Whatâs going on here? A key measure of oil prices rose above $90 a barrel for the first time since November, as major oil-producing nations extended their supply cuts. What does this mean? In a bid to prop up oil prices, Saudi Arabia and Russia are keeping their oil taps turned down a bit. The countries just extended their production cuts until December, which means theyâre pumping out less oil than they could. And thatâs a decision that caught many off guard: investors had already been bracing for a bit of a squeeze in supply, especially with some key countries producing less oil and Saudi Arabia making extra cuts back in July. But this mega-lengthy cut means the pinch might be even tighter than expected. As a result, Brent oil, a global price benchmark, has jumped to its highest level in ten months. And itâs not just oil feeling the heat: the Energy Select Sector SPDR Fund, which keeps tabs on big energy players, has also seen a boost. Why should I care? For you personally: Higher prices at the pump. When oil prices rise, so does the cost of gasoline. And thatâs bad news given that weâre currently at an average of $3.80 per gallon, nearing the dreaded $4 mark. Thatâll only add to the cost of living for regular folk â which doesnât bode well for President Biden, as rising gas prices can be a seriously sore spot for voters. The bigger picture: The specter of stagflation. Rising oil prices can fan the flames of inflation, driving the cost of everyday items skyward. And if inflation keeps climbing, central banks might hike up interest rates further, making borrowing more expensive. That could lead to a nightmare scenario: stagflation, where we see stagnant growth paired with high inflation. But itâs not all gloomy. The economy has shown resilience so far, and thereâs been some solid evidence that other components of inflation might actually be cooling down. |