Oil Prices Surge as Energy & Travel Costs Climb High

本站添加: 2026-05-14

[00:00:00]Let's take a look at the oil prices.

[00:00:02]What a roller coaster we have been on.

[00:00:05]So, you got to get a grip on the overall market because of late since late February in the conflict that began between the US and Iran. Well, you know, we're up to 120. We were down in the 80s. So, let's go deeper into this watch list panel. I'm really happy to have the team here with us. Mark Wade, partner at Cass Investments, and Patrick Dhan, head of petroleum analysis at Gas Buddy.

[00:00:28]Thank you both for being with us. Uh, you know, Memorial Day weekend is upon us and the pump prices are heavy. Um, but Mark, let's start with you. I want to hear your thoughts on the oil print right now and what I mean, what's going on here and what do you expect to happen?

[00:00:47]>> Well, thank you, Nicole. It's great to be here with you. Uh, it really is a pleasure. Oil prices, they're very high.

[00:00:54]I think they're going to be high for for a while to go still. I think what folks aren't really appreciating about what's going on with oil prices is it's not just a production issue, but this is also an infrastructure and a transportation issue. What you've got going on here with the with the straight closing, you've got an issue where refiners can't get the oil that they need around the globe and as a result of that, prices are going to be sustained higher and the reverberations of that are going to be felt throughout the economy for some time to come. I think you're starting to see it now. You saw the print this morning of of the PPI numbers. uh with energy but also X energy even without energy being included in that the numbers are going up significantly. So oil prices we we see them being you know sustained higher for longer based on this conflict in Iran. But more so than that there's a premium that's going to be in the in the markets because of the risk factors that everybody appreciates now at a whole another level beyond just what happened with uh Russia and Ukraine. I mean you look at how high prices got with Russia and Ukraine. The impact of what's going on with the strait is far larger than what's going on than what happened with Russia and Ukraine.

[00:01:58]>> Understood. I mean, Patrick Dihan, I mean, I know you're focusing on all things Iran minute to minute because it's really affected oil prices so greatly and folks are going from town to town trying to get the best price. I know somebody went to Costco because could save 30 cents on the gallon or something. I mean, you know, there are high oil prices and for gasoline and that was part of our inflation prints that we got when we look at CPI and PPI and how it relates to the global economy. But now what what's your expectation for Memorial Day weekend?

[00:02:27]Are a lot of people going to be driving even though it's going to cost them an arm and a leg?

[00:02:32]>> Yeah, Nicole, we only get three summer holidays a year and Americans aren't going to lose them even with gas prices being elevated. I would look for some secondary cascading impacts. Consumers are still going to hit the road, but they may not go to a sit-down restaurant. They may go to a QSR, a quick service restaurant. They may not spend money on movies. They may go to PP put golf instead. Look for consumers to replace and substitute lowerric uh items during their road trips. They may not go into the sea store and spend as much uh as they would otherwise. But uh gasoline demand is somewhat inelastic, especially during summer, the the three months of summer that we get. So I wouldn't look for necessarily huge demand destruction.

[00:03:14]We are starting to see a little bit of demand erosion which is down now uh8% over the last four weeks compared to last year. So the high prices are starting to have a pinch but when it comes to summer consumers are still going to travel but again they will make some subtle changes to their plans. You may go up to the cottage for the weekend. You may not run the boat or you may stay closer to home and you may try to reduce expenses on where you're eating out. But uh look for consum consumers to still hit the road. But it really also is contingent on whether or not we see that national average starting with a five or if we stick with a four handle. Of course, over the summer, the longer the straight remains closed, there is the potential that the national average could reach record levels and that's probably going to cause a lot of uh uh anxiety for consumers over the course of the summer.

[00:04:01]So, if it gets worse, you may see consumers spending less or trying to substitute where possible. Uh, but again, consumers only get three good months of summer. I think a lot of us are still going to be hitting the roads there. We're going to be complaining a lot more.

[00:04:15]>> Nicole, may I add something to that?

[00:04:18]>> Yes, please do.

[00:04:19]>> Well, I I think it's very well stated, Patrick. I I would I build on that by saying that I think the real concerns here are what's going to happen with the jet fuel market and the cost of airfare, right? I know I for me, I live in Houston, Texas. It's real hot here in the summertime. Everybody gets it out.

[00:04:34]The question is, where are you going and how you getting there? Uh fuel prices are way up. Airline ticket costs are going to be going way up. I know for me and my family of six, uh considering whether or not we're driving or flying to Colorado this summer has become a much more credible question. Although I will say, you know, that long in the car with a 9, 8, 6, and fouryear-old, I'm not sure I want to do that. There's a price I'm still willing to pay to make the trip shorter. Uh, so I think that the impact in the jet fuel market is one that's probably more intense that people are feeling given what's happened with all the shutdowns and refineries, you know, primarily in Kuwait, China, and South Korea.

[00:05:07]>> And we've used a lot of um oil as well.

[00:05:10]When you think of strategic reserves and things like that around the world um you know, I don't know how much oil demand there will be going forward, but at the same time to your point about the jet fuel, they may run and have a shortage in Europe. And they were talking about Air France and Lufansza and uh one other one in Europe that may have to cancel flights because they may just not have the jet fuel and that too could be problematic for folks. Imagine you were all set for your Europe vacation for whatever and not necessarily vacation maybe something important you know an older family member whatever to be in convenience and have things canceled can be real thorn in the side. Um Mark when we talk about AI and you know powering AI and having reliable electricity you said look we have plenty of energy here in the United States we're energy rich but infrastructure conra constrained explain that. Yeah. So, so all of the interesting conversations that are going on with the hyperscalers, the $500 billion in proposed capex projects, all of that is predicated on having access to power that can do what needs to be done. And I think that's a very very cautious assumption to make that that's going to be there. Um, none of none of this none of these projects are going to go off. none of the the impact uh to stock prices and and I I heard your your previous comments around what's going on with with earnings. All of those are forecasting future earnings that are predicated on having access to power for all these data centers and the flow through effect of all that. And I think that's a very very again uh I'd be concerned about that assumption. What we believe is the best way to play what's going on with AI is actually in the power side of the business and energy.

[00:06:52]uh what AI has done to growing power demands is largely unprecedented. You see growth through the roof for basically all forms of energy and and being here in Houston, we we have the unique perspective where we get to live every day amongst people in the energy ecosystem that are doing it across renewables, traditional fossil fuels, nuclear, etc. And we get to see it all.

[00:07:13]We're for all forms of energy. But what you're seeing now is this rising growth of demand for energy and power as a result of that. And so our belief is that the best way to sort of play what's going on with AI rather than pay 40 50 times earnings for some of these chip companies is to do it in the power market and to do it in the energy market because none of those things matter.

[00:07:32]Those are very expensive paper weights unless you have the power for it.

[00:07:38]>> And quickly Patrick I mean I know you were looking at the amount per gallon. I think I saw 419. You tell me. But also President Trump had talked about saying he'll suspend the federal gas tax. Do you think that he can actually do that?

[00:07:51]Does that help folks to have gas tax on holiday?

[00:07:55]>> Well, Nicole, look, any any reduction in tax at the federal level is going to have to go through Congress. And we've all seen what a mess Congress has been as of late. So whether or not that gets through, I do think there's interest on both sides on on pushing forward a federal gas tax suspension. But at this point, 18 cents is the national average rises above 450 a gallon. Maybe not quite as bad as putting lipstick on a pig. But for motorists out there, it's salt in the wound. It's going to save them $2. And the the impact of gas prices right now are still that the average price is even with that discount a$120 above where it was last year. So consumers are looking for a lot bigger relief. Uh that bigger relief is only really held up by what's happening with the straight of hormuz. And that 18 cent federal gas tax potential suspension isn't doing a whole lot. And that's by the way why a lot of states are talking about doing much more. In fact, Indiana now has waved its excise and uh use tax on gasoline. Hoosiers are now getting a 60 cent a gallon uh drop in price. So, that's rather impressive. But at the federal level, the gas tax hasn't gone up since 1993. So, you're not talking about much with reducing prices 18 cents, but it is a little something.

[00:09:07]>> Yeah. And we'll see how quickly once it all ends and oil comes down. I mean, maybe $100 is the new norm, but it went up pretty quickly at the pump. You know, does if a round ends and all that, how quickly can things come back down? You know, we always say it goes up faster than it comes back down. Mark Wade, partner at Cass Investments and Patrick Dan Dhan, head of petroleum analysis at Gas Buddy. Patrick, Mark, thank you both so much.