The price of a barrel of Brent Crude oil was north of $66 on Friday morning. Oil traders have been keeping a close eye on the international benchmark in the wake of the sanctions President Donald Trump announced earlier this week on two major Russian oil companies.
The stock market usually doesn’t freak out anymore when the Trump administration announces new tariffs, partly because there’s a good chance those tariffs get rolled back or softened. Global oil traders have applied that lesson to these sanctions, according to Abhi Rajendran at Rice University’s Center for Energy Studies.
“That’s partly playing into why we’re only seeing kind of a couple of dollar response, even though the potential for disruption on paper could be quite large,” he said.
The price of oil going up $4 in a matter of days is significant, but Rajendran doesn’t expect it to rattle the global economy — a global economy that’s already slowing down and doesn’t need as much oil.
“You know, the market does have the cushion to weather maybe a modest supply disruption,” Rajendran said.
China and India import a lot of Russian crude, but economist Yuriy Gorodnichenko at UC Berkeley said that American drivers will likely be spared significantly higher gas prices. That’s good news for the Federal Reserve’s fight against inflation.
“We know, for example, that households have very sensitive inflation expectations. They’re very sensitive to the price of gasoline, price of oil,” he said.
If Americans do see those big black numbers above gas stations going up, research suggests they expect prices of other goods to rise, too — which can be a self-fulfilling expectation.
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