Transcript:
Tom Vaughan:
Everybody, welcome to Tuesday, the S&P 500 was down 1.55%. Today, the big story was oil. Let me give you some of the interesting information that’s been happening there. As a world, we use about 100 million barrels of oil a day, Russia produces 10 million barrels. Obviously, there’s a big conflict going on right now. And the question is, how much of Russia’s production would be cut back? That doesn’t disappear completely? Is it two, 3 million barrels a day, what happens there, we do have these very heavy sanctions. But there are carve outs in those sanctions to allow Russia to continue to sell their oil and gas, specifically, because it’s winter, and Europe uses a lot of Russian oil and gas. And so you know how much that drops will be a critical component of this as far as that goes. And so what happened, today’s International Energy Agency released 60 million barrels of oil out of their strategic reserves, 30 million came from the US 30 million came from the rest of the world.
And really, you know, one of the problems with oil has been that it’s kind of tight already, it has come up in price quite a bit prior to this conflict, because the world’s reopening, and a lot of the production of oil was closed down during the pandemic and still catching up and what have you to so it’s a little bit difficult to turn it up a lot. But Saudi Arabia still has, for example, an interest historically in keeping prices in that lower range, maybe in the $80 range. And one of the reasons is because higher cost producers like the US which have higher labor costs, when the price gets high enough, they can all start producing and taking away market share from some of the lower cost producers. So OPEC plus meets tomorrow, I’ll be interesting to see what they do, because I think they would have some desire to keep that price from getting too high. You know, it’s at $104 a barrel roughly, on the after hours, as I saw it up to $106. a barrel very easily will go higher than that before it goes lower, it got to $150 a barrel, for example, in 2007, because it’s going to take a while for this to work its way through. And so oil is important to the economy. That’s a big piece of the inflation picture, we’re dealing with last month’s inflation number seven and a half percent year over year, but in that number energy grew 27% year over year.
So the continuation of the growth and the cost of energy drives that inflation number and the Federal Reserve that has to deal with that. And does that mean that they end up with more rate increases? Hopefully not I you know, we’ll have to see how this goes. As far as that goes, and how, you know, we’re able to kind of overcome the production. But this is just like anything else, there’s a short term, cut back on the supply for whatever reason, and it does take some time to kind of re establish that supply from different sources as far as that goes. So we could see something happening, for example, with Iran, because they’ve been cut off at the world supply and they could come in here too. So but even that would take some significant time. So anyway, that’s what’s happening right now. I still feel fine about the market. You know, we had great motion up on Thursday, Friday, last week, really kind of going sideways at this point in time for the most part and you don’t have to wait and see what goes on. But look forward to seeing you tomorrow and get the chance to see what’s going to happen then. Thank you very much.