Gas prices are headed back up

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That ceasefire that wasn't really a ceasefire? Well, it's over, and the economy would like a word, from American public media. This is Marketplace.

In Los Angeles, I'm Kyle. It is Wednesday. Today, this one's the 8th of July. Good as it always is to have you along, everybody. The president is on his way back from that NATO summit in Turkey. Before he left, though, he did say the ceasefire was over. And both sides, according to reporting as of this moment, are shooting at and or bombing each other. And for those of us, for whom the economy is our concern, I mean, here we go again. We've gotten Robin Brooks back on the phone to talk things over. He has a senior fellow at the Brookings Institution. Robin, thanks for answering the phone when we called. Yeah, of course. Great to be with you, Kai.

Last time we had you on talking about the subject at hand, you said at one point in that conversation, you know, I think traders have to get their risk premium realigned. They're not pricing in the eventualities, as it were. And congratulations, I guess. Yeah, you know, when you and I last spoke a couple weeks ago, I think we said oil needs to trade in a range of $80 to $90 a barrel. And of course, it fell quite a bit below that. Before the most recent flare-up, we were all the way down to $70, $72 a barrel. And I think the reality is the world is a complicated place. This peace deal is a complicated peace deal, and so, yeah, better to be cautious.

Crude today, either one of your main benchmarks, Brent or West Texas, up six and a half, seven-ish percent. Going to go up a little more, right? Crystal ball this for me. So the big issue is that we don't really know when we are negotiating with Iran, who we are negotiating with. And the big problem is that there are hardliners in Iran who think that they can extort more from the United States. And so this is basically about cash and about control of the Strait of Hormuz. And the most recent rockets or drones or what have you that were launched at oil tankers trying to transit the street, that's basically about exacting leverage. So I think we are on the verge of going back to a hot war, and that obviously will push oil prices up. Let's go to the offhand issue market made up in the open, rather, the economy would like a word.

Obviously, oil prices will trickle out through this economy. Consumer spending will be hit by it. I mean, you know, play it out for me. You know, when we started all this oil prices, or rather prices at the pump for drivers in the United States, we were around $3 a gallon on average in the United States. We went all the way up to four and a half. We've been at $3.80 roughly on average in the United States. And obviously, this is going to push the price at the pump back up, right? So it's not good for the U.S. consumer. And it's going to feed resentment and feel. over affordability. So that's not good. I think there's going to be a lot of pressure to try and cobble a deal back together. My recommendation to the U.S. is, you know, the blockade that we did on Iran was highly effective. I've written about that a bunch on my substack, and there's many

ways to show that it did work. And in the end, if the problem is that there's hardliners in Iran who think they have a ton of leverage, well, it's time to hit them back again. And I think there's a way to make the blockade even harsher and tougher. And I think you just got to go that route if these guys don't stick with a piece deal. Let me just ask you, though, you know, we talked last time about how you had great perspicacity in your prediction that oil was not. going to go to $200 a barrel for reasons that you laid out in your substack. Are you still that sanguine? You got like 30 seconds. Yeah, I think the shock is basically the same. So if you think back to the worst moments that we've had, oil basically topped out around $125, $126 a barrel.

I think that's the top that we'll see now to if we really go back to a bad conflict again. Super quick, and this time I really mean at 30 seconds. Fed minutes today, some insights into what happened behind closed doors at that last meeting. Very interesting to me that there were some people on that committee who said, yeah, you know what, maybe we ought to raise rates now. This was like a couple of weeks ago. Make sense of that for me. Again, 30 seconds. So someone really famous I know named Kai Rizdahl tweeted after the Fed decision on June 17th, hey, wait a minute, this hold was unanimous.

And so actually it wasn't as hawkish as people thought or have thought since then. And I think the minutes kind of lean in that direction, Kai, so you win this one. I don't think the minutes were that hawkish either. All right. Fair enough. Robin Brooks at the Brookings Institution. Thanks, Robin. Take care.

Wall Street on this Wednesday, oil we talked about. Equities could have been worse. Actually, bond traders, not all that happy. Details numbers when we get there.

As Robin and I just spent four or five minutes talking about, five minutes and two seconds actually by my stopwatch, there is a lot up in the air right now with the war and in. interest rates and inflation and oil, all of that. But retailers still do have to take their best guesses as to what their economic future holds. Because even though summer's in full swing, right about now is when companies are preparing for the holidays. Marketplace's Kristen Schwab made some calls. One of the foods trending on social media right now, dot cakes, single serving desserts in cups covered with rainbow sprinkles. And Aaron Calvo-Bachi can't make enough dot cake peanut butter cups.

to keep up. Our non-Porels are suddenly very popular. We have seen a 40% spike, which is insane. Calvo Bocci owns CB Stuffer, a chocolate treat maker in Massachusetts. She says a trend she's less excited about, one that unfortunately seems here to stay, is inflation in key ingredients, like peanuts. We've received word that that price is going to increase. Shipping is going up. Also, the boxes CB Stuffer ships candy in. So to avoid paying extra, Calvobachi has ordered ahead. She's bought enough containers to get her through the end of the year. It means she's dedicating a lot of warehouse space and a lot of cash to packaging. It's become, okay, fine. What additional cost am I facing today?

Most of the business owners I checked in with say business conditions are more certain than they were a year ago, when trade policy seemed to shift every day. But they're still operating on eggshells, so a lot of them are ordering ahead. Containerized freight rates have reached their highest prices in nearly two years, in part because business owners are trying to rush in holiday inventory before new tariffs are expected to begin. I was really just afraid of another erratic, unexpected tariff coming, so I stocked up.

Greg Sugar at Bowties of Vermont now has enough that, to get him past the holidays and into 2027. It means leaning into more standard designs like the classic black tie. We try to make it a little interesting adding either different fabrics like a grenadine silk or velvet. Men's neckwear trends, fortunately, don't change too drastically, too quickly. Sugar has recently had to raise prices. So has Ashley Sims, who owns Humans Before Handles, a jewelry brand in Atlanta. We have, but we've done our best to still stick to our model. which is everything under $50. I kind of have a running joke like we're boogie on a budget.

Sims says online sales are down, but in-person events are performing well. Her next ones are back-to-school pop-up shops at nearby universities. People are making a lot more conscious buys, so people are stretching their dollars right now, and in person, people are still very excited to shop with us. Business owners tell me they're getting mixed messages from consumers, and they're trying to decipher what that means

while also trying to sort out the future of trade policy and the economy. Erin Calvobachi at CB Stuffer says you just kind of have to put your head down, drown out the noise, and keep working. It's a really great business philosophy. It's called a wing and a prayer. That's what I'm using right now. In reality, it's mostly lots of planning ahead and maybe a little luck. I'm Kristen Schwab for Marketplace.

Mitchell Hartman did a set-up piece for us yesterday, about second quarter earning season and how, by and large, publicly traded companies are expected to have done pretty well April through June, despite all of the geopolitical, you know, messiness. Also, and related, a lot of companies have been issuing a whole lot of new equity, selling brand new shares to raise capital. Marketplace of Justin Ho has more on this wave of stock issuance and what it might mean. Up until this year, companies were hesitant to issue new shares. This has been a fraught couple of years when it comes to a changing environment, a changing environment in the markets, a changing political environment. Creti Gupta is a senior strategist with JPMorgan Private Bank. She says this year, demand for stocks picked up.

since markets have been rising. This is companies that are buying back shares. This is households and retail investors that are getting more excited about the stock market gains that they're seeing. Companies also need the money, in part for mergers and acquisitions, which have been booming this year. That process takes fundraising. And we're in an environment where consolidation is something that corporations have been encouraged to do. Issuing stock isn't the only way companies can raise money. They can also sell bonds.

But Drew Pascarilla at Cornell University says that requires companies to pay back the money they borrowed over time, which can be risky. So by issuing shares instead? They're taking less risk in that they don't have to pay it back and they're not burdened by that eventual need to return the capital by contract to the investor. Pascarilla says that's why companies in the AI sector have been issuing a lot of stock because they don't want to be hamstrung by the need to pay back bondholders. And they're looking for investors to believe in their store and take on. additional risk by becoming owners in the company. Healthcare and real estate companies have been issuing new shares too, along with companies with ambitious expansion plans, says Matt Robert F. Kennedy Jr. with Renaissance Capital.

I mean, we had a quantum computer company go public recently, a developer of next generation geothermal energy. Robert F. Kennedy Jr. says their plans are long term, despite all of today's geopolitical uncertainty. Some of these companies are targeting five or ten-year timelines. And Robert F. Kennedy Jr. says investors are more comfortable making those long-term.

bets because the stock market has been holding up. I'm Justin Hough for Marketplace. different than what you started with. Well, you know, when it rains, it pours. But first, let's do the numbers. Dow Industrial's down 576 today. One in a tenth percent finished at 52,348. Nasdaq crept up 51 points, about two-tenths percent, 25,870. S&P 500 down 21 points, three-tenths percent, ended at 74 and 82. Just to give you some numbers on the oil thing that Robin Brooks and I were talking about, Brent Crude, $179 at one point today. That's per barrel, obviously. West Texas intermediate, $74 a barrel. Retailers, you ask, after Kirsten Swamp's piece, Walmart gained 1.4% on the day. Target improved three and eight-tenths of one percent. The budget retailer dollar tree added eight-tenths percent.

Bond prices went down. The yield dust went up. Ten years at 4.57 percent. You're listening to Marketplace. Vantage Score. The modern credit score used by 3700 institutions. including nine of the top 10 banks. Built with trended and alternative data, Vantage score is more predictive, scoring 33 million more consumers than conventional credit scores. Now accepted by Fannie Mae and Freddie Mac for conforming mortgages, Vantage Score 4.0, safely unlocks approximately 2.7 million new mortgages and up to $1 trillion in new loans. Better credit score, better data, better mortgage decisions. Vantagescore.com. Being an HR professional, is no easy task. Gusto is here to help make your stressful job far less stressful.

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Try Gusto today at gusto.com slash marketplace and get three months free when you run your first payroll. That's three months of free payroll at gusto.com slash marketplace. One more time, gusto.com slash marketplace. investing in real estate has always been smart, but it wasn't simple. Now it's both, thanks to the Fundrise Flagship Fund. The Fundrise Flagship Fund launched more than five years ago with a mission of delivering low-fee access to blue-chip private market real estate. Today, the Fundrise flagship fund has grown to manage more than a billion dollars of real estate on behalf of hundreds of thousands of investors, making it one of the largest funds of its kind. For those who believe real estate has an important role to play in their portfolio strategy, the Fundrise Flagship Fund has. positioned itself as both a simple and smart option. Whether you're starting with $10,000 or $10,000, the Fundrise Flagship Fund makes adding real estate's unique potential for both passive income and consistent growth easy. Just visit fundrise.com slash marketplace to make your first investment

today. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. This is Marketplace. I'm Kai Risdahl. We're going to do energy in the second half of the program, electrical energy to begin with. The energy information administration was out with some new data today. Electricity use in the United States hit a record high last year. It's going to hit another record high this year and probably again next year too. Data centers, yes, of course, but commercial power users more broadly, really, which the EIA says will for the first time on record

use more energy than homes this year and odds are next year as well. And as Marketplace's Kelly Wells reports, it is going to keep on being that way for a while. There are two big reasons behind this shift. Let's start with the reason coming from the residential side. A.J. Chandra is CEO of the energy consulting firm Baker and O'Brien. Electrical usage in households is basically been flat for a number of years. Household power demand peaked in 2010. Then came better insulation and more efficient appliances and LED bulbs. We just got better at living comfortably on less power and less space.

Now people are probably reexamining that to a certain extent. You know, we don't need, I don't know, 5,000 square foot houses if your kids have, you know, grown out of the house. And while residential use stays flat, commercial use boomed after the pandemic, which brings us to our second reason. I think the central piece of the story is data centers in terms of growth. Akshay Jhae Jha teaches economics and public policy at Carnegie Mellon University. He says the shift in demand is because of an AI-driven boom in data centers, but also in how the energy from those data centers is being recorded. Everyday people using AI shows up on the residential side as the electricity

needed to use your laptop. But that's a teeny tiny fraction of the power AI requires. Let's say you're putting a prompt at the chat GPT. Chat GPT on the back end is using data center compute in order to give you an answer to your query. And that is commercial demand. So it's recorded as commercial energy use. Now, energy use in both sectors is expected to keep climbing. On the residential side, even as electric appliances keep getting more efficient, you may have a Tesla in your drive and a home battery and a heat pump or something like that. Energy economist Caspian Conran at Beringa says less gas and gasoline at home means using more electricity. And on the commercial side, Conran says the U.S. has arrived at a fourth industrial revolution.

We're in the age of electrons. We're in the age of compute. And energy availability and power demand is a core component of that. As long as the data center demand holds, the forecast says commercial power use will increase faster and keep out pacing. the residential side.

I'm Kaylee Wells for Marketplace. All right, energy of a different sort now, not how we power our homes and our businesses, rather how we get airplanes into the sky. Back in 2024, after the Biden administration created a bunch of clean energy programs, we spent some time looking into sustainable aviation fuel, SAF in the shorthand, an industry that the federal government back then was hoping to jumpstart.

It's made from things like vegetable oil and beef tallow. It's cleaner than traditional jet fuel, but comes at something in the neighborhood of two to five times the cost, and it is, give or take, less than 1% of all the jet fuel used worldwide. So the government series of tax credits and grants was meant to make SAF cheaper for both customers and its producers. Government's critical, and it's neither just the government or just the private sector. It's the government and private sector working in concert that is going to enable us to decarbonize aviation. That's a guy named Gene Gabolis back in 2024.

It's been a couple of years since you and I spoke. And I guess the first thing we need to do probably is sort of an update on the status of things in the world of sustainable aviation fuel and, I guess, to world energy's point now, the decarbonization industry. Well, I think we had talked right after an election and right before an inauguration. So to say things have evolved, it would be putting it lightly. Fair enough, go on. Well, yeah, it's a very different environment that we're in today in some ways. But in many ways, it's very similar. So you may remember that we sell primarily to corporations who are focused on decarbonizing their activities.

And most of those corporations are carrying right along with their activities. So our business is strong and things are good, but certainly the broader environment is quite different. You know, just on that topic of the broader environment and government involvement, you said when we spoke, and this is you, once it's really rocking and rolling, you don't need as much government intervention, but you do in the early going. Are you guys in the industry rocking and rolling yet, or are you still in the early going? Well, I think it's somewhere in between those two. But what is happening is markets are playing a bigger role in decarbonization than ever before. And so in our work, companies that have made a commitment to do what they can do to decarbonize their activities are increasingly doing what we offer, which is a tool called insetting, which enables them to take the benefit from low-carbon fuels. to apply to their aviation activity. So that's very much growing,

and its applications go far beyond aviation. And so, yeah, I'd say that part of things very much are rock and rolling. You know, it's just insets, just on the wordplay this here, just as opposed to offsets, right? Yeah, very much so. People know about carbon offsets,

and those have been around for quite a while. The difference between an offset and an inset is insetting happens in the sector that you're decarbonizing. So if you're focused on aviation, in our case, we focus on the aviation fuel and the decarbonized activities relate to lower carbon aviation fuel. Gotcha. You know, it was interesting to me that some, you know, reading up on you in World Energy and what you guys have been doing the last couple of years, some of your clients, some of your

customers are upfront about what you're trying to do with decarbonization. and others are not so upfront, but they're still doing it sort of behind the scenes, which strikes me as interesting. It strikes me as interesting, too. I can't tell you how many times we've taken on a new client who said we're happy to do this work, but at least for the time being, we'd rather do it quietly. And, you know, in some ways, that's not a horrible thing. I think years ago there was a bit too much talk and a little too much, too little action.

and now to some degree we've got really an increasing amount of action, but less talk. Yeah, yeah. Can we talk to geopolitics here for a second? What effect has the president's war on Iran and all of that had on you guys? I mean, oil is more expensive now, which, you know, has to be good for you guys. Yeah, in the near term, obviously when conventional energy goes up and costs, ours become relatively more affordable. But it turns out for a whole bunch of reasons. that continued reliance on fossil energy forever is not sustainable.

But the work that we're doing is on domestically produced energy that is inherently more sustainable, not only on a climate basis, but on a national security basis and a whole bunch of other areas. So, yeah, in the near term, yes, the changes in various commodity prices has been impacting us to the positive. But I think more importantly, is there this ongoing reminder of the need to transition to cleaner and more domestic forms of energy? Can we talk about the sort of theoretical drop in the bucket here? I mean, SAF is like less than 1% of all the aviation fuel that we use on this planet or maybe in this country.

I don't know, but it's a drop nonetheless. So you guys, by definition, sir, you have to be playing the long game. I hear your deep sigh there. Yeah, no, it's obviously It's a question that you have to wrestle with And of course it's a drop in the bucket And it's meaningless in the volumes today But nothing's going to make much of a dent

In the near term in an 150-year-old industry. So, yep, it's a drop in the bucket But it's a small drop And that drop More drops and more drops and more drops So eventually you're filling up the bucket with something different than what you started with. With the understanding that it's your job to be optimistic but realistic for your company, are you holding on until there's a change of tone in Washington?

Well, the good news is our customer base is largely international companies. They play in lots of different environments. They don't play for any particular election cycle. Look, we live in democracies. there's always going to be changed. I think it would be foolhardy to think that we're always going to get in any particular jurisdiction, the government, that is 100% supportive. So it's not much of a business if it depends on a particular election cycle. And so, yeah, we're carrying on.

Gene Gaboulis, company's World Energy. He's founded, the chair, also the CEO. Mr. Gabalas, thanks for your time, sir. I appreciate it. Thanks, Guy. I appreciate it. It's been great to be back with you.

This final note on the way out today, a quick aviation fuel addendum coming out of Gene Gabola's there, saw this via the Associated Press data from the Bureau of Transportation Statistics about airlines and their jet fuel spending in May. $6.66 billion. That's up, and you probably don't need me to tell you this, if you bought a plane ticket lately. Airlines' jet fuel spending up 84% in May from a year ago. Our media production team includes Brian Allison, John Fokie, Montana Johnson, Drew Jostad, Gary O'Keefe, and Charlton Thorpe. Alex Simpson is the manager of media production.

And I'm Kyle Rizzdahl. We will see you tomorrow, everybody. This is APM. I'm Amy Scott, host of How We Survive, a podcast about the messy business of climate solutions. To a lot of people, geoengineering might seem like a dangerous, outlandish way to play God. But some are embracing this sci-fi-inspired approach as a solution. to the climate crisis. We're going to launch some balloons

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