Yikes! Inflation Ahead

Vern Sumnicht CEO | CIO |

On Sunday (April 2, 2023), nine members of OPEC (Organization of Petroleum Exporting Countries - a collective of 23 nations) announced a voluntary output cut of 1.2 million barrels per day from May until the end of the year. This amounts to 1.1 percent of global supply. The move drove up oil prices immediately.

A decrease in OPEC oil production can cause inflation because it can lead to a decrease in the global supply of oil. This, in turn, can cause an increase in the price of oil, as the demand for oil remains relatively constant.

The price of oil is an important factor in determining the cost of transportation, heating, and electricity generation, among other things. As the cost of oil increases, it can increase the cost of producing goods and services, and these costs may be passed on to consumers in the form of higher prices. This increase in prices is called inflation.

Furthermore, oil is an essential input in many production processes, so any increase in its price can increase the cost of producing a wide range of goods and services, leading to inflation. In addition, an increase in the price of oil can also increase the cost of transportation, leading to higher transportation costs for goods, which can also contribute to inflation.

Therefore, a decrease in OPEC oil production can cause inflation by reducing the global supply of oil and causing an increase in the price of oil, leading to higher costs for the production and transportation of goods and services, and ultimately resulting in higher prices for consumers.

So, what can investors do to help mitigate this inflation risk? By investing in hard assets like gold, silver, real estate, commodities, inflation protected bonds, and bitcoin. At iSectors, we provide a simple way to gain access to these asset classes in our iSectors® Inflation Protection Allocation, iSectors® Precious Metals Allocation and iSectors® CryptoBlock® Allocation models. For more information about these strategies please visit our web site at iSectors.com  or feel free to reach out to Scott Jones at iSectors at 800-869-5184 for more information.