Oil prices just hit their highs of the year. Because crude oil is refined a thousand ways and used in every single level of manufacturing and shipping, it’s a bedrock determinant of the cost of almost everything else. The prospect of higher prices is of course inflationary, but we won’t see the data for a few more months until the higher costs work their way through the system. Last week, OPEC confirmed that it will reduce production through the end of the year, which will keep the value of a barrel of oil elevated. How much is yet to be seen. For comparison, in June of 2022 the cost of ICE Brent Crude was 26% higher than the current $92.31. Back then, the overall inflation rate in the U.S. was 2.8X today’s 3.2%.
Tomorrow we’ll get the Consumer Inflation numbers, which are expected to rise to 3.6% YOY, though Thursday’s Retail Sales are to decline to a five month low with a MOM gain of only 0.2%