Catherine Rempel

Glad to be here.

It's kind of a funny concept.

And actually, I talked with an economist earlier today who said the idea of demand destruction offends him because demand is the relationship that tells you, you know, how many barrels people are willing to buy at any price.

And the idea here is that like maybe a lot of people will need less oil, will purchase less oil because prices have gone up.

And look, you know, if there were some magic new technology that made cars go twice as fast per gallon, I guess that would be demand destruction.

What we're really talking about here is people buying less because of higher prices.

To be nerdy about it, you're on a different point of the demand curve.

But in this case, it's like prices got so expensive that, in fact, people are going to, to the extent possible, purchase less oil.

They are worried about it because, first of all, there may be a switch in terms of what people's buying habits are going forward.

It may lead to potentially a slowdown in the U.S.

economy, again, to the extent that it is possible, or U.S.

economy, global economy, really, to the extent that it is possible to purchase less oil.

That probably means

Fewer people are going to work.

Less stuff is getting manufactured.

There are big macroeconomic consequences, essentially, of a big decrease in oil consumption and oil demand in an analogous way, I guess I would say, to what happened during COVID when you saw a huge destruction of demand, in that case, because of COVID, not because of high prices.

And that was indicative of and, in fact, contributed to a big slowdown economically around the world.

Well, I think the issue for the Fed is that prices are rising.

Normally, that implies that interest rates should go up, right?

And that the point of interest rates going up is to curb demand, like there's less money sloshing around in the economy, so people are less able to buy things.