Apollo Economist Warns Record Diesel Prices Pose Greater Inflation Threat Than Fed Anticipates
Apollo Global Management chief economist Torsten Slok warned that record-high U.S. diesel prices, up 83% year-to-date to $6.50 per gallon, pose a greater inflation threat than the Federal Reserve currently assesses. Unlike gasoline, diesel costs permeate core CPI through inelastic demand from freight transport and data center construction. Slok's analysis challenges the Fed's "look-through" approach to energy shocks, with Chicago Fed President Austan Goolsbee acknowledging persistent supply shocks undermine that strategy. Slok also noted AI-related spending contributes about one percentage point to GDP growth, creating a reinforcing cycle with diesel demand.
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Apollo Chief Economist Warns Fed May Underestimate Diesel Price Inflation Risk
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently assesses. He argued that diesel costs permeate core consumer price index components beyond energy, unlike gasoline, due to inelastic demand from freight transport and data center construction. Slok noted that U.S. diesel prices have surged 83% year-to-date to $6.50 per gallon, outpacing gasoline's 59% rise, exacerbated by U.S.-Iran tensions disrupting Persian Gulf oil flows. This contrasts with the Fed's July view that energy price spikes would fade. However, Chicago Fed President Austan Goolsbee recently acknowledged that persistent supply shocks undermine the 'look-through' approach. Slok described the Fed's hope that resolving the Iran conflict would ease energy prices as a 'Hail Mary.' He also highlighted that AI-related spending, contributing about one percentage point to GDP growth, is driving diesel demand through data center construction, creating a self-reinforcing cycle that could sustain inflationary pressure.
Read sourceApollo Chief Economist Warns Fed May Underestimate Diesel Price Inflation Risk
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently assesses. In a Bloomberg Television interview and a research report, Slok argued that diesel costs permeate core CPI through transportation and supply chains, unlike gasoline. U.S. diesel prices have surged 83% year-to-date to $6.50 per gallon, outpacing gasoline's 59% rise, driven by Iran conflict disruptions. Slok's warning contrasts with the Fed's July view that energy price shocks would fade. However, Chicago Fed President Austan Goolsbee recently acknowledged that persistent supply shocks undermine the 'look-through' approach. Slok described the Fed's hope that resolving the Iran conflict would ease energy prices as 'all-in at this point.' He also noted that AI-related spending, including data center construction, contributes about one percentage point to GDP growth and is highly dependent on diesel, creating a reinforcing cycle that could sustain inflationary pressure.
Read sourceApollo Chief Economist Warns Fed May Underestimate Diesel Price Inflation Risk
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently assesses. He argued that diesel costs permeate core CPI beyond the energy component, unlike gasoline, due to inelastic demand from freight transport and data center construction. Slok noted diesel prices have surged 83% year-to-date to $6.50 per gallon, outpacing gasoline's 59% rise, partly due to Iran conflict disruptions. This contrasts with the Fed's July view that energy price spikes would fade. Chicago Fed President Austan Goolsbee recently acknowledged that persistent supply shocks undermine the 'look-through' approach. Slok described the Fed's hope for a resolution to the Iran war as a 'do-or-die' bet. He also estimated AI-related spending contributes about one percentage point to GDP growth, roughly half of current expansion, and noted that AI-driven data center construction increases diesel demand, creating a reinforcing cycle that could sustain inflationary pressure.
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Apollo Economist Warns Fed May Underestimate Diesel Price Inflation Risk
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently assesses. He argues that diesel costs permeate core CPI beyond energy components, challenging the Fed's traditional 'look-through' approach to energy shocks. Slok noted diesel prices have surged 83% this year to $6.50 per gallon, outpacing gasoline's 59% rise, driven by geopolitical tensions. This view contrasts with Fed minutes suggesting energy price pressures will fade. Chicago Fed President Austan Goolsbee echoed concerns that persistent supply shocks undermine the 'look-through' logic. Slok also highlighted that AI-related spending, contributing about 1% to GDP growth, is a key source of economic resilience but also reinforces diesel demand, creating a feedback loop that sustains inflation. The analysis suggests the Fed faces a dilemma between further rate hikes and hoping for a resolution to the Iran conflict to ease energy prices.
Apollo Economist Warns Fed May Underestimate Diesel Price Inflation Risk
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently assesses. He argues that diesel costs permeate core consumer price index (CPI) components beyond energy, unlike gasoline, due to its critical role in transporting goods and supporting data center construction. Slok stated that diesel prices have surged 83% this year to $6.50 per gallon, outpacing gasoline's 59% rise, driven partly by the Iran conflict. This challenges the Fed's 'look-through' approach to energy shocks, as Chicago Fed President Austan Goolsbee acknowledged that persistent supply shocks undermine that strategy. Slok described the Fed's hope for a resolution to the Iran war to ease energy prices as a 'last-ditch' effort. Additionally, he noted that AI-related spending, contributing about one percentage point to GDP growth, is intertwined with diesel demand, potentially reinforcing inflationary pressures.
Apollo Chief Economist Warns Fed May Overlook Inflation Threat from Surging Diesel Prices
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve may recognize, as transportation costs feed into core consumer price index (CPI) components beyond just energy. Slok explained that diesel demand is highly inelastic due to its critical role in freight transport across retail supply chains and data center construction, meaning price increases are passed on to businesses and consumers. He also attributed U.S. economic resilience amid high interest rates largely to an AI spending boom, estimating AI-related activities—including data center construction, energy demand, software spending, and wealth effects from elevated stock prices—contribute about 1 percentage point to GDP growth, roughly half of current economic expansion. Slok described the Fed's apparent hope that resolution of the Iran conflict would ease energy prices and eliminate the need for further rate hikes as a 'bet on a miracle.'
Read sourceApollo economist warns diesel surge may make core inflation more stubborn for Fed
Apollo Global Management Chief Economist Torsten Slok warned that surging U.S. diesel prices, up 83% year-to-date to $6.50 per gallon, pose a more serious inflation threat than the Federal Reserve currently recognizes. Unlike gasoline, which mainly affects energy expenditure, diesel costs are embedded in goods transportation, retail supply chains, and data center construction, potentially transmitting into core CPI categories beyond energy. Slok argued the Fed cannot dismiss this as a temporary energy shock because higher transport costs may eventually permeate core goods and services prices, making inflation more persistent. He noted that AI investment is currently boosting U.S. GDP by about 1 percentage point, offsetting some economic drag. Slok suggested that a resolution to the U.S.-Iran conflict could lower oil and diesel prices, potentially allowing the Fed to avoid further rate hikes, but stressed this outcome remains highly uncertain.
Read sourceApollo Economist Warns Diesel Surge May Make Core Inflation More Stubborn for Fed
Apollo Global Management Chief Economist Torsten Slok warns that the 83% surge in US diesel prices this year poses a more serious inflation threat than the Federal Reserve currently recognizes. Unlike gasoline, which directly impacts energy costs, diesel is widely used in transporting goods, retail supply chains, and data center construction, meaning its cost increases can spread into core CPI categories beyond energy. Slok argues the Fed cannot dismiss this as a temporary energy shock, as higher transport costs may be passed through to core goods and services, making inflation more persistent. This comes as the Fed has just resumed rate hikes. Slok notes that AI investment is currently boosting US GDP by about 1 percentage point, offsetting some economic drag. He suggests that a resolution to the US-Iran conflict, which has disrupted oil supply, could lower diesel prices and potentially allow the Fed to avoid further rate hikes, but this outcome remains highly uncertain.
Read sourceApollo Chief Economist Warns Diesel Surge May Make Core Inflation More Stubborn for Fed
Torsten Slok, chief economist at Apollo Global Management, warns that the 83% surge in U.S. diesel prices this year poses a greater inflation threat than the Federal Reserve currently recognizes. Unlike gasoline, which mainly affects energy spending, diesel costs are embedded in goods transportation, retail supply chains, and data center construction, potentially feeding into core consumer price index (CPI) categories beyond energy. Slok argues that the Fed cannot dismiss this as a temporary energy shock because higher transport costs may be passed through to core goods and services, making inflation more persistent. This comes as the Fed has just resumed interest rate hikes. Slok notes that AI investment is currently supporting U.S. GDP growth by about 1 percentage point, offsetting some economic drag. He suggests that a resolution to the U.S.-Iran conflict could ease energy supply pressures and lower diesel prices, potentially allowing the Fed to avoid further rate hikes, but this outcome remains highly uncertain.
Read sourceApollo economist warns US diesel surge may fuel core inflation, complicating Fed policy
Apollo Global Management Chief Economist Torsten Slok warns that the 83% surge in US diesel prices to $6.50 per gallon poses a more serious inflation threat than the Federal Reserve currently recognizes. Unlike gasoline, which directly impacts energy costs, diesel is widely used in transportation, retail supply chains, and data center construction, meaning higher costs can spread into core CPI categories beyond energy. Slok argues this 'secondary transmission' makes the diesel shock different from temporary energy spikes, potentially making core inflation more persistent and complicating the Fed's monetary policy after its 2023 rate hike. He notes that AI investment is currently boosting US GDP by about 1 percentage point, offsetting some economic drag. Slok suggests that a resolution to the US-Iran conflict could lower oil prices and reduce inflation pressure, potentially allowing the Fed to avoid further rate hikes, but this outcome remains highly uncertain.
Read sourceApollo Economist Warns Record Diesel Prices Pose Greater Inflation Challenge for Fed
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently anticipates. In an article published by格隆汇 on September 25, Slok argued that diesel-related transportation costs, unlike gasoline prices, are highly inelastic due to their critical role in moving goods across retail supply chains and data center construction. This inelasticity means rising fuel costs will inevitably be passed on to businesses and consumers, spilling over into core consumer price index categories that typically exclude energy. Slok's warning comes as the Fed sets monetary policy following its first rate hike since 2023, with inflation still significantly above the central bank's 2% target. He cautioned that the Fed cannot treat diesel price increases as a temporary phenomenon, as their spillover effects will directly impact core inflation measures.
Read sourceApollo Economist Warns Record Diesel Prices Pose Greater Inflation Challenge for Fed
Torsten Slok, chief economist at Apollo Global Management, warned on September 25 that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently anticipates. Slok argues that diesel-related transportation costs differ from gasoline price impacts because demand for transporting goods—from retail supply chains to data center construction—is highly inelastic, meaning price increases will inevitably be passed on to businesses and consumers. This dynamic is particularly critical as the Fed formulates monetary policy following its first interest rate hike since 2023. Slok contends that the Fed cannot dismiss diesel price increases as temporary, as they will spill over into core inflation categories, which currently remain well above the central bank's 2% target.
Read sourceApollo Economist Warns Record Diesel Prices Pose Greater Inflation Challenge for Fed
Torsten Slok, chief economist at Apollo Global Management, warned that record-high diesel prices pose a greater inflation threat than the Federal Reserve currently anticipates. He argues that diesel-related transport costs, unlike gasoline prices, are highly inelastic because they are essential for moving goods across the retail supply chain and data center construction. These costs are being passed on to businesses and consumers, spilling over into core consumer price index categories. Slok's warning comes as the Fed considers its next monetary policy steps after its first rate hike since 2023, with inflation still well above the 2% target. He cautions that the Fed cannot treat the diesel price surge as temporary, as its effects are already feeding into core inflation measures that typically exclude energy.
Read sourceDiesel Price Surge May Signal New Inflation Threat, Financial Analysis Warns
This analysis from financial research group Caizhifang, published on Tencent Stock's Jinwu Information platform, argues that diesel prices are a more direct indicator of economic inflation than crude oil. It notes that diesel powers logistics, shipping, agriculture, and industry, and its price is highly correlated with US inflation, often leading it. The analysis warns that current diesel prices imply a potential resurgence of US inflation, possibly nearing the 9% peak of 2022. It calculates that diesel's current price implies an equivalent Brent crude oil price of around $193 per barrel, indicating a significant energy shock to the real economy even if crude oil prices are not at historic extremes. The article cautions that high diesel prices act as a 'hidden tax' on the global economy, compressing corporate profits, raising transport and food costs, and could force central banks to maintain higher interest rates for longer ('Higher for Longer'), challenging market expectations for rapid Fed rate cuts. It concludes that the resolution of this 'diesel storm' is a key factor for future inflation and interest rate paths.
Read sourceApollo Warns Diesel Prices Driving Core Inflation, Complicating Fed Policy Path
Apollo Global Management's chief economist Torsten Slok warns that surging diesel crack spreads, which hit a record $100 per barrel in the U.S. Gulf Coast in August compared to a historical norm of $15-$30, are a key leading indicator for core inflation. Unlike gasoline, which primarily affects consumer spending, diesel is essential for freight, rail, agriculture, and construction. Slok argues that because U.S. refinery capacity is constrained and supply is inelastic, industrial and logistics firms pass high fuel costs downstream, embedding them into core goods and services. This structural pressure undermines the Federal Reserve's ability to rely on natural inflation cooling, as interest rate tools cannot increase refinery capacity or fix supply chains. Combined with AI investment demand, fiscal deficits, and Treasury supply, the analysis suggests the Fed may be forced to keep rates higher for longer to combat this persistent inflation source.
Apollo Warns Diesel Costs Driving Core Inflation, Complicating Fed Rate Path
An analysis by Apollo Global Management, attributed to chief economist Torsten Slok, warns that surging diesel prices are becoming a key driver of core inflation, creating a policy dilemma for the Federal Reserve. The article notes that the diesel crack spread in the U.S. Gulf Coast surged past $100 per barrel in August, far above the historical norm of $15-$30, signaling severe supply bottlenecks. Unlike gasoline, which primarily affects consumer spending, diesel is essential for freight, rail, agriculture, and construction, meaning its costs are passed through the supply chain into core goods and services. Apollo argues that the Fed's rate hikes cannot address refinery capacity constraints or supply chain disruptions. Combined with AI investment demand, fiscal deficits, and Treasury supply, this structural pressure could force the Fed to keep rates higher for longer, challenging the expectation of a natural inflation decline.