Remy Blaire: This morning's CPI print confirming that rising energy costs are squeezing American households. This week, Brent crude topping $109 a barrel while WTI cleared $102, while spot prices for physical crude also touching $120 a barrel. At the pump, national gas prices averaging $4.29 a gallon, while diesel topping $6 and now at an all-time high near $6.05.
Now, the higher prices feeding directly into broad inflation concerns ahead of next week's Fed meeting. Well, joining us live to break down the data and the numbers and what drivers can expect at the pump is Patrick De Haan, head of petroleum analysis for GasBuddy. Patrick, happy Friday. Thank you so much for joining us.
While we are looking at elevated prices yet once again for energy, and starting out with oil, there is a lot of concern here. So how much of this price movement reflects immediate refining as well as physical tightness versus an escalating geopolitical risk premium?
Patrick De Haan: Yeah, happy Friday, Remy. Well, a lot of this is really still chalked up to geopolitical tensions, which continue to deteriorate overseas, especially the Houthis making a move on the Red Sea. We have new escalations between the U.S. and Iran, launching strikes on tankers. And overnight, we have another Ukrainian drone attack on a Russian oil refinery.
Now, that story there, with the Ukrainians attacking Russian refineries, has been much of the reason why diesel prices continue to hit new records. Now this morning, live pricing data showing we're now at $6.08 a gallon, and the national average for diesel could head towards $6.25. These are all-time records.
That's also why this is not affecting gasoline in the same way, though the price of gasoline is going up because oil prices, as you mentioned, hitting that $100-a-barrel mark. The national average for gasoline this morning at about $4.30. You add it all up, and the U.S. economy is now spending $700 million more every day compared to last year.
That's a huge cost.
Remy Blaire: Yeah, Patrick, I'm glad that you brought up diesel and what's happening outside of the Middle East as well, because we all know that this does end up trickling down to the American consumer. So how quickly do you expect elevated diesel costs to pass through freight networks and also eventually show up in core consumer goods?
Patrick De Haan: Yeah, I think it'll probably be much quicker this time around, because we also saw a spike in diesel prices back in April and May, and a lot of businesses and logistics and supply chains quickly had to jump in back in April and May to raise prices. And then we immediately saw it in the CPI months later.
I think this time around the increases probably will be faster because this is now a little bit of muscle memory. So September CPI is likely to show an acceleration in core energy prices, and that is likely to start trickling down to consumer goods probably right about in the next week or two.
So I think still, September CPI is going to print hot. And then October at this pace really could ramp up. And that could eventually start impacting what Americans are spending going into the holiday shopping time.
So certainly no good time for record prices. But the worst potential time is when consumers are concentrating on shopping ahead of the holidays, and that is when they're going to start really getting hit with those goods and services going up in price.
Remy Blaire: Yeah, and when we're taking a look at what's happening in terms of geopolitical tensions, shipping risks do remain elevated. So when we're looking at some of these critical logistics corridors that face potential prolonged disruptions, where do you see the ceiling for crude as well as refined product prices this autumn heading into the winter months?
Patrick De Haan: Well, that's certainly the million-dollar question. And it's really going to be contingent on how we continue to watch inventories weaken and how supply becomes more constrained behind things like the Strait of Hormuz and the Red Sea and from Russia. There's a lot of disruption right now.
And, you know, China has been a major wild card, cutting their crude oil imports. But now they're starting to jump back in a little bit as well. And if the U.S. continues to be effective in blocking Iran's ports and attacking tankers, we could still see that $150-a-barrel mark before the end of the year, depending on how all of these issues dovetail together. It's still an open-ended question.
Of course, we heard a lot of analysts calling for $150 and potentially even $200 oil months ago. It didn't come to fruition. It's hard to know how all the levers would work in the next couple of months, but $150 oil is still not off the table. But I certainly believe that we could still see WTI prices heading another $10 to $20 a barrel higher by the end of the year if things don't go well.
Remy Blaire: Yeah, and of course, Patrick, we're all coming back from the summer months and some of us are going back to work and easing into our regular schedules or even back to school. So for Americans concerned about pain at the pump as well as inflation and how everything seems elevated in terms of costs, tell us how the supply-driven energy surge complicates the Fed's policy calculus heading into next week's meeting and beyond.
And what should Americans realistically expect when it comes to gas prices?
Patrick De Haan: Well, I think I'll start there with gas prices. We usually see a little bit of a decrease seasonally as we get into the fall. As you mentioned, gasoline demand cools off at the end of summer. We're also just a few days away from making the changeover back to cheaper winter gasoline. And so normally that provides a little bit of downward movement in prices, but that could be offset by new geopolitical tensions.
Now, in regards to the rest of your question, I still don't know how the rest of fall is going to look. There's still the question of hurricane season. Expect a lot of volatility to continue. And certainly CPI inflation is going to tick higher. So the prognosis moving forward, I'm still a little bit pessimistic that higher energy prices, especially diesel, may stick around for several months, if not longer than that.
Remy Blaire: And Patrick, less than 60 seconds here. But this is a question I know you get a lot. So for Americans who are shopping around for the cheapest gas prices in their area, what should they really do?
Patrick De Haan: Well, obviously, the smartphone. There are so many apps that you can download. I think the GasBuddy app is certainly a great option for those trying to find lower prices, but other apps like Google Maps and Waze will also show you those lower prices.
It's a lot of things Americans don't think about. We think we're only going to save a nickel or a dime when, in essence, with the volatility in the market we've been seeing, there's a lot of propensity to save.
If you're checking those apps before you fill your tank up, potentially 20 to 50 cents a gallon of savings by shopping around before you fill up.
Remy Blaire: Well, Patrick, we know that all those cents do add up. So I appreciate you joining us today. Thank you so much for sharing all of your insights and your perspective. Have a great weekend.
Patrick De Haan: You too.
