Episode summary
What $4 Gas Would Do to the Economy | Prof G Markets
Prof G Markets
· · 27 min · Hosts: Ed Elson, Scott Galloway · Guests: Mark Zandi, Jackson Ader
Summary
The host opens with a sharp read on inflation: February CPI rose 0.3% month over month and 2.4% year over year, but a guest economist argues the underlying trend is closer to 3% and likely to worsen because of the Iran war. He says the CPI is now a rearview-mirror number for markets, while the Fed’s preferred gauge due Friday should come in at 3% on the nose. Gasoline is already the most immediate transmission channel, with AAA prices a little over $3.50 a gallon and potentially heading toward $3.75 if oil stays near $85 to $90 a barrel.
The conversation argues that $4 gasoline would be a meaningful macro shock, raising annual consumer costs by roughly $200 billion and adding about $1,000 per household over a year. The guest economist says that would be especially painful for lower- and middle-income households and would likely force the president to stand down because gas prices are politically explosive.
The second segment focuses on Oracle, where a software analyst says the company’s quarter was solid because it showed not just a huge backlog but actual execution. Cloud revenue jumped 44% year over year, cloud infrastructure revenue rose 84%, and remaining performance obligations climbed to $553 billion. He argues investors are more comfortable because the backlog is less concentrated in OpenAI and because newer contract structures, including prepayments and customer-supplied chips, reduce financing risk.
Key takeaways
- The guest economist says inflation is effectively running closer to 3% than 2.4%, and the war in Iran is pushing it higher.
- He expects gas prices to move from a little over $3.50 a gallon toward $3.75 if oil stays near $85 to $90 a barrel.
- A sustained move toward $4 gasoline would add about $200 billion a year in consumer costs and roughly $1,000 per household.
- The analyst says Oracle’s backlog is more credible because the company is now showing near-term execution, not just future promises.
- Oracle’s remaining performance obligations rose to $553 billion, and investors are increasingly comfortable that the build is not just tied to OpenAI.
Notable quotes
“I think it just what it really does is show that the company can also execute on delivering some of that capacity in the near term”
“I mean, there's nothing that resonates more with the American people than the cost of a gallon of regular unleted”
“if oil prices stay right where they are today, you know, they're somewhere between$ 85 $90 a barrel depending on WTI or brand”
“that would that would probably add about $1,000 to the typical household spill, you know, in a year”
“we also need to recognize that Oracle also has a gigantic application software business in a gigantic database business on top of the cloud business”
How the episode opens
Today's number, 2 million. That's how many dollars the Department of Defense spent on Alaskan king crab in the month of September. That's in addition to the 7 million they spent on lobster tails and the 15 million they spent on ribeye.
More evidence that Republicans are the fiscally responsible party. Welcome to Profy Markets. I'm Edson.
It is March 12th. Let's check in on yesterday's market vitals. The S&P and the Nasdaq were flat and the Dow declined.
Oil crept higher even after the International Energy Agency approved its largest ever reserve distribution. And finally, Treasury yields rose as hopes for rate cuts this year waned following the CPI report. We will get into that right now.
Okay, what's happening? Inflation was sticky in February as expected. The consumer price index, including food and energy, rose.3% from January and 2.4% from a year earlier.
That annual rate is higher than the Fed's 2% target and unchanged from January. Inflation in the coming months, though, is likely to get worse. The war with Iran has already driven up the cost of oil, airfare, and fertilizer, and prices at the pump have increased by 20% since the strikes began, which complicates the inflation picture.
So, here to help us break it down, we're speaking with our friend Mark Zandandy, chief economist at Moody's Analytics. Mark, thank you for joining us. I want to get right into it.
2.4%. What do you make of this inflation print? You know, once you once you account for all the moving parts here and the measurement issues, it feels like to me inflation is closer to 3% than two.
And 3% is uh on the high side of anything that you'd feel comfortable with. I mean, as you pointed out, the Fed's target uh is lower.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- february cpi
- inflation outlook
- oracle earnings
- ai industry
- iran war gas prices
Companies and tickers mentioned
- MCO
- KEY
- ORCL
- Moody’s Analytics
- KeyBanc Capital Markets
- Oracle
Watch the episode
Watch “What $4 Gas Would Do to the Economy | Prof G Markets” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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