent droughts, according to Hsu Huang-hsiung, a climate researcher at Academia Sinica.

“Our projections show the drought is going to become more severe in the future. So this year has provided a good opportunity to test the sustainability of our semiconductor industry,” Hsu said.

The global chip shortage is going from bad to worse. Here's why you should care

That could potentially limit Taiwan’s development of advanced chips, according to Chiu. That’s because as the technology behind semiconductors becomes more sophisticated, chipmakers will require more water during the chemical processes needed to manufacture them.

Water shortages aren’t the only environmental issue at play, either. Rolling blackouts caused by a growing demand for electricity in Taiwan have also stifled production. TSMC said that power outages even affected some of its facilities.

“We need to cut down our carbon dioxide emission. But on the other hand, we need to generate more electricity,” said Hsu, adding that Taiwan’s semiconductor firms will need to invest in more renewable energies to ensure a sustainable future.

TSMC has said it is already working to shore up its energy supply by partnering with solar plants and wind farms across the island. Last year, it said it intends to power its production entirely through renewable energy by 2050.

— Will Ripley, Hanna Ziady, Clare Duffy and Jill Disis contributed to this report.