Latest / Trumponomics / Episode 22: Has Cheap Oil Become Bad For The Economy?

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Episode 22: Has Cheap Oil Become Bad For The Economy? · Trumponomics

• 0:00
  Speaker 1: I guess the good news is oil can only go
• 0:02
  Speaker 1: so low. It can only go as low zero right.
• 0:09
  Speaker 1: This episode is brought to you by nat X, the
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  Speaker 1: risk and may not be appropriate for all investors. Hi,
• 0:40
  Speaker 1: and welcome back to Bloomberg Benchmarket podcast about the global economy.
• 0:44
  Speaker 1: It is Thursday January. I'm Tori Stillwell and economics reporter
• 0:49
  Speaker 1: with Bloomberg News in d C. And I'm joined by
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  Speaker 1: my co host, Dan Moss, our executive editor for Global
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  Speaker 1: Economics in New York. He Dan, Hi, Tori, it's been
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  Speaker 1: a while. I know this is your first episode back
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  Speaker 1: since liber Beer. That's right, I've been on paternity leave,
• 1:05
  Speaker 1: which was the subject of one of our final podcasts
• 1:08
  Speaker 1: before she was born. And yes, it's true we named
• 1:11
  Speaker 1: her Victoria. And how is Victoria doing? Last night? She
• 1:17
  Speaker 1: was pretty active I'm hoping for a better outcome tonight.
• 1:22
  Speaker 1: When what does an active baby look like? Just like
• 1:25
  Speaker 1: just rolling around a lot? This is a euphemism for
• 1:31
  Speaker 1: how well is the baby sleeping between say, eleven PM
• 1:36
  Speaker 1: and five am. I see well today, Dan, I want
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  Speaker 1: to talk about oil, and I think that it's been
• 1:44
  Speaker 1: impossible for us at least two escape headlines about low
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  Speaker 1: or falling oil prices. We're hearing a lot about how
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  Speaker 1: they're contributing to the stock market declines or at least volatility.
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  Speaker 1: Energy companies are also in some serious earning trouble thanks
• 1:59
  Speaker 1: to the oil slump, and it may weigh on inflation
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  Speaker 1: as well. So let me give our listeners some specifics.
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  Speaker 1: In June, which is important. Day will reference it a
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  Speaker 1: couple of times in this episode. Oil was trading at
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  Speaker 1: over a hundred dollars a barrel, then it started going down,
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  Speaker 1: and now it's at just over thirty dollars a barrel.
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  Speaker 1: Last week it touched the lowest levels since two thousand three,
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  Speaker 1: at around twenty seven dollars a barrel. So how do
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  Speaker 1: we get here? It's a classic instance of supply and
• 2:30
  Speaker 1: demand at work, right, Dan, and several explanations have been advanced.
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  Speaker 1: For what's affecting that classic supply and demand right now.
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  Speaker 1: We've heard people talk about a slowdown in economic growth
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  Speaker 1: in China, though I have to say that's not a
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  Speaker 1: particularly super news story. We've heard people talk about how
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  Speaker 1: OPEC no longer packs the punch as a cartel controlling
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  Speaker 1: prices that it used to. Again, not necessarily a super
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  Speaker 1: news story. And we've also heard some discussion about Iran
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  Speaker 1: re entering the global oil market that is more recent.
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  Speaker 1: It's also a production story. We've just got too much oil.
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  Speaker 1: We don't know what to do with it all. There's
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  Speaker 1: been higher production here in the US thanks to new
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  Speaker 1: technologies like fracking, etcetera. Um as damaged OPEC has also
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  Speaker 1: been playing a role. They haven't tamped down production to
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  Speaker 1: sort of get more adjusted to the new price dynamics
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  Speaker 1: that we're seeing. They want to maintain that market share,
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  Speaker 1: so they are continuing to pump out oil um And
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  Speaker 1: there's also been a mild winter here in the Northern Hemisphere.
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  Speaker 1: And again, growth prospects for the global economy, as Dan mentioned,
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  Speaker 1: major emerging market economies may have weaker growth prospects. That's
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  Speaker 1: something to keep an eye onto and for all these reasons.
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  Speaker 1: The World Bank just lowered its forecast for crude oil
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  Speaker 1: prices to thirty seven dollars per bail. That's down from
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  Speaker 1: fifth d one dollars in its October projection, so already
• 4:03
  Speaker 1: they've had to go in and revise that. Now. Normally,
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  Speaker 1: cheap oil has been viewed as unambiguously good for the
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  Speaker 1: US economy. Sure it may hurt producers when oil prices
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  Speaker 1: dropped because it makes their operations less profitable, but what
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  Speaker 1: they lose the consumer gets for one oil is an
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  Speaker 1: input into a lot of other manufactured goods, so the
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  Speaker 1: prices of those things could drop or at least not
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  Speaker 1: go up. Airlines can afford to let prices for flight
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  Speaker 1: strifted a little lower if competition warrants it. Household heating
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  Speaker 1: costs can be lower, and most notably, gas prices can
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  Speaker 1: drop a lot. In Gas prices peaked for the year
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  Speaker 1: in April when they reached an averaged three dollars and
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  Speaker 1: seventy cents a gallon for regular gasoline. Since then, it's
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  Speaker 1: been almost a straight line down. There's a small rebound
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  Speaker 1: in mid but now they fall into a dollar eighty
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  Speaker 1: three gallon, so literally half of what they were at
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  Speaker 1: back in April. Now, because of these factors, when oil
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  Speaker 1: prices started to head south in mid many economists thought, great,
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  Speaker 1: this will be a boon to economic growth. Then the
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  Speaker 1: energy industry started slashing jobs, cutting investment, and still prices fell.
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  Speaker 1: But consumer spending, they said, don't worry, that'll take up
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  Speaker 1: more of the slack. And it looks like it did
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  Speaker 1: help somewhat. Consumers spent more on eating out. There were
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  Speaker 1: a couple of months last year we're spending really popped.
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  Speaker 1: But for the most parts, spending took a down step
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  Speaker 1: last year compared to certainly not the big game that
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  Speaker 1: many observers were expecting. And what's more, the savings rate
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  Speaker 1: actually increased. So not only do they not spent, they
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  Speaker 1: say in October it rows for three year high five
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  Speaker 1: point six. It doesn't sound like much, but we are
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  Speaker 1: talking about a massive population here, and in November, which
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  Speaker 1: is the latest data we have, it was five point
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  Speaker 1: five pretty close to that level, right, And that compares
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  Speaker 1: to four point eight percent back into June when those
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  Speaker 1: oil prices really started to fall. So this doesn't make
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  Speaker 1: a ton of sense. When did Americans become so thrifty?
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  Speaker 1: We do not save money. We spend our money, we
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  Speaker 1: spend all of it. We don't we don't think about
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  Speaker 1: the future. Yellow right? Dan? All right, So why does
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  Speaker 1: it seem like we've been hearing more about cheap oil
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  Speaker 1: being a greater negative for the economy than the positive
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  Speaker 1: everyone expected it to be. To help us figure this
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  Speaker 1: out more, we're bringing on Ryan Sweet. He's a senior
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  Speaker 1: economists at Moody's Analytics, Inc. In Westchester, New York, and
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  Speaker 1: he covers the U. S economy and all the indicators
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  Speaker 1: that track its health. He's one of the economies that
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  Speaker 1: I speak to the most on my beat. Hello Ryan,
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  Speaker 1: thanks for joining us, Thanks for having me. Let's start
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  Speaker 1: with what's going on in the oil markets right now.
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  Speaker 1: A lot of investors are saying that the volatilion the
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  Speaker 1: stock market has been driven apart by the oil route.
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  Speaker 1: But wasn't cheap oils supposed to be good for the economy.
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  Speaker 1: What happened here? I think economists underestimated the hit to
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  Speaker 1: investment that was going to be that that occurred because
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  Speaker 1: of the enormous drop in oil prices. So business investment
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  Speaker 1: fell significantly in and that really offset a good portion
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  Speaker 1: but not all of the boost that we got from uh,
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  Speaker 1: increased consumer spending from lower oil prices. And Ryan, is
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  Speaker 1: it the drop or the magnitude of the drop, It's both.
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  Speaker 1: That sounds like the perfect economist answer, but it true.
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  Speaker 1: It is true. Uh. Typically when gasoling prices are going up,
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  Speaker 1: it's how quickly they're rising that can affect consumer spending
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  Speaker 1: and ultimately how high gasoling prices rise and what that
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  Speaker 1: would do to consumer spending. And on the flip side,
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  Speaker 1: it's how fast they're falling and ultimately what uh how
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  Speaker 1: low they go matters for consumer spending. And I think
• 7:56
  Speaker 1: your point is very important in explaining why consumers didn't
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  Speaker 1: rush out and spend the initial savings from gasoline prices
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  Speaker 1: because I think they were a little bit hesitant or uh,
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  Speaker 1: they didn't expect lower gasoline prices to stick because it
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  Speaker 1: had been very very rare for oil prices to be
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  Speaker 1: or gasoline prices to be below three dollars per gallon.
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  Speaker 1: So initially, when they fell below that threshold, I think
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  Speaker 1: you know, the rational consumer was thinking, you know, they're
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  Speaker 1: likely going to go back up, so I'll save some
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  Speaker 1: of that windfall from lower gasoline prices, right, just wait
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  Speaker 1: it out. Yeah, exactly, and I think they waited it out,
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  Speaker 1: which is which is fair. I mean that's the rational
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  Speaker 1: thing to expect because typically, you know, sharp declines and
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  Speaker 1: gasoline prices don't stick too long. But now we've seen
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  Speaker 1: gasoline prices remain low for an extended period of time.
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  Speaker 1: I think we've seen consumers spend more and more of
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  Speaker 1: that of that windfall, so we still think it's going
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  Speaker 1: to happen. I think it's happening, and I think it
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  Speaker 1: will continue to happen. As you know, wholesale prices indicate
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  Speaker 1: that retail gasoline prices are going to go even a
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  Speaker 1: little bit further lower. So I think we're gonna get
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  Speaker 1: aditional boost to consumer we're spending in that regard. And
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  Speaker 1: I also think lower gasoline prices will be more of
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  Speaker 1: a positive in early for overall GDP growth because we're
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  Speaker 1: not going to get as sharp as a decline in
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  Speaker 1: UH energy related investment. Because the job that we got
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  Speaker 1: in was almost as big as we saw during the
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  Speaker 1: Great Recession. Now it doesn't feel like there's a big
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  Speaker 1: consumer boom going on. I hear on what the surveys
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  Speaker 1: of sentiments say, is it possible with saying one thing
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  Speaker 1: to polsters and then doing another when it comes to
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  Speaker 1: opening in wallets. I actually have some numbers on this
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  Speaker 1: because I looked at it right before I came here,
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  Speaker 1: and when I was looking at the Commerce Department data.
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  Speaker 1: In the year ended third quarter, which is the latest
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  Speaker 1: data that we have right now, consumers spent about eighty
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  Speaker 1: six billion dollars less on gasoline. And during that same
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  Speaker 1: time frame, so the year ended third quarter, personal savings
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  Speaker 1: were up by about sixty two billion, So that basically
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  Speaker 1: shows that consumers have you know, it looks like they've
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  Speaker 1: saved almost three quarters of their savings from cheap gas.
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  Speaker 1: So it looks like Ryan the model is being defied.
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  Speaker 1: I think it has a little bit, at least initially,
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  Speaker 1: but I do think they'll ultimately spend it over the
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  Speaker 1: course of this year. To give you a good rule
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  Speaker 1: of thumb, a penny change in gasoline prices typically increases
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  Speaker 1: or decreases consumer spending by one billion dollars over the
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  Speaker 1: course of a year, So it does take time for
• 10:30
  Speaker 1: consumers to realize that they've got extra money in their
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  Speaker 1: pockets from lower gasoling prices and go out and begin
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  Speaker 1: to spend that windfall. I think it's very difficult to
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  Speaker 1: parse out from the spending and the savings data some
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  Speaker 1: of the other effects that are weighing on consumer spending.
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  Speaker 1: So they may have a lot of windfall from lower
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  Speaker 1: gasoline prices, but the volatility in the stock market, uh,
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  Speaker 1: some concerns about the global economy may be forcing them
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  Speaker 1: to save some of that windfall for a rain. Get
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  Speaker 1: This just seems to be another of these examples where
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  Speaker 1: the textbook models of economics about what should happen when
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  Speaker 1: one thing happens, it doesn't really seem to apply. Ryan.
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  Speaker 1: It's like the tightening labor market was supposed to produce
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  Speaker 1: and is supposed to produce higher wages than ultimately greater
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  Speaker 1: rates of inflation, which would actually be welcomed by people.
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  Speaker 1: The consumer oil boom seems to be much of the
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  Speaker 1: same thing the models, not really happening, and yet and
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  Speaker 1: yet we're still convinced that it ultimately will. Can you
• 11:37
  Speaker 1: talk a bit about that. Yeah, it may appear that
• 11:40
  Speaker 1: economists are wed through their models, but you know, a
• 11:43
  Speaker 1: good philosophy to always it hereby is that when the
• 11:47
  Speaker 1: facts change, opinions change, and your view should change. And
• 11:51
  Speaker 1: I think you know the what we're seeing in response
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  Speaker 1: to lower gasoline prices by consumers. You know, I think
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  Speaker 1: does justify relook taking another look at how we view
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  Speaker 1: the impact of lower gasoline prices and its effect on consumers.
• 12:08
  Speaker 1: And we've done that, and we've been looking at UH
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  Speaker 1: the mix, and I think the mix is very important.
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  Speaker 1: And what I mean by that is who accounts for
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  Speaker 1: the large share of spending on gasoline? And surprisingly, UH,
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  Speaker 1: it's high income earners. So those that are high income
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  Speaker 1: earners account for allion share of total UH consumption on gasoline.
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  Speaker 1: And typically those consumers have a a smaller marginal propendency
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  Speaker 1: to consume, meaning that you put another dollar in their pocket,
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  Speaker 1: they're going to spend a smaller share of that, whereas
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  Speaker 1: low income earners, UH, they don't make as much of UH,
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  Speaker 1: and they don't account for as large of an increase
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  Speaker 1: or as large of a total conspending on gasoline. Therefore,
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  Speaker 1: you know, this mixed issue is I think kind of
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  Speaker 1: accounting for why all the money from lower gasoline prices
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  Speaker 1: hasn't made it into consumer spending. So it doesn't sound
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  Speaker 1: like you think that there's been this fundamental shift then
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  Speaker 1: in how consumers approach unexpected wind falls to their income
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  Speaker 1: I don't think so, because there's there's a lot going
• 13:13
  Speaker 1: on in the economy. Uh, the stock market is very volatile.
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  Speaker 1: Wage growth, as you pointed out earlier, hasn't really accelerated
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  Speaker 1: as much as the tightening and the job market would
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  Speaker 1: otherwise suggests. So I think consumers are being rational in
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  Speaker 1: saving some of the windfall because I think the scars
• 13:28
  Speaker 1: in the shadow of the Great Recession is still linkering
• 13:31
  Speaker 1: with us. Well, let's pick back up with this conversation
• 13:35
  Speaker 1: after a short break to hear from our sponsors. When
• 13:37
  Speaker 1: we come back, let's talk about why we're worried about
• 13:41
  Speaker 1: what consumers are doing in the first place, which is
• 13:43
  Speaker 1: that producers have been taking such a huge hit as well.
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  Speaker 1: for all investors, all right. So one of the reasons
• 14:36
  Speaker 1: why we're sort of waiting for this other shoe to
• 14:39
  Speaker 1: drop with the consumer, when will they spend this supposed
• 14:43
  Speaker 1: windfall from gas savings UM is because producers have been
• 14:47
  Speaker 1: taking such a huge hit. Just Tuesday, hess Court said
• 14:52
  Speaker 1: that it will cut capital spending on exploration and production
• 14:56
  Speaker 1: by this year from due to the low oil prices.
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  Speaker 1: So let's talk a little bit about what's going on
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  Speaker 1: with energy producers and why this this lack of a
• 15:09
  Speaker 1: pickup from the consumers has been a little bit concerning
• 15:12
  Speaker 1: due to what's going on in their world right now.
• 15:15
  Speaker 1: The producer has been hit particularly hard, particularly the energy producer,
• 15:19
  Speaker 1: because of lower oil prices. Because the oil market is
• 15:23
  Speaker 1: we're just a wash in it. We're essentially swimming in
• 15:26
  Speaker 1: excess oil, and that's been a big factor of why
• 15:29
  Speaker 1: oil prices are you know, trading roughly around thirty dollars
• 15:32
  Speaker 1: per barrel. I mean, did this happen all at once, though,
• 15:35
  Speaker 1: I mean it seems like it's sort of been a
• 15:36
  Speaker 1: long time coming, just the trends that have been in place.
• 15:40
  Speaker 1: It has, uh, you know, the the excess supply has
• 15:42
  Speaker 1: built over time. But I also think there's other factors
• 15:46
  Speaker 1: behind why oil prices are thirty dollars today. For example,
• 15:49
  Speaker 1: the the US dollar has appreciated significantly over the last
• 15:52
  Speaker 1: couple of years, and because oil is priced in dollars,
• 15:55
  Speaker 1: that's driven the price lower. Uh. The Iran nuclear deal
• 16:00
  Speaker 1: think that also had a significant significant effect on oil prices.
• 16:03
  Speaker 1: And then there's demand concerns, and the Chinese economy isn't
• 16:06
  Speaker 1: doing very well. It slows substantially, and I think that's
• 16:09
  Speaker 1: led investors to re evaluate their their expectations for the
• 16:12
  Speaker 1: global economy and ultimately what the price of oil should be. Ryan.
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  Speaker 1: These are all perfectly plausible explanations which we here advanced
• 16:22
  Speaker 1: um on media outlets each day. Is there something I
• 16:27
  Speaker 1: just want to push you a little bit? Is there
• 16:29
  Speaker 1: something deeper going on here? Is the world economy going
• 16:36
  Speaker 1: through a fundamental structural, not cyclical, but structural change which
• 16:42
  Speaker 1: is just throwing some of these models and assumptions we've
• 16:46
  Speaker 1: all grown up without the window. Yeah, I think we
• 16:50
  Speaker 1: are going through a lot of changes. I mean, the
• 16:53
  Speaker 1: global economy in the post Great Recession era is likely
• 16:57
  Speaker 1: going to look different than it was fire to it.
• 17:00
  Speaker 1: But it already does, doesn't it does. I'm talking about
• 17:04
  Speaker 1: something that might not be right staring us in the face,
• 17:07
  Speaker 1: but it's building and building, and these things we've been
• 17:10
  Speaker 1: describing are really just symptoms of it. It could be
• 17:14
  Speaker 1: I mean, we could be underestimating the weakness in the
• 17:18
  Speaker 1: Chinese economy, because as everyone knows, you've got to take
• 17:22
  Speaker 1: the Chinese economic data of a grain of salt, so
• 17:25
  Speaker 1: that economy could be doing a lot worse than we
• 17:28
  Speaker 1: anticipate or is visible in the economic data. But I
• 17:32
  Speaker 1: you know, looking around looking for for bubbles or looking
• 17:35
  Speaker 1: for you know, the these uh potential issues is very difficult.
• 17:41
  Speaker 1: It's difficult to find anything that would be explaining why
• 17:43
  Speaker 1: oil is thirty dollars today based on fundamental I mean,
• 17:47
  Speaker 1: the fundamental price of oil is substantially higher than it
• 17:50
  Speaker 1: is trading at today. I think financial demand for oil
• 17:53
  Speaker 1: is very, very low, and I don't think that's getting
• 17:55
  Speaker 1: a lot of attention in the press. UH. And I
• 17:57
  Speaker 1: think that's another reason why oil prices are are where
• 18:00
  Speaker 1: they are today. Can you talk a little bit more
• 18:02
  Speaker 1: about that last point. Yeah, of course. Um, if financial
• 18:07
  Speaker 1: demand plays an important role, you can take a financial
• 18:10
  Speaker 1: demand to speculation. Uh So, speculators can cause the price
• 18:13
  Speaker 1: of oil to increase and decrease from day to day,
• 18:15
  Speaker 1: week to week, and even want the month. But in
• 18:18
  Speaker 1: the long run, fundamentals typically went out, So it boils
• 18:22
  Speaker 1: down to supply and demand how people are using it,
• 18:24
  Speaker 1: basically exactly. And you know, given that, you know, if
• 18:28
  Speaker 1: our view of the world unfolds, we think the global
• 18:32
  Speaker 1: economy is going to pick up over the next couple
• 18:34
  Speaker 1: of years. That applies stronger demand for oil will start
• 18:37
  Speaker 1: to a road or work off some of the excess
• 18:40
  Speaker 1: supply in the oil market today, and that the price
• 18:44
  Speaker 1: will gradually move back towards its equilibrium. When you talk
• 18:48
  Speaker 1: about questions from your relatives or questions in a restaurant
• 18:52
  Speaker 1: and you just find yourself shaking your head, it's part
• 18:56
  Speaker 1: of this because people think, uh ha, but no one
• 18:59
  Speaker 1: foresaw a national housing crash either. We were told it
• 19:04
  Speaker 1: was quote contained unquote. Is that part of the thing
• 19:08
  Speaker 1: that's going on with consumer psyche here. I mean, you
• 19:10
  Speaker 1: did refer to scars of the recession. Is that partly
• 19:14
  Speaker 1: what's going on in terms of why such a slide
• 19:18
  Speaker 1: and oil prices hasn't translated to a consumer booments because
• 19:22
  Speaker 1: belief is gone. That's a very good point, and I
• 19:25
  Speaker 1: think pessimism has become very popular. You know, during the recession,
• 19:29
  Speaker 1: there was just cost to that because you know, our
• 19:32
  Speaker 1: economy was undrapping very very very quickly, and I think
• 19:35
  Speaker 1: the scars from that have taken a long time to heal,
• 19:38
  Speaker 1: and understandably because for many people, uh, you know, it
• 19:42
  Speaker 1: still feels like a recession to them, because there's a
• 19:45
  Speaker 1: large number of people that are not in the labor
• 19:48
  Speaker 1: force but want a job. Wage growth is very, very
• 19:51
  Speaker 1: very weak from a historical perspective, so for many people
• 19:54
  Speaker 1: it's still you know, has has that feel of recessionary conditions.
• 19:59
  Speaker 1: But what makes me worried is that the collective psyche
• 20:04
  Speaker 1: can be very important at turning points, because typically when
• 20:08
  Speaker 1: the economy is doing well, consumers are feeling optimistic and
• 20:11
  Speaker 1: the commis falling apart, pessimism becomes more popular. But at
• 20:15
  Speaker 1: turning points, at changing the collective psychic can be very
• 20:18
  Speaker 1: very important in determining whether the expansion moves on or
• 20:22
  Speaker 1: if the economy becomes at serious risk of falling into recession.
• 20:26
  Speaker 1: And that's one reason why the impact on the stock
• 20:28
  Speaker 1: market is uh and it's a it's full over effect
• 20:31
  Speaker 1: on consumer confidence. Business confidence is going to be very
• 20:34
  Speaker 1: very important to watch over the next few months. Yeah,
• 20:37
  Speaker 1: and we actually talked about that exact issue in an
• 20:40
  Speaker 1: episode just two weeks ago, so listeners should go in
• 20:43
  Speaker 1: and tune into that. But before we wrap up, I
• 20:45
  Speaker 1: do want to kind of address head on this question
• 20:48
  Speaker 1: that we are wondering. At what point does does all
• 20:51
  Speaker 1: this cheap oil become bad for the economy. I guess
• 20:54
  Speaker 1: the good news is oil can only go so low,
• 20:57
  Speaker 1: But I mean, is there is there a point where
• 21:00
  Speaker 1: it becomes bad for us? Do you are we there
• 21:02
  Speaker 1: yet or do you anticipate that we will get there
• 21:04
  Speaker 1: anytime soon? It's a very interesting question. I guess it
• 21:08
  Speaker 1: can only go as low zero, but hopefully we won't
• 21:12
  Speaker 1: get to that point in anytime soon. I think low
• 21:16
  Speaker 1: oil prices haven't been as positive for the economy as
• 21:21
  Speaker 1: we anticipated, you know, when they were you know, falling
• 21:23
  Speaker 1: in late um excuse me, partly because of the investment side.
• 21:30
  Speaker 1: You know, they took it on the chin consumers. They
• 21:32
  Speaker 1: were more cautious than we we had anticipated. But I
• 21:37
  Speaker 1: think oil prices, hopefully they stabilize and begin to increase,
• 21:40
  Speaker 1: because our economy needs a little bit more inflation, and
• 21:45
  Speaker 1: inflation is just too low right now. And if inflation
• 21:48
  Speaker 1: doesn't pick up, then I think, you know, the Fed's
• 21:51
  Speaker 1: going to have to be very very cautious and normalizing
• 21:54
  Speaker 1: interest rates. They're likely punt on a few meetings here
• 21:57
  Speaker 1: and there on raising interest rates, and that's gonna raise
• 22:01
  Speaker 1: concerns about financial stability in so essentially, you know, bubbles
• 22:07
  Speaker 1: will have a greater odds of developing down down the
• 22:11
  Speaker 1: road the longer the Fed weights to to start this process.
• 22:13
  Speaker 1: The other concern is oil prices and inflation expectations are
• 22:18
  Speaker 1: becoming strongly correlated, which is a little bit puzzling to me.
• 22:21
  Speaker 1: Uh you know, it's it's difficult for uh me to
• 22:25
  Speaker 1: understand why consumers expectations of where inflation will be ten
• 22:29
  Speaker 1: years from now is dependent on the price of oil today.
• 22:32
  Speaker 1: But then it's just the whole link with gas prices
• 22:34
  Speaker 1: and that being the price that they see so often
• 22:37
  Speaker 1: I think that I think that's true. You know, I
• 22:38
  Speaker 1: think they do base their inflation expectations on when they
• 22:41
  Speaker 1: drive by, they see the gasoline pump and you know,
• 22:43
  Speaker 1: that's that milk. I think is a big influence on
• 22:46
  Speaker 1: consumers expectations for inflation. But the FED is very very
• 22:50
  Speaker 1: sensitive to fluctuations in long term inflation expectations. So um,
• 22:55
  Speaker 1: I think oil prices are going to be very very
• 22:57
  Speaker 1: important in where monetary policies headed over the next year
• 23:01
  Speaker 1: or so. Well. On that note, we are going to
• 23:04
  Speaker 1: wrap up for today. Thank you so much Ryan for
• 23:07
  Speaker 1: joining us. It's been great being able to chat this
• 23:09
  Speaker 1: over with you. Thank you for having me with my pleasure.
• 23:12
  Speaker 1: Thanks and thanks to you all for listening to Bloomberg Benchmark.
• 23:17
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