Economist Warns Of Rising Gas Prices And Local Impacts

Gas prices are high and St. Cloud State Economist King Banaian feels they could get higher.  He joined me on WJON to discuss the current local economy.  He says for 2 months in 2022 we had gas prices above the current level.  Banaian says diesel prices are nearly equaled the highest level reached in 2022.  He suspects gas prices to continue to rise before prices slowly drift downward.

It could take time

Banaian says even if the war in Iran ended today, it would take a few months for all the ships waiting to distribute oil from the middle east around the world to reach their destinations.  He says oil storage locations have reached capacity in the middle east which means the pumping for new oil has stopped.  Banaian says once the pumping has stopped it will take awhile for it to start again.

Fertilizer and Other Goods

Gas isn't the only item that has been impacted by the conflict with Iran.  He says other products impacted by the rise in oil prices worldwide include fertilizer, some clothing products, and nitrogen based products.  Banaian says farmers typically do well during oil price shocks because food prices will go up more than their costs will go up.  He's concerned that the cost of fertilizer could change that script for farmers.

Inflation Rate

Banaian says the inflation rate is stuck at 3% but many would like to see that change to 2%.  He says a potential change in interest rate will have a big impact on the price of goods and services probably more so than the gas price situation.

Recession Chance

Banaian put the chance of recession at 25%, the unemployment rate is under 4.5%.  He says we aren't seeing a lot of new jobs but we aren't seeing a lot of firings either.  Banaian says that is a sign of a pretty good economy.

If you'd like to listen to my conversation with King Banaian, click below.