Black Gold, A Persistent Problem For the Fed
Oil above $100 is creating a new inflation problem for the Fed
Oil has earned its reputation as black gold, but unlike the precious metal, this liquid gold is consumed. It fuels the trucks delivering groceries. It fuels tractors harvesting crops. It moves people around the world. But when its price rises, the effects don’t stop at the gas pump.
Brent crude, the international oil benchmark, closed above $105 per barrel on October 13, as geopolitical tensions and supply disruptions continued to pressure global energy markets. According to Reuters, uncertainty surrounding global supply remains a significant factor supporting prices.
That’s of course a problem for consumers and businesses, but it’s particularly a problem for the Fed. Higher oil prices can simultaneously increase inflation and slow economic growth, leaving the Fed with two competing objectives and no good solutions.