Steve Hanke Warns: Inflation Could Stay High as Oil Prices Surge

Inflation is rising faster than expected, and economist Steve Hanke believes the problem is far from over.

Speaking with David Lin, the Johns Hopkins University professor explains why rising oil prices, rapid money supply growth, and expensive borrowing could keep pressure on the US economy.

US Inflation Reaches 3.7%

According to figures discussed in the interview, September's inflation report showed:

• Headline inflation: 3.7% year-over-year.

• Core inflation: 2.6%.

• Gasoline prices: Up 9.1% in September.

• Fuel oil prices: Up approximately 74% year-over-year.

Hanke argues that inflation remains elevated because the money supply is growing too quickly.

He estimates that broad money supply growth of approximately 5–6% annually would be consistent with the Federal Reserve's 2% inflation target.

However, he says the Divisia M4 money supply is currently growing at around 7.5%.

Why Oil Prices Could Stay High

Hanke believes the oil market faces more than just geopolitical problems.

Although Middle Eastern oil exports have partially recovered, tanker shortages, transportation costs, and low inventories continue to push prices higher.

He highlights three concerns:

• Physical oil delivery costs are significantly higher than quoted futures prices.

• Diesel shortages are affecting farmers and transportation companies.

• Refining capacity is already operating near its limits in the United States.

Hanke agrees with projections discussed in the interview suggesting diesel supply could remain tight into 2027.

Why High Energy Prices Affect Businesses

Higher fuel prices don't just affect drivers.

Diesel is essential for agriculture, trucking, and distribution.

When transportation and production become more expensive, businesses may eventually pass those costs on to customers.

Hanke warns that even if some grocery prices are currently falling, higher energy costs can take time to spread through the economy.

Could Interest Rates Stay Higher?

Hanke believes interest rates may remain elevated until money supply growth slows.

He also points to the massive AI infrastructure investment boom as a factor increasing demand for borrowing.

Companies building data centers require significant financing, potentially adding to credit creation and monetary growth.

The Business Lesson

Rising costs can affect your business long before they appear in consumer prices.

Entrepreneurs should monitor fuel costs, supplier prices, borrowing rates, and cash flow rather than relying only on headline inflation figures.

Understanding how economic changes move through supply chains can help businesses prepare before costs increase.

Watch the original interview: https://www.youtube.com/watch?v=Q_H-h2ZAcLA

Disclaimer: This article summarizes Steve Hanke's economic views and figures discussed in the interview. His forecasts are opinions, and the figures have not been independently verified.