Oil Is Back Above $100. Your Gas Tank May Not Be the Biggest Problem

Oil moved back above $100 a barrel this week.

For most Americans, that immediately brings one thing to mind: higher prices at the gas station.

But this time, the bigger story may be happening well beyond the pump.

The global energy system is dealing with a complicated mix of geopolitical conflict, strained refining capacity, expensive shipping and tightening supplies of critical fuels like diesel. And those pressures can work their way through transportation, manufacturing, agriculture and eventually the prices consumers pay.

It is also one reason investors may want to keep an eye on gold.

Not because $100 oil automatically sends gold higher. But when energy prices, inflation concerns, geopolitical uncertainty and interest-rate expectations begin moving at the same time, it can change the investment landscape quickly.

And right now, there is considerably more happening beneath the surface of the oil market than the price of a barrel might suggest.

The Oil Story Has Changed

Brent crude moved back above $100 a barrel this week as markets reacted to continuing supply concerns in the Middle East and new threats to energy infrastructure.

But simply looking at the price of crude misses part of the story.

Even as some Middle Eastern crude exports have recovered, the system responsible for actually moving and refining that oil remains under significant strain.

Reuters recently reported that rising shipping and insurance costs, refinery disruptions and shortages of important petroleum products such as diesel have become a growing part of the problem. Tanker rates on some Middle East-to-Asia routes have surged, while constrained refining capacity has made turning crude oil into usable fuels more difficult.

In other words, the world may have oil available, but getting the right oil to the right refinery and then delivering the finished fuel where it is needed has become much more expensive.

Watch Diesel, Not Just Gasoline

Americans naturally pay attention to gasoline prices because they see them advertised on street corners every day.

But diesel may be the more important economic number to watch right now.

As of October 6, U.S. Energy Information Administration data showed average U.S. retail gasoline at roughly $4.37 per gallon and diesel at approximately $6.30 per gallon.

Why does diesel matter so much?

Because diesel helps move the economy.

The EIA notes that trucks, trains, boats and barges use diesel to transport much of what Americans consume. Diesel also powers large amounts of farm equipment, construction machinery and other heavy equipment.

So when diesel becomes substantially more expensive, the impact does not necessarily stop with someone filling up a pickup truck.

It can potentially increase the cost of:

• transporting food and consumer goods
• operating farm equipment
• construction and heavy machinery
• manufacturing and industrial operations
• moving products through the nation’s supply chain

Businesses can absorb some of those increases. But sustained increases eventually make their way into the prices customers pay.

That’s one reason the current energy story deserves more attention than simply asking whether gasoline will rise another 20 cents.

Inflation Expectations Are Moving Again

This becomes especially important because Americans were already concerned about inflation before this week’s latest move in oil.

Fresh data released October 7 by the Federal Reserve Bank of New York showed that consumers now expect inflation of 3.9% over the next year, up from 3.6% the previous month and the highest one-year expectation since May 2023.

Consumers also raised their expectations for price increases in gasoline and food.

And there are signs that businesses are already experiencing additional pressure.

The latest Institute for Supply Management (ISM) services report showed input prices reaching their highest level since 2022as companies dealt with higher fuel and commodity costs and renewed supply-chain strains.

That makes the current oil move particularly interesting.

It isn’t arriving when inflation is comfortably back at 2%.

It’s arriving while inflation remains above the Federal Reserve’s target and policymakers are already debating whether interest rates need to remain higher, or potentially move higher still.

So Where Does Gold Fit?

This is where the story becomes more interesting for investors. Gold is not simply a bet that gasoline prices will rise. And oil moving above $100 does not guarantee that gold prices will rise with it.

At the same time, persistent inflation, geopolitical risk, financial-market volatility, and concerns about preserving purchasing power can increase the reasons some investors consider owning it.

That is why gold may be more useful to think about as a tangible asset that can help diversify savings during periods of rising prices and economic uncertainty.

Periods when gold retreats from recent highs can give investors who were reluctant to buy during a sharp run-up an opportunity to reassess whether they want to add physical gold before the market’s next major move. With the recent dip in prices, savvy savers are moving fast.

The Bigger Question Isn’t Whether Oil Hits $110

Trying to predict the next $10 move in crude is probably less important than understanding what today’s energy market is telling us.

Right now:

Oil prices remain elevated.

Diesel is unusually expensive.

Shipping and refining systems remain strained.

Governments are releasing emergency reserves.

Consumers’ inflation expectations are rising again.

And the Federal Reserve is trying to determine whether inflation pressures will require interest rates to stay higher for longer.

Any one of those developments might be manageable on its own.

Together, they create another reminder of how quickly the economic environment can change.

For Americans who have spent decades building savings and retirement assets, that may be a good reason to periodically ask whether everything they own responds to inflation, geopolitical risk and financial-market volatility in the same way.

For investors looking for assets that behave differently from traditional stocks, bonds and cash, today’s unusual combination of energy pressure, inflation uncertainty and geopolitical instability may provide another reason to learn more about the role physical precious metals can play in a diversified portfolio. The recent pullback may offer an opportunity to explore their options while prices remain below recent highs.

To learn more about owning physical gold or adding eligible precious metals to a self-directed IRA, call Lear Capital at 855-271-2873 to speak with an experienced representative.