Brent rises as energy crunch fears worsen

Brent [music] crude had been hovering

around $105 a barrel today after spiking

to about $107 to start the day. My next

guest believes the global economy will

experience an oil supply shock as a

result of what's going on in the Middle

East. Let's go to Doug Pede, chief US

investment strategist at BCA Research.

Doug, thanks for joining us today.

Thanks for having me. So, you believe

there will be a supply shock. Is a Asia

already in that scenario and how long

before we see it in North America?

Well, it sure does feel like Asia is

already in that scenario when you have

school weeks being shortened, work weeks

being shortened,

jet fuel being rationed. Those are the

sorts of things that we would expect to

see

as Europe begins to run out of

cushions in their supply of crude oil

and liquefied natural gas and other

refined products like jet fuel and other

derivatives, other things that come from

natural gas like fertilizer, other

things that come from crude oil and

other petroleum products.

For North America, because both the US

and Canada export energy, what are the

things

we could do to sort of avoid or make

sure that the shock doesn't deepen. What

do you think the US would stop

exporting?

The issue with the US, it's funny, it's

not so much a crude oil issue, but

apparently our refineries that turn

crude oil into gasoline that fire

internal combustion engines and

automobiles

are set up to process sour crude,

not the sweet light crude that is what

is mainly produced in the United States.

So, even though you could see the United

States as

since it's a net exporter of crude oil

as energy sufficient from a crude oil

standpoint,

crude oil doesn't make an automobile go.

Only gasoline does. And we have to send

our crude out elsewhere for the most

part to have it refined, turned into

gasoline before we can bring it back and

use it for transportation. We can't just

turn it into diesel fuel for trucks and

ships and

trains. So,

it's fair to say that the US is more

insulated. It's fair to say that Canada

is more insulated, but

no country is an island in the global

economy. And

global trade matters for every economy.

And therefore, while North America will

feel the impact

after Asia and Europe do, it's not going

to escape the impact entirely.

Okay, because we've seen that spike at

the pumps for people in North America,

what do you expect from the Federal

Reserve then next week?

We don't think Federal Reserve is going

anywhere next week or for the next

couple of meetings. Now that the supply

shock

is in train, is on the way,

we don't believe the FOMC will be able

to cut rates until it has definitive

evidence

that this supply shock

has dissipated

and that

inflation is definitely on its way back

to the 2% target.

Now, the Fed was always sort of in that

situation that it needed to be able to

say, "Look,

we're on our way to the target to

justify cutting." But the existence of a

supply shock has pushed forward the date

when it will be able to make that

declaration. So, we think that the Fed

is likely on hold for

most if not all of 2026.

How would you say consumers are holding

up in the US? I know there's new

consumer sentiment data out of one if

you can factor that in.

Sure. Look, what we found last year that

was a surprise, frankly, to my team at

BCA

was that you don't need any job creation

for households to be able to spend

because over the last eight months of

last year, May through December,

the United States lost jobs.

But

households kept on spending.

Well, they did it partially because

equity prices have risen so much and

home prices have risen so much such that

households had enough wealth to be able

to draw on. They were able to draw on

their assets

and they or their past income, let's

call it.

And they didn't need the

current inflows so much to be able to

keep spending. That we think is going to

be a feature of the US economy going

forward because over the last 40 years,

we've had tremendous bull markets in

equities and other financial markets.

And the estate tax in the United States

has been rendered very nearly toothless

so that the combination of really

powerful rising asset values for both

financial instruments and for homes

coupled with

the fact that those gains are now

allowed to compound across generations

with again the estate tax, the

inheritance tax being rendered almost

impotent, that has allowed households to

build up a lot of wealth.

And that wealth turns out to have

supported spending in 2025 even when

there was no job creation. Now, three

months into 2026,

we have the January, February, and March

employment data.

We have averaged 68,000 new jobs a

month.

That's not a ton, but it's a whole lot

better than the 10,000 we had for the

whole year in 2025. And like I said,

contraction in the last eight months of

2025. So, it appears that there is some

help on the way

for the labor market, some help on the

way for household incomes, and that

should allow households to be able to

keep spending such that the expansion

continues in the United States. I'm

almost out of time time with you, but I

do want to ask you about labor because

we're now seeing a pickup in the speed

that the big tech companies are are

laying off, right? Meta is going to lay

off 10% of its workforce. Microsoft is

looking at buyouts in that way. How

concerned are you about that part of the

equation?

Look, it is very important. What we've

been in over the last year is a no

hiring, no firing stasis. There's been

very little hiring, but counterbalancing

that, there've been very, very few

layoffs.

You would therefore

potentially get nervous when you see the

headlines like Meta and Microsoft and

Nike announcing these reductions in

force. However,

the Challenger, Gray and Christmas tally

of layoff announcements doesn't

correlate with much of anything.

So, these announcements are going to go

right into that Challenger, Gray and

Christmas tally, but they don't

correlate with anything. They're not

predictive. So, we're just going to have

to wait and see with the monthly

employment situation reports, with

weekly initial jobless claims and

continuing unemployment claims to know

if the no firing

condition is still holding. For now,

it's my best guess that it is and we

may, if it goes away, but no hiring also

goes away, we may remain in a tolerable

equilibrium

where

the labor force is is okay and labor

growth is okay.

Doug Pede, good to have you, sir. Thanks

for joining us today.