pattydo t1_it7x90l wrote on October 21, 2022 at 4:07 PM

Reply to comment by Orangeflea215 in [OC] Inflation rate and nominal interest rate by giteam

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.

AftyOfTheUK t1_it7z696 wrote on October 21, 2022 at 4:20 PM

>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.

pattydo t1_it7zkyu wrote on October 21, 2022 at 4:23 PM

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.

AftyOfTheUK t1_it8a4cc wrote on October 21, 2022 at 5:33 PM

>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.

pattydo t1_it8ao7d wrote on October 21, 2022 at 5:36 PM

>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.

AftyOfTheUK t1_it8hl22 wrote on October 21, 2022 at 6:22 PM

>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.

pattydo t1_it8i6m2 wrote on October 21, 2022 at 6:26 PM

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.

AftyOfTheUK t1_it8scg7 wrote on October 21, 2022 at 7:35 PM

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.

pattydo t1_it8slr1 wrote on October 21, 2022 at 7:36 PM

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.