Diesel does get you better gas mileage…right?
The US National average diesel price just hit an all-time high of $6.53 on September 21st. The squeeze is obvious and painful, especially for truck drivers and anyone who owns a diesel vehicle. Inflation numbers, such as the Consumer Price Index (CPI), have been steadily increasing over the course of the war between the US and Iran due to decreases in exports, tariff wars, and, of course, oil prices.
The seemingly all-telling crude oil futures contract has seen alarming volatility this year, especially from February to now. Although core CPI excludes food and energy, oil has still moved the needle indirectly. By driving up market uncertainty and speculation and increasing shipping costs, the sharp price rise has caused inflation to leak into core consumer prices. But that could be a whole different article; this article focuses on how that inflation made its way into everyday products. The answer is higher diesel prices, and therefore higher transit costs, so much so that top officials are even considering a diesel export ban.
But how did we get to record U.S. national average diesel prices? Especially when Brent crude futures prices have remained below their April 7th peak of $112.95 per barrel. The widening gap between crude oil prices and diesel prices has rung another alarm bell for investors and consumers alike about the magnitude of the Iran conflict and the urgent need to return to the June Memorandum of Understanding or end the conflict altogether. After Houthi attacks caused Saudi Arabia to close its East-West oil pipeline, investors have been speculating around US and Iran diplomacy aimed at reopening the Strait of Hormuz. Alternative methods of oil transportation have been widely explored amid rising tensions. Still, President Trump announced Friday that he rejected Iran’s proposal for a 7-day ceasefire, and plans to resume bombing Iran after November midterms.
Although some have predicted that the Iran conflict could last President Trump’s entire term, nobody really knows what the resolution will look like. A Wall Street Journal article from July reported growing disapproval of President Trump's policies and the economy that his administration has fostered. With inflation rising throughout the year and everyday consumers who voted for him feeling the squeeze, he faces a lot of turmoil heading into the midterms. Although he appears increasingly optimistic in the public eye,
the current economic state will no doubt be a blemish on his resume for years to come.
With feigned economic sentiment and the lowest approval ratings of any president in modern history, the ball is not slanted in the president's favor ahead of the midterm elections. Uncertainty is certainly hitting investors, but with the Fed hiking rates for the first time in 3 years at the September meeting, borrowing costs have been raised. With unemployment holding steady, the Fed is doing its best to curb inflation.
Sources:
Comments