Why Falling Oil Prices Won't Save America From Inflation
Detailed summary
Don’t look to falling oil prices to stave off inflation now. Brent is down from above $100 to the low $90s; Saudi Arabia pumped 10.56 million barrels a day in October, back at…
Don’t look to falling oil prices to stave off inflation now. Brent is down from above $100 to the low $90s; Saudi Arabia pumped 10.56 million barrels a day in October, back at pre-war levels and above its quota, and gasoline just posted its steepest one-day drop in 18 years. Consumer prices still rose an estimated 4% from a year earlier in October, with pump prices slightly lower, up from 3.7% in September, and core prices rose 0.3% in a single month. Expect the Fed to hike in December, but markets have already priced this in. October’s core reading hit the exact threshold Fed Governor Christopher Waller set for a half-point move.
Services and the AI buildout are keeping inflation high, and cheaper crude does nothing to either. Prices for doctor visits, childcare, restaurant meals and hotel stays are still climbing, and auto insurance rose 0.7% in October. Data center construction has pushed up the cost of chips, generation equipment and copper, and electronics are following. Smartphone prices rose 1.4% in October, the largest monthly jump on record, and television prices climbed 3.3% in a category where prices usually fall.
Energy costs will be high, even with cheaper crude. War-risk insurance, rerouting, and naval escorts through Hormuz add $20 to $30 to every barrel of Gulf crude. Diesel will stay tight while Ukrainian drone strikes keep about 30% of Russia’s refining capacity disrupted. U.S. crude still costs about $30 more than it did a year ago, and Saudi…
Don’t look to falling oil prices to stave off inflation now. Brent is down from above $100 to the low $90s; Saudi Arabia pumped 10.56 million barrels a day in October, back at pre-war levels and above its quota, and gasoline just posted its steepest one-day drop in 18 years. Consumer prices still rose an estimated 4% from a year earlier in October, with pump prices slightly lower, up from 3.7% in September, and core prices rose 0.3% in a single month.
Services and the AI buildout are keeping inflation high, and…
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