Here's Why Prices Are Staying High

[View this email in your browser]( Everyone has been talking about inflation...and for good reason. It's everywhere! Gas, up. Food, up. Rent, up. Literally breathing air feels like it's up. Throughout the entire 2021 calendar year, we were told by the "professionals" that inflation would be transitory, yet as I write this email to you, inflation is still at a 40-year high. Why? Well, I don't want to act like I know everything about inflation, but there is something that I do know quite well; the majority of inflation comes down to just one thing...oil. Today is October 27, 2022, and as of writing this email, demand for crude oil in the United States is DOWN 1,200,000 barrels a day and is trading for $88.77 a barrel. Last year, on October 27, 2021, demand for crude oil in the United States was of course greater by 1,200,000 barrels a day, and was trading for $82.34 a barrel. So, in 365 days, demand is DOWN 1,200,000 barrels a day yet the price of oil is higher...how? Well, basis economics 101 tells me that is because supply is down more than 1,200,000 barrels a day, and that number is being boosted by the greatest releases from the United State's strategic oil reserves...ever! Supply constraints, even with the historic releases from our oil reserves, are making the price of oil stay elevated, and here is the problem...oil is in EVERYTHING. The car you ride to and from work in...oil. The plane you fly in...oil. The products you purchase at the store...all transported with oil. Now, when it comes to transportation, whether is it by land or sea, is not using the gasoline you and I are buying at the local gas station. No, those transport vehicles are running on diesel. Here is where it gets very concerning when looking at diesel, which again, transports literally everything. 1) Diesel inventory (remember, it's a supply thing) is currently at its lowest levels ever for October. Not lowest in the last XX year...ever. 2) According to the EIA, the United States now has just 25 days of diesel supply 3) The cost of converting crude oil to diesel is 450% greater in 2022 than the average cost from 2000-2020 Ugly picture for diesel, which again, transports everything. And supply for diesel is and will continue to go lower unless energy policy in the US makes a 180 degree turn. Now, what does this have to do with inflation? Well, if it costs Trader Joe's triple what it cost them last year to get food to arrive at a location to be purchased by consumers because of the cost of diesel fuel, Trader Joe ain't lowering prices. They would prefer to stay in business I imagine. And if Trader Joe's input prices are not coming down, food prices ain't coming down. Fortunately, or not fortunately, getting gasoline and diesel prices lower is actually really easy, but it will require politicians to do a 180-degree turn, which no politician in the history of the US has ever done. And if oil is going to remain so elevated, and transportation costs are going to continue to be insane due to the high price of diesel, inflation is going to have a very difficult time getting below 5% or even 6%, which means... Higher rates for longer, and lower growth for longer. Be on the lookout for the price of oil. Unless it comes way down, in talking to like $60/barrel, it's going to be really tough to get inflation under 5-6%, almost regardless of what the Fed wakes up and decides to do. Oh, and if you are one of those people who are hoping for a Fed pivot, what would you think will happen to the price of oil if the Fed flips and the dollar comes down... Stay small and win more trades, Steven STONY BROOK SECURITIES LLC IS A PUBLISHER AND DOES NOT OFFER TRADING ADVICE OR RECOMMENDATIONS. ALL INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND NOT AN OFFER OR A RECOMMENDATION TO TRADE FUTURES CONTRACTS, STOCKS, OPTIONS OR FOREX. GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE FACT THAT WHILE THE TRADING IDEAS AND TRADING METHODS SHOWN ON THIS WEBSITE MAY HAVE WORKED IN THE PAST; BUT PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A HUGE RISK OF LOSS. A LOSS INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS, STOCKS, OPTIONS OR FOREX CAN BE SIGNIFICANT. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION SINCE ALL SPECULATIVE TRADING IS INHERENTLY RISKY AND SHOULD ONLY BE UNDERTAKEN BY INDIVIDUALS WITH ADEQUATE RISK CAPITAL. AN INVESTOR COULD POTENTIALLY LOSE ALL OR MORE THAN THE INITIAL INVESTMENT. [FULL INVESTMENT RISK DISCLOSURE]( Copyright © 2022 Stonybrooksecurities LLC, All rights reserved. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](. Questions? Contact support@stonybrooksecurities.com