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Speaker 1: Welcome to ask Fear and Greed, where we attempt to

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Speaker 1: answer listeners questions, or more appropriately, Sean does, good afternoon,

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Speaker 1: Sean Almer, Oh, I'm.

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Speaker 2: A bit worried, you said, I attempt to answer the questions.

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Speaker 2: I fully answer them, madam Lang, fully answer them completelytively

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Speaker 2: answer the questions. Yeah, yeah, I speak loudly and hope

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Speaker 2: that makes sense.

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Speaker 1: Go on, yes with confidence. Marg On LinkedIn has sent

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Speaker 1: this one through. Sean says, why does oil seem to

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Speaker 1: affect the price of everything? I get it having an

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Speaker 1: effect on petrol prices, but it seems like everything else

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Speaker 1: is time to the price of oil too. Is it

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Speaker 1: just because of manufacturing or is there more to it?

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Speaker 2: Ah, The answer is in the.

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Speaker 1: Question, simple question.

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Speaker 2: No, Well it actually ANSWER's answered the question without realizing

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Speaker 2: it because it is actually mostly about transport. It's a

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Speaker 2: great question. Some oil's central to global economic growth and inflation.

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Speaker 2: We always talk about oil, and when we do our

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Speaker 2: daily shows, we mostly mention oil because it is the

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Speaker 2: most important commodity. What do we use oil for? Right? Petrol,

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Speaker 2: jet fuel, and then stuff like lubricants, kerosine, some gas liquids,

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Speaker 2: but a lot of it sort of energy, petrol and

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Speaker 2: jet fuel, that type of stuff. About two thirds of

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Speaker 2: petrol products are consumed in transportation, really important to keep

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Speaker 2: that in mind. Another big chunk, about thirty percent, is

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Speaker 2: in manufacturing, and that's sort of plastics, road construction materials,

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Speaker 2: that type of stuff. A relatively small amount of oil

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Speaker 2: is in residential commercial electric power. So transport is really

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Speaker 2: the big one. Primarily we care about oil and oil

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Speaker 2: prices because of transportation and then, to a lesser extent,

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Speaker 2: the cost of manufacturing. If oil prices are higher, we

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Speaker 2: pay more at the petrol bowsers. Now I've made that point,

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Speaker 2: that's exactly right. You pay more to take a flight

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Speaker 2: as well. There's a direct impact there, but there's also

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Speaker 2: an indirect impact. If oil prices rise, the costs of

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Speaker 2: moving goods around the world, or even from Brisbane to

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Speaker 2: Melbourne by ship, by plane, by truck increases. Suddenly the

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Speaker 2: goods and the shelf are just that little bit more

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Speaker 2: expensive because the transport costs are higher. And this secondary

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Speaker 2: effect is what can really push prices up across the economy. Now,

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Speaker 2: when the Reserve Bank thinks about inflation, we have this

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Speaker 2: thing called the headline rate and the underlying rate we

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Speaker 2: always say the difference. Well, one of the main differences

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Speaker 2: between headline and underlying is we take out petrol prices,

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Speaker 2: which is true, but oil prices still feed through to

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Speaker 2: that underlying rate because of transportation costs. So higher oil

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Speaker 2: prices certainly act as a driver inflation and slows economic growth.

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Speaker 2: The direct effect costing water flat your car spend less

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Speaker 2: than other stuff because it's costing one hundred bucks to flap,

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Speaker 2: you can not sixty or seventy bucks. The indirect effect

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Speaker 2: higher transport costs feed through to final prices. One little

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Speaker 2: aside to all this. Oil of course is priced in

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Speaker 2: US dollars, so the weaker the Aussie dollar, the more

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Speaker 2: expensive it is for US. Just an add on, now, Adam,

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Speaker 2: given you didn't say a word through that, so I

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Speaker 2: don't know whether you were bored, or whether you were

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Speaker 2: interested or whatever.

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Speaker 1: I was just thinking about it, Sean. You think about

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Speaker 1: the stuff you buy that doesn't need transport, be it

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Speaker 1: software services of course, where you have to go somewhere,

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Speaker 1: you still have to travel. It's almost the transport is

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Speaker 1: almost in everything. It's I was wondering whether it's easy

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Speaker 1: to talk everything stuff the petrol or transport isn't involved

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Speaker 1: with you know, so you can creeps into everything you are.

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Speaker 2: Right, like services in an interesting so education at one

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Speaker 2: point there you used to go to university or used

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Speaker 2: to go to a tape college. Say, much of that

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Speaker 2: is online, so maybe transport costs don't hit that as much.

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Speaker 2: But yeah, transport is sort of everything. And that's kind

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Speaker 2: of why oil mattered so much. It's mostly about transport

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Speaker 2: rather than anything else. I've got a test for you, though, Adam, Okay,

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Speaker 2: don't don't look at me l like now you get

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Speaker 2: you get this out of three three.

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Speaker 1: I think that's the look of gratitude. Sean love a test.

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Speaker 2: You've got to give me the biggest producer of oil,

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Speaker 2: the biggest exporter of oil, and the biggest importer.

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Speaker 1: Of oil Middle Eastern countries.

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Speaker 2: Well, hold on, I'll done so so producer, export importer.

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Speaker 2: Oh god, so producer, biggest, biggest producer.

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Speaker 1: Saudi Arabia to guess, I know, but you should have

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Speaker 1: guessed the other one. Russia.

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Speaker 2: Yeah, biggest producer is actually Russia, but Russia uses a

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Speaker 2: lot of its own't okay, Yeah, the biggest, the biggest

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Speaker 2: exporter though, You're right, Saudi Arabia Saudi, Yeah, biggest importer.

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Speaker 2: Oh gosh, do you think the world big economies.

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Speaker 1: And who don't make a lot of it like Japan?

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Speaker 2: No, no, yep?

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Speaker 1: Okay China, China.

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Speaker 2: Yea, let's can it.

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Speaker 1: That'll do us.

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Speaker 2: I think we have answered the question. We're gonna leave

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Speaker 2: it there.

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Speaker 1: Yeah, Adam failed. Apart from that, oil prices get into everything.

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Speaker 2: Thank you, Sean, Thank you very much, Adam.

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Speaker 1: That was asked for you and Greed And if you

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Speaker 1: have a question, send it through LinkedIn or submit it

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Speaker 1: at fogreed dot com dot au. I'm Adam Lang. Have

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Speaker 1: a great day.