Oil Hits $100: What it means for your money

Danni Hewson (0:00)

It's been a while, Dan, since we've done a pod. You all set?

Dan Coatsworth (0:03)

I have to try and remember how to do it.

Danni Hewson (0:05)

Have you got your microphone plugged in? That's the key thing, though.

Dan Coatsworth (0:09)

I'm ready to go. Here we go.

Danni Hewson (0:19)

Hello and welcome to this week's episode of the AJ Bell Money & Markets podcast. I'm Danni Hewson, and joining me to discuss what has moved Markets this week. And in fact, well, we'll kind of look back over the summer. I know we had a pod last week, but still.

Dan Coatsworth. Hi, Dan.

Dan Coatsworth (0:37)

Hi, Danni. You're right. Good to see you.

Oil price is definitely at the top of everyone's list as we're recording this. Everyone is talking about oil price. Brent Crude has gone back over $100 a barrel, Mark. So we're going to have a chat about what that really means. We've also got a timely interview. We've got an expert called Adam Rozencwajg from Commodities Investment Group G&R, who's going to tell us all about what's happening with oil supplies in the Middle East and what it actually means for the oil industry much longer term.

Danni Hewson (1:08)

I feel like maybe we shouldn't have had a break over the summer this year because it has not stopped. And helpfully, of course, we have had a new Chancellor as well as a new Prime Minister. And John Healey gave his first major speech as Chancellor this week. But I don't think we really got anything more than positive vibes. And those vibes were rather knocked off kilter by the announcement of four thousand job cuts from Jaguar Land Rover, which unfortunately happened at exactly the same time as the speech.

Dan Coatsworth (1:44)

So government borrowing costs have been breaking records with the UK paying the highest borrowing costs on a sale of debt in 30 years. And on the personal finance front, house prices have fallen for the first time since 2023, and lenders are now raising mortgage rates. Plus, we're also going to chat about the new cohort of university students and how parents with younger children actually could save to help cover the costs that they could potentially face when these people are old enough to go to university themselves.

Danni Hewson (2:13)

And Martin Gamble is joining us to talk price to earnings ratios. Don't get scared if you're not an experienced investor because we're going to break down what they are, why they matter and how you use them to choose your investments, and also why some sectors like technology trade at a premium, whereas oil giants sit at the other end of the spectrum. So do stay with us for that.

Dan Coatsworth (2:39)

So let's start with oil price. We mentioned that at the start of the podcast. It is the big news of the day. We are recording this 2pm on Wednesday. So Danni, what is going on? Why is this oil price going up? And what does this really mean, particularly for people who are driving off to the forecourt to fill up their car?

Danni Hewson (2:57)

Yes, we've been keeping an eye on this, haven't we, since the end of February, at which point the price of Brent crude was around $70 a barrel. And that was one of the big things which was really helping bring inflation down. And then of course we had Donald Trump and saying that the US and Iran were going to enter into this conflict. And of course then we had the blockade of the Strait of Humeuze. Now in the intervening period, the oil price has been incredibly volatile because we've had moments when it looked like maybe there was going to be some kind of peace deal and things would be resolved very quickly. And now, as we go into September, we've had six months of this conflict. And honestly, it doesn't look like we're any further forward in any kind of resolution. So what that means is investors, people who are buying oil are reassessing what is going on with availability. So clearly, we have seen huge demand for oil from other areas than the Middle East because a lot of those supplies have been hard to get out of the area.

We haven't seen oil rise above $100 a barrel up until now. And I think in many ways, that's because it's been the summer. I think in many ways, it's because a lot of oil producers have found alternate measures to get the oil out of the Middle East or because there has been other oil supplies which have been made available or certainly being traded. But now as we look towards the second half of the year, well, the back end of the year, I think people are now really beginning to think hard about oil and oil availability. And what it means for all of us, of course, is that if you go to fill up your car, then you are going to have seen a significant jump in the price at the pump. So the average price of unleaded petrol has risen by 5p a liter, just in the space of the week. That is according to data out from the RAC today. So a liter of unleaded now costs on average 167.17.