Oil Price Increase
This week, for the first time since 2019, OPEC will be meeting in person in Vienna. The talk of the town, which was moving markets this morning, is that they’re talking about cutting production by a million barrels per day. Last month when they met virtually, they discussed and followed through on cutting their production by one hundred thousand barrels a day. That didn’t appear to have the impact on the energy market that they had hoped, and they appear to be pushing for prices to go higher this time. A one million barrels a day cut will be sizable in terms of the impact of the markets. We’re seeing that oil prices are up four to five percent just on the rumor of this news. It’ll be good to see how markets react to the actual news once it occurs later this week. What is also throwing a hitch in this, is that one of the OPEC Plus members, Russian’s oil minister, is under sanctions and legally cannot leave Russia. How he will be able to be part of these talks will also be something to watch close. This is a big part of where we’ve seen the supply of oil stay high, and the price of oil come down. That alone has been a huge help in the last couple of months in terms of our CPI. It appears that OPEC is wanting to turn that around and push our oil prices back up. This is something we’re watching very closely. However, there’s numerous things that could occur after OPEC makes their decision, which could help in maybe keeping oil prices stable. It’s an ever-moving world but this will be a big data point this week for close out the year.
Money Supply
Cutting supply isn’t always a bad thing. We’ve seen a good sign here of cutting the money supply down. During the pandemic the government was printing a lot of money but people weren’t working. That typically has a thirteen-month leading indicator of CPI which, of course, is inflation. With us bringing supply down, we’re at about 1.5% growth, which is way below normal. Normal is around 4-5%. During COVID, it was up to around 9%. That’s a good leading indicator of inflation for thirteen months from now. Even though that’s thirteen months from now, it has steadily decreased and if we are down to 1.5% now, we should start seeing an impact here in around six months or so. One analogy that we’ve used before with CPI is if you have ten dollars and ten apples, and that’s your whole economy, each apple is a dollar. If we print more money and we have fifteen dollars available, but still just ten apples, now every apple is a dollar fifty. That’s kind of what we saw during the pandemic. Now, we’re getting back to the more of the normal ten for ten.
Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here
Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here
Ty Miller
Associate Vice President
Email Ty Miller here
Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.
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