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Diesel Prices Are Doing What $4 Gas Did in 2008. Inflation Warning Sign?
US diesel prices have posted their sharpest annual increase on record. The Bloomberg heating oil index is up 150% over the past year. Bloomberg Intelligence senior commodity strategist Mike McGlone said this echoes 2008, when four-dollar gasoline marked a peak before prices collapsed.
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What happened
US diesel prices have posted their sharpest annual increase on record. The Bloomberg heating oil index is up 150% over the past year. Bloomberg Intelligence senior commodity strategist Mike McGlone said this echoes 2008, when four-dollar gasoline marked a peak before prices collapsed.
Confirmed
Global impact / market context
Diesel powers trucks, trains and farm equipment, so higher diesel prices raise shipping and production costs for many companies. Those extra costs can be passed to customers through higher prices, which keeps inflation pressure alive and complicates decisions for investors expecting price growth to cool.
Analyst inference
This comparison to 2008 suggests a possible turning point, because that year energy prices peaked before falling sharply. For investors, that means today's spike could either signal more inflation ahead or mark an eventual top, depending on whether diesel prices follow the same path.
Analyst inference
What to watch
- Watch whether the Bloomberg heating oil index keeps rising after its 150% yearly gain, since further increases would confirm the inflation warning McGlone described. Confirmed
- Investors could compare today's diesel move with 2008, when four-dollar gasoline reportedly peaked before collapsing, to judge whether a similar reversal might be forming. Proposed
- Watch shipping, farming and transport companies' costs, because sustained diesel prices raise their expenses, cut profit per sale, and may push them to charge customers more. Analyst inference