The Energy Shock Is Here

**Jessica Mendoza** (0:00)
Hey everyone, it's Jess.

**Ryan** (0:02)
And Ryan.

**David Uberti** (0:03)
We have a live event coming up that you do not want to miss.

**Jessica Mendoza** (0:06)
It's in Los Angeles on Tuesday, April 28th at the El Rey Theater.

**David Uberti** (0:10)
We'll have Emmy winner and Oscar nominated actor Riz Ahmed.

**Jessica Mendoza** (0:13)
Who was in the Star Wars movie Rogue One.

**David Uberti** (0:15)
And TV and film producer Franklin Leonard.

**Jessica Mendoza** (0:18)
We'll be talking about the future of Hollywood, and we'll have a few other surprises.

**SPEAKER_4** (0:22)
Tickets are still available.

**David Uberti** (0:23)
Grab yours now via the link in our show notes.

**Jessica Mendoza** (0:26)
See you April 28th. So before the war in Iran started, how were things going with the US economy?

**David Uberti** (0:38)
So at the start of the year, if you looked at surveys about business or consumer confidence, they were actually quite high relative to recent history.

**Jessica Mendoza** (0:46)
Our colleague David Uberti covers markets in the economy.

**David Uberti** (0:50)
Inflation was coming down, and consumer spending was pretty robust. You had an economy coming into the year where there was a lot of tailwinds. There was optimism that the uncertainty from the tariff turmoil of last year was dying down. There was optimism that President Trump's tax cuts would boost the economy in certain ways. And there was optimism that the US consumer was pretty resilient after the last several years or so.

**Jessica Mendoza** (1:15)
Dave says back at the beginning of the year, there were some downward indicators, stagnant job growth, for example. But overall, inflation seemed to be mostly under control. Higher than in years past, but moving in the right direction.
That is, until a new report dropped last week.

**SPEAKER_5** (1:33)
New inflation numbers are not good, tripling in just a month and driven by the biggest spike in gas prices in six decades.

**David Uberti** (1:41)
So year-over-year inflation through the CPI index, which is a broad measurement of inflation, is up 3.3% from a year ago. And the Federal Reserve uses 2% as a target for where it wants inflation to be.

**Jessica Mendoza** (1:56)
That's a significant increase. And a major factor, oil prices.

**David Uberti** (2:01)
So even before the war with Iran started, inflation was above that target level. And what we have now is an energy shock that is sending gasoline and diesel prices on one of their steepest climbs in decades, if not ever.

**Jessica Mendoza** (2:15)
So we are in an energy shock.

**David Uberti** (2:18)
We are in an energy shock.

**Jessica Mendoza** (2:19)
Okay.

**David Uberti** (2:20)
An energy shock is when there's a major disruption to supplies. And that could be because of a natural disaster, but more often than not, it's because of some sort of geopolitical conflict, most likely a war.

**Jessica Mendoza** (2:33)
Check, check and check.

**David Uberti** (2:35)
This, if you talk to people who follow the history of the oil industry, is the mother of all energy shocks.

**Jessica Mendoza** (2:43)
Welcome to The Journal, our show about money, business and power. I'm Jessica Mendoza. It's Wednesday, April 15th.
Coming up on the show, a wartime report card on the US economy.

**SPEAKER_4** (3:08)
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**SPEAKER_6** (3:38)
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**Jessica Mendoza** (4:08)
Iran and the US are in a ceasefire and are expected to start another round of negotiations. But the Strait of Hormuz, the most important choke point for oil trade in the world, is still closed. And on Monday, the US began imposing a blockade on Iran's ports in the Strait, further escalating the standoff.
The millions of barrels of oil that have essentially been stuck there amounts to around 10% of what the world uses on any given day.

**David Uberti** (4:36)
And while we can make up some of that gap, because countries and companies have stockpiles, we can sort of like massage it a little bit here and there for the moment. The longer this situation goes on, the longer the tankers can't make it out of the Strait of Hormuz, the longer that 10% will continue compounding. And the longer that the supply disruption will end up rippling through the global economy.