Are energy prices and inflation about to escalate?

 NARRATIVE WILL NO LONGER CONTAIN ENERGY PRICES

WE SHOULD EXPECT MANY NEW RECORD HIGH PRICES 

 

The latest escalation of the conflict in Iran, coupled with the energy wars in the Russia/Ukraine conflict are now about to move costs to the next level and possibly actual shortages. The biggest increase are in diesel and heating oil. Today diesel is over $6.00 gallon and heating oil is at $5.20 a gallon. This is a result of the continued conflict with Iran and the damage being inflicted on western Russia's refining capacity.

 

Much of this has to do with refined products, especially diesel and aviation fuel. Much of these products are refined outside the United States and Russia has discontinued the export of Diesel fuel. Russia, even today, was still a producer of Diesel fuel for the United States.  The rise in diesel fuel prices will result in higher prices for everything, from food, every product that is transported, it will increase inflation and probably interest rates.

 

Bond yields exploded with the 2yr now yielding $4.40 %, ten year 4.81 % and 30 yr, 5.28%, this will dramatically add to the US deficit just in servicing its debt that is rising by the day. We may be on the precipice of a debt spiral that will bring down the world economy. Speeches, and optimistic narratives may no longer be effective. The realities of basic math will always overcome empty words.

 

While the G20 was an exercise in political gamesmanship the other meeting in Kyrgyzstan of the Shanghai cooperation Organization, SCO, was optimistic that their members will prosper with mutual cooperation. The presidents of the biggest members, Russia, China, India and Iran  with 8 other members and 15 associate members represent 40% of the worlds population and 25% of the worlds GDP. Their agenda was a multi polar economic alliance that is independent of the western economic system.

 

This meeting precedes the bigger more diverse BRICS meeting coming up Sept 12-13 in New Delhi. It will have a similar goal of cooperation and a multi polar economic system. All these nations have refused to cooperate with sanctions and other economic warfare. The sad reality is that endless war and economic sanctions have increased cooperation and which is in effect isolating those who have engaged in those practices.  

 

Hopefully the west will realize that it cannot control the world by force and intimidation and it is possible for coexistence and mutual prosperity.