Rapid Insights Ep.4: Will Oil Fuel the Flames of Inflation?

In this podcast, we explore the impacts of surging oil prices on inflation, amidst the backdrop of the Middle East conflict and its complex geopolitical dynamics. The conflict, acting as a proxy war involving various global powers, has led to a rise in oil prices. From here, it can go two ways: a cost-push inflation spiral or demand destruction due to squeezed household budgets. We analyze the situation from three main perspectives: geopolitics, cost-push inflation, and demand destruction. At face value, rising oil prices can result in higher inflation as transportation and production costs increase, potentially leading to higher wage demands, cycling higher. On the flip side, high fuel costs can also squeeze household budgets. In the past, oil prices above $100 have led markets to extrapolate consumer demand destruction. We also look at a potential reduction in oil demand as people look for more economical alternatives, such as electric vehicles, but conclude that battery prices are not low enough yet for widespread adoption on an economic basis. In conclusion, the interplay between oil prices, geopolitics, and inflation is complex and multi-faceted, with various potential outcomes depending on how these factors evolve over time.

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The information on this podcast contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Damien Klassen is an authorised representative of Nucleus Wealth Management. Nucleus Wealth is a business name of Nucleus Wealth Management Pty Ltd (ABN 54 614 386 266 ) and is a Corporate Authorised Representative of Nucleus Advice Pty Ltd - AFSL 515796

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