Supply chain disruptions in the Middle East are driving up energy costs and forcing retailers like Costco to ration motor oil, even as the Federal Reserve prepares for a 25-basis-point rate hike to combat 3.4% inflation.
Brent crude surged above $109 per barrel on Middle East supply disruptions and record inventory draws.
WTI crude hit a four-month high of $106.75 on tightening global supplies.
10-year Treasury yield breached 5% on inflation and expected Fed rate hike, pushing the yield index higher.
Chevron benefits from surging crude oil prices, as its CEO noted diminished global buffers.
Costco's near doubling of motor oil prices and purchase limits signals severe supply chain disruptions that could pressure sales volumes and margins.
Global energy markets face severe supply constraints as Brent crude surges past $109 per barrel and WTI hits $106.75. The disruption has reached retail shelves, forcing Costco to implement purchase limits on motor oil as refiners prioritize fuel production over lubricants.
Costco is rationing motor oil due to severe supply chain disruptions and a 235% surge in base oil prices, which have forced the retailer to manage inventory amid refinery prioritization of fuel over lubricants.
Economists suggest that while rate hikes may curb aggregate demand, they cannot address the fundamental physical supply shocks, such as damaged pipelines and closed shipping lanes, currently driving energy prices higher.