033: Pain at the Pump: Deciphering the Complex World of Commodity Markets

Do you ever wonder how global events impact your wallet? Brace yourself for a deep dive into the murky, complex world of commodity markets. Join me, Megan Horneman, Chief Investment Officer at Verdence Capital Advisors, as we explore how the Russia-Ukraine war and Saudi Arabia's decision to extend production cuts are increasing pressure on the oil market, and consequently, your gas price.

The heatwave isn't just making you sweat, it's making your wallet lighter too. We'll unravel how rising temperatures are causing refineries to operate below capacity, leading to higher gasoline prices. But what does this mean for consumer spending and inflation in the coming months? Tune in as we dissect the impacts of these market trends and make sense of the numbers shaping your financial future. Questions or feedback? Don't hesitate to reach out at podcasts at verdence dot com. 

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. Bringing you Markets With Megan, today we're going to talk a little bit about what we're seeing going on in the commodity markets, specifically in the oil market. We've had consistent pressure upper pressure on oil prices for many reasons, primarily the war between Russia and Ukraine. But last week Saudi Arabia decided to extend their production cuts by a million barrels a day for another month, so it's putting upper pressure on oil prices.

We're in the peak driving season in the US, so you're seeing oil prices up more than 20% just over the past couple months. This is translating into higher gasoline prices and you're going to be feeling it at the pump. But there's one other factor that we wanted to highlight on why we're seeing gasoline prices rise, and that has to do with the excessive heat that we've had this summer. The refineries here in the US can't operate at full capacity when we have temperatures over 100 degrees, so refineries are now operating at a lower capacity. That means less gasoline making its way to the pumps and that means consumers paying more. We've seen gasoline prices up about 63 cents just this year to date.

To put that in perspective what that means from an economic standpoint. It's a general rule of thumb that one-cent every in gasoline prices at the pump, that means there's about a billion dollars less annual spending power by consumers. So what we're looking at is about 63 billion dollars of less spending power consumers have this year just because of the rise we've seen here over the summer. So again we're watching other developments in the commodity markets, what that will mean for consumer spending as well as what that might mean for inflation numbers over the coming months. If you have any questions or feedback, please feel free to reach out to podcasts at verdence dot com.