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Orangeflea215 t1_it7w8ws wrote

Reply to comment by pattydo in [OC] Inflation rate and nominal interest rate by giteam

I’m not convinced. You don’t think a decrease in overall economic activity will result in a decrease in fuel consumption (i.e. demand for fuel)?

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pattydo t1_it7x90l wrote

Not to a large degree, no. There are way too many other factors causing it right now. The amount of activity it would have to cut would be a disaster.

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AftyOfTheUK t1_it7z696 wrote

>Not to a large degree, no. There are way too many other factors causing it right now. The amount of activity it would have to cut would be a disaster.

You don't need a large cut to make a significant impact. Even a 5% fall would be incredibly notable.

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pattydo t1_it7zkyu wrote

And OPEC would probably just cut production a little and keep the price the same. Or russia would destroy another pipeline.

Even still, a 5% decrease in global demand for oil is massive.

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AftyOfTheUK t1_it8a4cc wrote

>And OPEC would probably just cut production a little and keep the price the same.

You appear to be talking about gas prices at the pump.

I'm talking about consumption levels. When people buy fewer services and go on fewer trips/holidays, they use less fuel.

Very different things.

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pattydo t1_it8ao7d wrote

>You don’t think a decrease in overall economic activity will result in a decrease in fuel consumption?

If you wanted to change the subject you should have specified.

But yeah, consumption can pretty easily be reduced without impacting price. Our markets are too concentrated and barriers too high.

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AftyOfTheUK t1_it8hl22 wrote

>If you wanted to change the subject you should have specified.

I didn't change the subject.

Someone asked:

>I’m not convinced. You don’t think a decrease in overall economic activity will result in a decrease in fuel consumption (i.e. demand for fuel)?

You responded:

>Not to a large degree, no.

You knew what the subject was, as you were discussing it before I even entered the discussion.

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pattydo t1_it8i6m2 wrote

Oh, I didn't articulate my point well. My bad.

Yes, a decrease in overall economic activity will result in a decrease fuel consumption. That doesn't mean it will lead to a decrease in fuel price.

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AftyOfTheUK t1_it8scg7 wrote

Indeed it doesn't. But to reign in inflation we need to reduce economic activity. Fuel prices are weakly correlated with economic activity so may or may not follow that trend depending on other determining factors.

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pattydo t1_it8slr1 wrote

I mean, no we don't? Just because the Fed only has a hammer doesn't mean the problem has to be a nail. This is not the best way to fix it, and is probably one of the worst.

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shhalahr t1_it7ygzc wrote

I'd think there are more factors. I mean, if people continue to go grocery shopping on the same schedule, but just buy less with each trip, that can slow overall economic activity without significantly impacting fuel demand.

Similarly, people that can't work from home still have to make it to work.

Or perhaps the economic downturn causes businesses closer to where most people live to shut down and now they gotta get all the way to the other side of town to get their necessities at the big box store that is now their only option.

Fuel demand can certainly stay the same or even increase while demand for most other things goes down.

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Orangeflea215 t1_it7zhl5 wrote

But you’re just thinking about households. Manufacturing and shipping far outpace households for fuel consumption, and thus have a larger impact on fuel prices.

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