These days we often think of memes that capture a particular moment or idea. In the old days it was cartoons. There’s a classic that captures a big part of what is happening now with the stoppage of tankers (they’re not all oil or even other hydrocarbons) in the Strait of Hormuz. I think the cartoon in question is from The New Yorker. If anyone has a copy, do send it. In the cartoon a guy has jumped off a skyscraper. As he flies by the 50th floor a guy in the building asks him, “How’s it going?” The guy flying by says, “So far, so good!”
That about captures the current moment. I noted yesterday that the oil futures markets currently show the price of oil getting back close to where it was in mid-February by December 2028. Yes, 2028. So if you’re thinking in U.S. electoral terms, this isn’t just something for the 2026 midterms. It’s an issue for the 2028 general election as well. The current spot price for oil out of the Gulf (Brent Crude) is at $141, a price runup based on immediate scarcity issues which the futures markets assume will level out fairly quickly. The point is that a big runup in prices is basically already locked in. Obviously, markets could be pricing in more price increases than will actually happen. But those prices seem to assume a quicker end to the conflict than will actually happen. And it’s not just oil. It’s all the things that run on oil. It will show up in the price of foodstuffs that get shipped around the United States in trucks which run on diesel fuel. It’s fertilizer that comes out of the Gulf. Donald Trump claims and maybe believes that this isn’t really an issue for the United States since we now produce more oil than we use domestically. But obviously that’s not how a global market works. If prices are high for Gulf oil going to Asia, they’ll start pulling oil in from other parts of the world including the U.S. More or less, it will even out.
I’m already seeing good signs that major shippers of various products are already figuring into their planning two or three points higher inflation over the next couple years. They could be wrong too. But one of the things about inflation surges is that people raise prices on expectations. So some of the predictions create their own price reality.
I’m not saying anything that people paying attention and with money on the line don’t know. It hasn’t creeped into the news and political conversation yet. But it’s coming.