The Outlook for U.S. Gas Prices
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Here's your Money Briefing. I'm J.R. Whalen at The Wall Street Journal in New York. Gas prices jumped by an average of $0.07 a gallon following the attacks on Saudi Arabian oil facilities last weekend. In a moment, we'll find out from a Journal Markets reporter why prices are rising when the U.S. is the world's leader in oil production. First, some money in market news you should know. As the Federal Reserve has lowered interest rates this year, borrowing costs for consumers, including mortgage rates, have come down as well. The average rate on a 30-year fixed-rate mortgage has come down to about 3.5%.
How did gas prices react immediately after the attacks on Saudi oil facilities?
Not only has that sparked an increase in mortgage applications for new homes, but mortgage refinancing applications have more than doubled compared to a year ago. Other costs to borrow have come down also. Bankrate.com says both the average rate on a five-year new car loan and the average rate on a home equity line of credit have both come down in the past two months. And Wall Street Journal columnist Joanne Lublin examines the most coveted qualities among workers looking for a promotion. At the top of the list, be able to play nice. Recruiters and career advisors say being highly collaborative can boost your value and can help your reputation even if you lose the bump up to somebody else. Seeking out an internal mentor can be a key to moving up as well.
Management experts say a mentor can be a sounding board to help an employee manage their emotions, but a promotion candidate could also inform a mentor if another candidate steals credit for their accomplishments. And in terms of CEO jobs, most corporate boards now scrutinize whether CEO prospects get along with each other and their peers. About three-quarters of the heads of S&P 500 companies who got the top job last year came from within. See the full story at WSJ.com and the WSJ app.
Saudi Arabia says it expects oil production to return to normal by the end of the month, following attacks on the country's oil facilities earlier this month. That doesn't mean that drivers won't feel it at the pump. Let's bring in Wall Street Journal Markets reporter Amrith Ramkamar for some answers. So, Amrith, drivers got some sticker shock almost right away. Gas prices crept up by about seven cents a gallon in the days after the attack. What's Was that based on speculation, or is the impact of supply disruption that immediate?
So really, it's a bit of both. There is an immediate impact felt in global oil markets, and that really carries through to the pump. And there is a lot of uncertainty now that's being priced in, if that makes sense. So the thing people often misunderstand is that even though the U.S. is producing a lot of oil... The U.S. also imports a lot of oil. That's why the Saudi Arabian production is so important. And that's why there's this risk premium now that people are talking about in the marketplace that could result in higher gas prices moving forward.
So this is like a balancing act between the U.S. and other countries it relies on.
That's exactly right. Even though the U.S. is now the world's largest oil producer and has huge capacity, the U.S. has limited export capacity. So Saudi Arabia is the world's most important producer because it has a lot of spare capacity that it can turn on in emergencies and massive amounts of export capacity, and it exports a ton. So there are really complex flows around the world here, and that's why things that are happening in these Asian markets that count on Saudi Arabian crude could impact people at the pump. Right now, Saudi Arabia is trying to calm markets by saying it's getting production back to normal, and that's why we're seeing oil prices come back down. So that could mitigate some of this, but there's a lot of uncertainty again, so it's really worth watching what happens.
What is the typical lag between a disruption in supply and when we see an impact in a change in prices at the pump? Is there a typical rule of thumb? Is it a couple of days? Is it a week?
I would say there's not necessarily an easy answer to that because it really depends on the magnitude of the shock and the reaction we see in the futures markets again.
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