Tags: trump | opec | oil | trade | tariff | investors

Want to Get Average American's Attention? Raise Gasoline Prices

Want to Get Average American's Attention? Raise Gasoline Prices

Thursday, 05 July 2018 10:13 AM Current | Bio | Archive

President Donald Trump has tweeted angrily about OPEC and oil prices.

“The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two way street. REDUCE PRICING NOW!” he wrote on Twitter.

The president appears unhappy with the level of oil prices considering them to be too high. The president’s authority in the oil market is such that oil prices rose marginally in European trading when markets were closed in the U.S. for the holiday.

A higher oil price transfers money from American oil consumers to oil producers. Now, as OPEC spends, by far, most of its income in Europe rather than in the United States, any money flowing from the U.S. to OPEC will tend to be spent in Europe.

However, and for investors that’s important, not that much money flows from the U.S. to OPEC into the U.S. fracking area.

More significantly perhaps is the extraordinarily low taxation of oil in the United States, which means that U.S. consumers do notice when the oil price goes up. As oil is a high-frequency purchase, U.S. consumers react to a rise in the oil price fearing that their way of life could be challenged if it is more expensive to fill up the family fleet of sports-utility vehicles like for example crossover SUVs, Mini SUVs, Compact SUVs and other similar vehicles of course.

Interestingly, Iran’s OPEC Governor Hossein Kazempour Ardebili said in a message to President Trump: “Your tweets have driven the prices up by at least $10 per barrel, Pls stop it, otherwise it will go even higher!”

Germany’s and EU Economy

Meanwhile on the other side of the Atlantic Ocean, German factory orders were up by 2.6 percent month-over-month in May of 2018, beating market consensus of a 1.1 percent rise and recovering from a downwardly revised 1.6 percent drop in April.

It was the first rise in manufacturing output since December 2017, due to a 4.3 percent gain in both domestic demand and a 1.6 percent growth in foreign orders.

New orders from the Euro Area went up 6.7 percent, while those from countries outside the Euro area fell by 1.3 percent.

By category, new orders rose for both capital (4.7 percent) and consumer goods (4.9 percent), but fell for intermediate goods (-0.6 percent).

All this rather reinforces the point for long-term investors that in fact there wasn’t really a soft patch at the start of the year in Germany, which is by way still the biggest economy in the European Union (EU) and all this was nothing more than an optical illusion caused by poor data calculation.

For investors it could be not such a bad idea to take note the that the underlying growth has signaled “trend” to be above trend growth as well as in the United Sates as in the Euro area.

Emerging Markets

Emerging stocks fell for a fourth straight session today as tomorrow’s US deadline comes close for imposing tariffs $34 billion on Chinese goods, with Beijing set to retaliate in kind.

China has made it clear that tariffs on U.S. goods will take effect immediately after the U.S. duties kick in.

Chinese stocks slid to a more-than two-year low ahead of the tariffs. The Shanghai Composite Index dropped 0.9 percent, extending its loss in the past four weeks to 12 percent.

The Turkish lira from its side stabilized after coming under sustained selling earlier in the week when consumer price inflation jumped to a 14-year high. This increased expectations the Turkish central bank will have to raise rates again.

As an EM (Emerging Markets) interested investor, and certainly for the time being, I would prefer to wait and see now that the so-called “Tariff Hour” could probably change to the overall picture.

As an EM-interested-investor you can be sure: " You will not miss the train! Time is on your side!”

Minutes of the Federal Reserve

Today, we’ll also get the last “Minutes of the Federal Reserve” that give investors somewhat more insight about the Fed’s thinking because, as of lately, the relative absence of Fed speakers.

We’ll wait and see what tomorrow’s employment situation numbers for June tell us.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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As oil is a high-frequency purchase, U.S. consumers react to a rise in the oil price fearing that their way of life could be challenged if it is more expensive to fill up the family fleet of sports-utility vehicles.
trump, opec, oil, trade, tariff, investors
Thursday, 05 July 2018 10:13 AM
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