OIL PRICES SURGE PAST $100 A BARREL: THE IMPLICATIONS AND OUTCOME

Oil prices have been going up, which means gas prices are higher too. In the first part of 2024, the global price of a barrel of West Texas Intermediate crude oil has risen above $90, which is a 15% rise since the beginning of the year. This in turn has led to higher gas prices which, according to AAA, are also up 15%, with the national average at $3.57 a gallon.

There are a few reasons why oil prices are rising. On one hand, there are conflicts in places like Ukraine and the Middle East, which are disrupting oil supplies. On the other hand, the United States, the world's largest oil producer, might not be able to make as much oil as before because of lower prices last year and not as many new investments in oil production. Lower prices and still-high interest rates have discouraged new investment, which is evident in steeply declining oil rig counts and aging refineries.

At the same time, more parts of the world are starting to grow economically again, which means they need more oil. This, along with other factors like increased air travel, increased vacation and travel spending, and greater consumption which requires more shipping of products around the globe are all increasing the demand for oil.

Going forward, falling U.S. output and rising global demand could push oil prices even higher. However, historically, higher oil prices don't always mean the economy will do poorly. It's possible that even if oil prices go over $100 a barrel, major oil producers will start making more oil because they can receive higher profits. This in turn should eventually cause prices to fall in the future.

Overall, higher oil prices could cause some short term problems, like making things more expensive for consumers and slowing down the economy. Since oil is used in some many products and it is necessary for the transportation of goods, it also has a direct influence on inflation. We have discussed the implications of higher inflation. Specifically, higher inflation may cause the FED to delay its plan for lowering interest rates in June which could be interpreted by stock market investors as a bearish signal.

There are many factors influencing the stock market right now and we expect more volatility going into the summer. We are well positioned to ride through the uncertainty. Recent headlines require us to manage your portfolio in light of rising oil prices, current uncertainty over the direction of interest rates, recent higher inflation numbers and strong employment numbers. We will continue to track these and other economic issues so that your money is properly invested.

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