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Join John Suter, vice president of economic research at CFC, as he explores how rising oil prices affect everything from gasoline and groceries to inflation and household budgets.
Contact the Economic & Market Watch team at economicresearch@nrucfc.coop.
Visit us, download the intelligence brief and dashboard and explore economic insights on our website, nrucfc.coop/Solutions.
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What is Solutions Economic and Market Watch?
Listen to the latest economic insights from CFC experts John Suter, Sam Kem, and Antony Davies.
Hello, and welcome to the Economic and Market Watch podcast for the week of August 03, 2026. This is John Suter of CFC.
John Suter:Whether it's Russia invading the Ukraine or the United States bombing Iran, any unexpected shock, such as these two, creates problems for the world's energy supplies. Governments are being forced to redefine energy security for an age of geopolitical fragmentation. It's an age in which resilience depends not only on how much oil the world produces, but also where it flows, who can get it, and which countries are able to absorb the shock when it is interrupted.
John Suter:For example, in wealthier countries like the United States, pricier oil generally shows up first as inflation and weaker economic growth. This happened back in the 1970s with the OPEC cartel. Slower economic growth and higher inflation, called stagflation, was caused by the 1973 oil embargo and the 1979 energy crisis. The Federal Reserve could not really address either problem through adjusting interest rates.
John Suter:The higher rates needed to combat inflation slow the economy further, and the lower interest rates stimulate inflation. It's a catch-22 that the Fed wants to desperately avoid this time around. However, this situation is even worse for lower income importing countries as it manifests as oil shortages. This is why Bangladesh has limited air conditioning to a balmy 77 degrees and Laos shortened the school week from five days to three.
John Suter:The oil market shock resulting from the bombing of Iran has resulted in the on- and off-again closure of the Strait of Hormuz, taking 20% of the world's oil supply off the market. The strait is a critical passageway between the Persian Gulf and the Gulf of Oman.
John Suter:It's important to understand that oil priced on global markets is influenced not just by potential shortages, but also by how risky and costly it is to move oil. Currently, we have all three issues impacting oil prices.
John Suter:Furthermore, this situation is made even more complex because one of the largest oil importers, China, has been an absent buyer. The reason is because China imported far more oil than it needed from 2024 through early 2026. For Wall Street and Main Street, the longer China holds off from buying lots of oil, the better the chance that inflation will slow or actually fall. That in turn leads to a bigger chance that the Federal Reserve and other central banks can lower interest rates in the future.
John Suter:As most Americans have found out at the gas pump, the U.S. is insulated, but not immune to the impact. The United States is a major oil producer and is more energy independent than many countries around the world.
John Suter:But, oil is priced globally. A disruption anywhere turns into a price increase everywhere. This is a key point that deserves repeating: A disruption anywhere turns into a price increase everywhere.
John Suter:The oil market is highly interconnected. The U.S. produces mostly lighter shale oil, while the bulk of its refineries are intended for a heavier grade of crude. As a result, the U.S. both exports and imports oil.
John Suter:And unfortunately, analysts believe the Middle East skirmish, either settled or unsettled, is going to impact the U.S. economy for the rest of the year.
John Suter:How so? Here are the different ways higher oil prices hurt the American consumer.
John Suter:First off, we all know the obvious when oil prices spike. Our costs at the gas pump starts to rise as oil gets more expensive to buy and refine. Gas prices nationally now set at over $4 per gallon and are much higher in many regions of the country. Higher gas prices hurt rural America more due to longer driving distances, lack of public transit, and heavy reliance on diesel for farming and freight. As such, voters get angry when prices at the pump become much higher.
John Suter:Secondly, with rising fuel costs, it now costs more to get our packages delivered. The price of diesel, a fuel refined from oil that powers the U.S. trucking industry, is spiking. Did you know that in the U.S., according to data from the American Trucking Association, over 72% to 73% of goods are delivered by tractor trailers?
John Suter:You might call them 18 wheelers, big rigs, semis, heavy-duty commercial, or long-haul trucks. Whatever you refer to them as, they are a vital part of our transport system. They account for more than 11 billion tons of goods transported across the country each year. Diesel prices have climbed by more than $2 per gallon in the last year with the current national average of $5.35 per gallon. As costs increase for trucks to move goods from coast to coast, prices for any number of products are going to start ticking up. For example, a short list of top commodities moved by tractor trailers would be construction materials gravel, sand, crushed stone, cereal grains, gasoline, and non-metallic mineral products.
John Suter:And it just doesn't stop at goods delivery. Soon, our groceries will cost more as well. The cost to produce and transport food is getting more expensive. Trucks move the vast majority of agricultural products in the U.S., and as mentioned earlier, diesel also powers farm equipment like tractors.
John Suter:Economists expect these price increases to become even more apparent to consumers during the second half of 2026. If you are following the headline Consumer Price Index, which includes volatile food and energy components, the upward trend has already started to spike, just like it did back in early 2022 when inflation peaked at an annualized rate of 9.1%. The high for 2026 so far has been 4.2% in May, only to back down to 3.8% due to the lower energy costs in June. Expect the whipsawing to continue due to the Middle East conflict and pray that no further global shocks develop.
John Suter:Lastly, your summer vacation flight might be more expensive, especially if you're flying internationally. Jet fuel prices have spiked as well, leading to higher airline fares and fees during the busy summer travel season. The cost of U.S. jet fuel is up more than 50% since the war began, and fuel costs are one of the biggest expenses for airlines.
John Suter:Unfortunately for our listeners, these price shocks are here to stay, at least for the time being. Even if the Strait of Hormuz reopens soon, unwinding the damage from the upheaval will take months. The ramifications of such a long lasting shock to system cannot be easily undone, which might mean a penny pitching second half of the year for many Americans.
John Suter:That's it for today, but before I go, this podcast is available on Spotify, Apple Podcasts, and other platforms. Look for the links at the top of the Economic and Market Watch page to find us and follow the show.
John Suter:As always, we thank you for listening, and be sure to download the Economic and Market Watch dashboard and intelligence brief. We'll talk to you soon.