March 16, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

Hi everyone, this is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR, you’re a political and unbiased source of economic intelligence. And today I wanted to discuss oil prices. It’s all over the media. We continue to watch the situation in the Middle East, specifically with Iran evolving over time. And we have updated our oil price forecast as a result of this. So I wanted to share with you that updated oil price forecast. And I also wanted to share with you some broader trends as far as the oil price impact on things like retail sales and the consumer.

So let me just give you a little bit of a summary of where we’ve been. The US Crude Oil spot price, 3 month moving average, I’m referencing West Texas Intermediate. It averaged about $60 per barrel, $60.96 to be specific per barrel in February. But as we know, as of late, the intraday prices have shot above $100 per barrel in recent days due to the military action in the Middle East. We’ve seen multiple oil facilities targeted in the region. Drone strikes near the Strait of Hormuz continue to threaten the flow of oil trade. And so as a result, we revised our oil price forecast upward given the geopolitical backdrop. And again, for those of you that are Trends Report subscribers, you can see that new oil price in our Trends Report, but I’ll verbalize some of this here for you today. We have looked into previous black swan events is what I’ll call them, including the Ukraine, Russia conflict just a few years ago, the Gulf war in 1990. We’ve looked at OPEC related production swings and a number of other drivers. So folks, it’s not that we don’t have precedents to look at throughout history. And you know, that matters to all of us at ITR because we’re business cycle forecasters. We are able to understand how previous cycles have been impacted and thus make adjustments and assumptions moving forward to drive our perspective. It is improbable based on looking at these past events that oil prices will hold on to the massive gains that we’ve seen in some of these intraday trading numbers. However, those historical events show us that prices are likely to stay elevated for the next three to six months.

That brings me to our oil price forecast. In the first or in the second quarter of 2026, we are expecting to see that 3 month moving average between $91 and $101 per barrel. So we are getting that elevated oil price because of some of these events. But by the time we get into the third quarter and fourth quarter, we have the average oil price number coming back down to the mid 80s, mid to low 80s by the third quarter of 2026 and then down to the $70 range as we get into the fourth quarter of 26. So again, yes, we’re seeing the shocks. Yes, we’re acknowledging the challenges. We’re looking at past historical events and we are going to see that quarterly moving average jump up to, I guess, experience a pretty significant jump here as we look at the second quarter numbers. But again, history does not suggest that that continues moving forward. Now we’re still talking about a higher price level for the rest of this year compared to what our previous forecast would suggest. So it’s important to acknowledge that.

Now that I’ve laid out the forecast, there’s a few things I wanted to share with you all. First of all, for our oil producers, in order to drill new wells, and this is based on the Dallas Federal Reserve data, most basins here in the US need between 60 and $70 per barrel oil. That’s their breakeven level. So to be more simple about this, we need oil prices above $70 per barrel for the oil producers to drill new wells profitably. I don’t wanna say the war is good news, that’s absolutely not my message, but oil prices being mis-elevated for likely again, the duration of this year is actually good news for the oil industry here in the US, because that brings prices above their breakeven levels, which allows them to drill new wells profitably. So I do want you to consider that trend. Now we do have to evaluate the impact that this has on consumers. The first thing I wanted to highlight about consumers is, yes, are there times throughout history where higher oil prices has contributed to some mild declines in personal income? Yes, we saw that back in the early 80s, late 80s, early 2000s, even in that lead up to the financial crisis, 2008, 2009. And again, we saw that again in 2022 with some of that inflation. So I’m not saying that there isn’t a relationship between some higher oil prices and eating into consumers’ income, but the percentage of folks’ personal income and spending that energy prices make up, oil prices make up, has gotten a lot lower over time, which is good news for consumers. So again, I don’t want to minimize the impact that higher gas prices, higher energy prices, higher oil prices do have an impact on our financials, but the impact is a lot less than what we would have seen throughout history.

So let me give you this relationship. I’m going to get a little technical with you all here. I know you can all handle it. We look at a trend, it is US Energy, Goods and Services, Personal Consumption Expenditures, that’s a mouthful, as a percentage of US Total Personal Consumption. So really what we’re looking at is how much do energy costs, oil costs, gas prices make up as a percentage of an individual’s income. And as we sit here today, that number is only 3.7%. So again, these energy costs, these oil prices, these gasoline prices are only making up on average about 3.7% of consumers’ overall spending here in the United States. That’s much different from the near 9.2%, if I’m rounding, that number made up back in the early 80s. Even if you look back to 2008, 2009, that number was 6.3%. So we are not as impacted as consumers today compared to how we were throughout history by some of these drastic increases in oil and gas prices.

That’s good news, right? That means this impact is likely to be less severe than what we’ve seen throughout history. And we also run a correlation of oil prices to retail sales. And there are a number of times throughout the last 15 years where we’ve seen spikes in oil prices, but yet retail sales have continued to grow. And I think that’s a reflection on that previous trend. Listen, do we have some impacts? Yes, might we get a slower pace of growth in our spending as a result of higher oil and gas prices? That’s probable, but it doesn’t mean the economy is collapsing or falling apart. But this is part of our inflation story is you have higher oil prices. We’ve been talking a lot on trends talk about higher oil prices, higher material costs, higher labor costs, and this idea of profit list prosperity, which is even if we’re growing as an economy, even if our sales and revenue as businesses are growing, we’re worrying more about the margin side of things and some of the cost impacts.

And folks, we have a webinar coming up here at the end of March with our chief economist, Brian Beaulieu, one of my colleagues, Connor Lokar, a great economist here at ITR, where they’re going to dig in to this Profitless Prosperity, trying to talk about some of these inflationary drivers like we’re seeing here with oil today. So please go over to our website, learn more about that and certainly sign up and check that out, because it’ll cover a lot of these topics in a lot greater detail than I have here as far as time on TrendsTalk with you all.

But again, the summary of what I’m saying here is we acknowledge the impacts, we have historical precedents to understand how the situation in Iran is going to impact oil prices. We do have oil prices trending higher throughout the year. But again, our comment is don’t assume this 90 to $100 a barrel is going to characterize the entirety of the year, because that is not what history suggests. And we as consumers have continued to do a better job of insulating ourselves from some of these higher oil price and higher prices that we’re paying at the pump. I hope this gives you some perspective. Listen, folks, the situation’s evolving. I’ll be very clear about that. My job is to keep you updated on current events and that’s what we’ll continue to do.

So again, head over to our website, read our blogs, check out our Trends Report. Those are the ways to stay updated with what we’re saying. And don’t forget to sign up for that webinar as our chief economist and my colleague, Connor, unpack some of these challenges. Thanks for joining me on TrendsTalk. I hope you found this information helpful. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. Look forward to seeing you all in the next one. Thanks so much. Take care for now.