Russia and the Inflationary Wildfire

Good morning,

I hope this message finds everyone well.  WTI Crude prices broke higher through $80/barrel as inflation data continues to run wild.  The market seems to be shrugging off any mention of the FED raising rates until something happens.  We seem to be stuck in a “I’ll believe it when I see it” attitude towards the FED.  Until inflation starts to cool, I’m afraid that energy prices are going to remain high.  Although true supply/demand economics are pointing towards surplus supply in the first half of the year, for now inflation has the market.  I believe the FED will need to act hard in order to put any stop to the rising prices.  At this point, I don’t think a quarter-percent rate increase will even move the needle.  In addition to our inflation troubles at home, the US and Russia are stalled in talks discussing a potential Russian invasion of Ukraine.  Both sides are keeping tensions high and coupling the tension with potential supply disruptions in the Ukraine if an invasion happens.  The geopolitical issues are baking “risk premiums” into the price of crude as well.  So, in order for crude prices to pop and drop, I think we need to see swift and hard action from the FED and the tensions in Ukraine dissipate.  Until then, I unfortunately see prices staying high and slowly climbing higher.

In local news, retail prices for gasoline and diesel slowly crept higher last week.  I expect to see those prices hold and even slowly move higher with the price of crude.

Propane prices are trading in a narrow range as producers and suppliers argue over the potential heating demand for the remainder of winter versus the price of crude oil.  Propane rail shipments have been a disaster as weather and COVID brought shipments to a halt at the start of the year.  Train cars are moving again and I think we will be in better shape by end of next week.  For now, supplies are a little wonky in Wisconsin but we should all be ok.  As a reminder, please make sure your driveway is plowed and there is a clear path to your propane tank to ensure a safe and efficient delivery.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

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