Gas prices jumped with the Strait of Hormuz disruption and they're staying high. In Episode 036, Luke Tatum, Nicky P and Rob Brayton compare today's oil shock to 1973 and 1979, look at why fuel costs reach everything from groceries to fertilizer, and use oil priced in gold to see past the weaker dollar. They close with how reserves, a second revenue stream and liquid capital help you come out the other side.
“It makes literally everything that you do more expensive.”
We're still talking about oil, because oil prices are still up. I've always thought it was strange that a 30 cent swing in gas prices could sink a president. Nicky sets me straight: when you add up commuting, errands and everything that gets trucked to the store, fuel costs touch nearly everything you do.
What We Covered
Gas touches everything. Nicky walks through the commute, the trips for the kids and the vacation to see family. Rob adds that diesel drives the cost of nearly everything we buy, since almost all of it moves by truck.
Fertilizer and food prices. The same fossil fuels go into the nitrogen fertilizer behind most of the world's food. Because crops take time, Nicky expects the full effect on grocery prices to show up a month or two later.
"Not even a little bit." I read President Trump's May 12 remark that Americans' financial situation wasn't motivating him in Iran talks "even a little bit." Rob is clear this isn't about party. It's about holding any leader accountable, and I point out that the last administration had its own disconnect.
“It’s not similar in severity.”
Four times the price in 1973. In the 1973 shock, oil went from around $3 a barrel to around $12. We've gone from the $90s to above $100, which hurts, but it isn't the same proportionally. An apples to apples repeat would mean oil at $300 or more.
Other supply lines. Nicky's point is that the world is more interconnected now. Some countries have other routes to move oil, and the longer this lasts, the more they'll retool around them. The US is also drawing on the Strategic Petroleum Reserve.
Oil priced in gold. Rob likes PricedInGold.com because pricing a commodity in another commodity strips out the currency. By his reading, a barrel cost about three grams of gold in the 1970s and is closer to half a gram now.
“Capital attracts opportunities.”
Dry powder. We always come back to having reserves on the sidelines, so you don't have to change your whole life every time something happens in geopolitics.
Build another revenue stream. If you work in an industry tied to energy, or one being reshaped by AI, it may be time to develop a skill or enterprise of your own that's marketable in any economy.
Capital attracts opportunities. Rob's point: unstable times create opportunities, and the people who are capitalized, with liquid access to their money, can act on them quickly.
Key Takeaway
You can't control oil prices or foreign policy. You can control how prepared you are when they move. Keep reserves you can reach, look for ways to earn that don't depend on one industry, and stay liquid. At Perfect Spiral Capital we help clients build that kind of capital with properly designed whole life insurance, a savings tool you can borrow against when opportunity shows up.
Key Moments
[2:00] Gas Touches Everything
[4:00] Hazlitt and the Knock-On Effect
[6:00] Fertilizer and Food Prices
[7:00] The 1970s Oil Shocks
[9:00] "Not Even a Little Bit"
[13:00] Four Times the Price in 1973
[15:00] Other Supply Lines and the SPR
[17:00] Oil Priced in Gold
[18:00] Dry Powder
[20:00] Capital Attracts Opportunities
“People are gonna gravitate towards stability.”
Related Episodes
Episode 028: Is War Good for the Economy? The Broken Window Fallacy and What War Costs You
Episode 030: What Is Stagflation, and How Do You Protect Your Savings From It?
Episode 024: Why Are Gold and Silver at All-Time Highs? Gresham's Law, Bank Rules and a Weaker Dollar
Want the full conversation, including Rob on oil priced in gold? Listen to the full episode and grab the free toolkit at PerfectSpiralCapital.com/podcast.
FAQ
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Not proportionally. In Episode 036, Luke Tatum notes that oil roughly quadrupled in the 1973 shock, from about $3 to about $12 a barrel. Today's move from the $90s to above $100 is painful, but a true repeat would put oil above $300.
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Almost everything you buy moves by truck, so diesel costs show up in store prices. Fuel also goes into the fertilizer that grows most of our food, and it raises the cost of commuting, errands and travel.
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How can I prepare my finances for an energy shock?
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Keep reserves you can reach quickly, consider a second revenue stream if your industry is exposed, and stay liquid. Rob Brayton points out that people with capital ready can act on the opportunities that unstable times create.
Show full transcript
Between The Lies: Episode 036 Transcript
Nicky P: Cheap energy is the cure for what ails you, unless you make your money on energy, in which case wild speculation and a destabilized global market terrify those profits right into your pocket. Welcome to the Between The Lies Podcast, your weekly lesson on how to approach an uncertain world with positivity and balance.
I'm Nicky P, here with my good friends and money brains, Luke Tatum and Rob Brayton from Perfect Spiral Capital, as they help us navigate the snares and pitfalls in a world of, trust me bro, economics. Stick around till the end of the video for their free toolkit, and be sure to like and subscribe if you enjoy what we do here.
Gentlemen, you feeling that stuck in the Strait of Hormuz blues?
Oil Prices Are Still Up [0:00]
Luke Tatum: Oh, I'm feeling it. I'm feeling it. We're so, I mean, we're still, we're still talking about oil, right? I mean, that's, I guess, the entry point today. The story for the week is really just that, you know, hey, oil prices are still up.
Hey, you know, it still costs a lot to fill up the gas tank, right? That's kind of the story. And I'll make a side comment first, and then we kind of see where we go from there. But it has always been weird to me, the average consumer being upset about, like a, you know, 30 cents a gallon price shift or something in the price of fuel.
It's like, I mean, how much do you drive? I mean, I, like you- if you're not a commercial trucker or something like that, I've always thought, I mean, this is gonna cost me a few extra dollars. You know? It's, the price of almost anything else affects me more than that a lot of times.
Nicky P: The average American commutes at least an hour a day.
Luke Tatum: Well, okay. But I mean, how many, how many miles of fuel, I mean, how many, gallons of gas is that necessarily? It's just, it's always something that I've kind of thought is interesting because g- you know, groceries double in price, and you're like, "Oh, wow, that's... I guess I'll figure out a way to manage."
But driving the car seems to be this different category that, you know, uniquely attacks whoever is president or whatever, you know? It's just weird to me.
Gas Touches Everything [2:00]
Nicky P: Well, so you, what do you... You go to work every day, five days a week. You spend an hour doing it. Even if it's, say, like two bucks a trip, okay? If it's just two bucks a trip, you've now added- $20 to your week just going to and from work.
Anything you would've done, how many times you gotta go do stuff for the kids? It makes literally everything that you do more expensive. And then again, and that's before you say, "It makes your groceries more expensive," 'cause they drive to and from places. If you're gonna go on vacation this year, like I, right now, what it's cost for my band to go on tour over the summer tripled because of gas prices.
So it's like it... If you're gonna do a vacation, you wanna see grandma across the country, everything in your life becomes harder to do because of it.
Luke Tatum: That is true. And so the reason we're bringing it up now, I guess, to cap the point is because it's staying up, right? It's a huge increase, and it's staying that way.
We've... I guess my point there is just really that in the past we've had like, oh, gas has gone up 20 cents a gallon or whatever, and it's this huge deal, and it's a failure of leadership from some politician for some reason, right? But this is unique in that way. This is a situation we haven't seen in quite some time, where it's an e- e- extremely large shift in prices, and it's staying that way.
So that kind of takes us to, I know you wanna talk about the '70s and all of these things, but, you know...
Why This Price Spike Is Different [3:00]
Nicky P: Well, but let's also point out that this is also unique in that we 100% can point the finger at one man for all of it because we didn't have to go to war. In fact, the only things they're trying to get out of it is the exact state of where we were before we started it.
Luke Tatum: Absolutely. It's a very, it's hard to take Trump's side on this one. Let me put it that way. I
Nicky P: Was listening to him talk on Part of the Problem, they had a clip from somewhere where he's like, "Well, yeah, I think it's worth it to make you all, America, pay more for everything so that they never get a nuke."
Well, they were never going to have a nuke anyways the way they were going. So he just wanted things to be expensive for us for no reason. That's what I'm hearing out of this.
Luke Tatum: I mean, Rob, what's your initial take on this? Like-
Rob Brayton: Yeah. I mean, it certainly doesn't make it... I mean, I, just the political side of it alone doesn't, didn't make a whole lot of sense to me.
Hazlitt and the Knock-On Effect [4:00]
Rob Brayton: And, and we can, that's a whole conversation in and of itself, but I think obviously what we are kinda highlighting with a lot of this stuff really is, what we s- what we see from Mr. Hazlitt, right, in Economics in One Lesson. One thing has a drastic impact on the rest of the economy when you have this huge shift in energy cost, even though it was, it's, you know, generally considered artificial in some respects 'cause we caused the problem.
It, you have this knock-on effect to all other aspects of the economy, and just when you look at the big shift in, particularly in diesel prices, that's where we've seen... I mean, it's over five, you know, what, $5 and some odd cents a gallon. That's what impacts all these prices because you have to get it someplace, and it's not like we're running on the old train network that we used to have for dis- distribution of goods.
I mean, everything's done by truck today, so.
Nicky P: S- s- sadly it's all still there, just not used all that often.
Rob Brayton: Yeah. Well, and in major disrepair or removed, so yeah.
Luke Tatum: You know, insert crumbling infrastructure comment or whatever, right? That's like the
Rob Brayton: Standard- Oh, we better tax more people to build up the infrastructure.
That's the standard. It's like no, please, not that. You're missing the point. How
Fertilizer and Food Prices [6:00]
Nicky P: About you just stop inflating it so that, you know, we can afford it because it doesn't cost as much? One of the other things is like, so we talk energy. Energy's kind of a broad term, even when you talk oil because, well, oil isn't everything, like specifically automotive oil, gas, because the same fossil fuels cycle is used to create the nitrogen-rich fertilizers that we use for all of the food in the world.
And those like, because the natural process of growing things takes so much longer, we haven't exactly seen what that's really going to do in grocery stores yet. Like, 'cause we still have another probably month or two before that really- It becomes a reality how much our food is going to cost based on the fertilizer and the transportation of said food.
The 1970s Oil Shocks [7:00]
Luke Tatum: Yeah. It is... Well, it's one of those things. How long is this going to last? That is really the question that determines how bad a lot of these things become. We were talking right before we hit record about kind of the differences between this current situation and the oil shocks of the '70s, like '73 and '79.
And your point, Nick, was to say, "Well, hey, we're in a more interconnected world. There's lot, a lot of different options for how these things are moved. Maybe one option is less efficient and less preferred, and maybe there's some retooling and some reallocation of resources required to really fully ramp up to using a different route, you know, in the current world or whatever.
But it's not that, you know, everything must move through the Strait of Hormuz, for example, right? So a lot of these countries, and it varies country to country, you know, but some of these places have some other ways to move oil. And so it's just, well, the longer that this goes, the more those places are going to start to retool and reallocate.
And then once they're already set up to more capitalize on a different route of travel or transportation, well, I don't know what that does exactly. When the strait opens back up, it doesn't become as necessary. It's not as important, you know, the longer that sort of thing goes on.
The Cost of US Production [8:00]
Nicky P: One of the things that we've always relied on here in the US is that we have our own production capacity.
Now, one of the issues with our production capacity is it is much more expensive to produce oil in the US 'cause it's harder to get at. There's regulations, a whole lot of things that make it... So until gas reaches a certain point, it doesn't make sense to get your gas and your oil here in the US. But you know, it's big problems over there mean, well, now the world has to come to us, and we get to charge what we charge for the oil we have here, which frankly is more.
So it's a Sometimes very hard to feel like these things aren't w- just done out of spite or maliciousness from somebody up at the top going, "Well, fuck you poors." You know?
Luke Tatum: You know, I- since you're bringing it up, I do have to br- I pulled that quote from Trump here recently. This is from a few days ago.
"Not Even a Little Bit" [9:00]
Luke Tatum: So Trump told reporters Tuesday, this is last Tuesday now as we're recording this, that, that the financial situations of Americans do not motivate him when he is negotiating with Iran. So here's the quotes from Trump. They basically ask him how much does the financial situation of Americans factor into his decisions as it relates to Iran.
He said, "Not even a little bit. The only thing that matters when I'm talking about Iran, they can't have a nuclear weapon. I don't think about Americans' financial situations. I don't think about anybody. I think about one thing. We cannot, let Iran have a nuclear weapon." And so that is who, that is what we're dealing with here.
It is, you know, who cares?
Rob Brayton: Haven't we heard all that before?
Nicky P: I mean, I hear that and it sounds very startlingly like let them eat cake.
Luke Tatum: Yeah. Unfortunately yes. I s- yep. This is just... I- I- it's such a, I mean, to say tone deaf is almost to be hilariously, you know, missing the point, I guess. It's like it's beyond It's beyond even the usual amount of political disconnect Right?
Holding Leaders Accountable [11:00]
Rob Brayton: Well, I mean, politically, how... You can't really say anything worse 'cause I mean, how often have we been in political cycles and people are like, "It's the economy, stupid"? Right? Like, that's what drives people to vote specific ways in certain sit- situations. And then to be utterly tone deaf to the fact that people are really struggling, and the ultimate reality is that not only you, but the people that are in the government that you have appointed caused the vast majority of the problem, that, that's not a good situation.
And for anybody that's, like, thinking we are, like, anti-Trump and we're on the other side, you couldn't be further from the truth. This is about just being, holding people accountable for what they're supposed to do. So-
Luke Tatum: Right. I mean, Biden, if I can just, like, give some flak to the other side, you know, and just kind of balance the scales or what have you, 'cause, like, I don't uniquely hate Trump or whatever.
Biden, given his, like, red b- red and black backlit creepy speech where he's condemning half of the entire voting population of the United States, you know, for being, like, wicked evil racist or whatever. Like, you know, we see the same sort of stuff all the time. It's just we play this ratchet game where, like, the next guy is always somehow worse than the last guy in, you know, n- new, unique ways.
We're gonna go even faster speeding off of this, you know, fiscal cliff, to use a term that we've seen thrown around in the past. And but I do, I do wanna maybe have a positive spin here for a second because we're talking about the oil shocks in the '70s, and because we have, you know, a, more options, more mobility, more transportation things that are on the table The shock is not as bad, you know.
Four Times the Price in 1973 [13:00]
Luke Tatum: So we were, we were at 90-something dollars a barrel for oil, and then, you know, we're now well above 100. But in the, '73 shock, it was around $3 a barrel, and it went up to 12. So it's four times, you know. And so we're not at $350 a barrel or 375 or, you know, 400. We're not at that kind of level.
It's not the same proportionately. I'm not saying it's not bad, 'cause it is bad. I don't wanna fill up my gas tank anymore. You know what I'm saying? Like I'd rather just stay home. We've made fewer trips, things like that. But, you know, it could be significantly worse if we were mirroring, you know, the situation from the '70s.
So as we see that kind of conversation out there, like, yes, it is similar in ways, but it's not, it's not similar in severity.
Rob Brayton: Yeah. That, that's a great point you bring up, 'cause if it was truly an apples to apples scenario, that's what would have to happen. Like oil would have to be $300 a barrel, and I mean, I pray that that does not happen, right?
But-
Luke Tatum: Oh, yeah. Right.
Rob Brayton: That's
Luke Tatum: Insane. You know?
Rob Brayton: That would, that would be crazy. I mean, that's like, you can see where things would get out of hand. But yeah, for sure. I mean, we... There's certainly just different aspects at play today than what there was then, and, you know, how we go about solving that is, you know, probably not a whole lot different though either.
So less foreign intervention.
What About the Weaker Dollar? [14:00]
Nicky P: Well, a question I asked before we kinda got this way was, so yeah, I get that the magnitude as far as, you know, percent, you know, X percent isn't as high. But I have to wonder if like, well, yeah, but that's 'cause we've so devalued our currency that like, good God, how expensive does it actually have to be to 4X what's already an insane price?
Well,
Other Supply Lines and the SPR [15:00]
Luke Tatum: I think there's a lot of factors with that. I mean, inflation adjusted, you know, I think you still have kind of the same argument, the same kind of things at play. I don't... I think it more has to do with just the fact that we've got other supply lines and other things. I mean, even Iran is currently exporting oil right now You know? They're sending stuff over to China. Like, they are currently doing some business. It's not as much, but they are moving oil. And, you know, the US is shrinking its strategic, what, SPR, right, the Strategic Petroleum Reserve. It's shrinking that to some extent. We're tapping our reserves.
It- if the duration of this continues, I don't know how long it has to continue, but if it stretches out long enough, I think quadrupling the price of gas is not off the table. You know, I don't want that to happen, but this is... It's early enough and, and, you know, thankfully the United States has had a reserve of petroleum products, petroleum, crude and all that.
But, you know, at some point it becomes completely untenable. And I've joked from the very beginning, you know, and challenged people, "How long do you think this war is going to last, this, you know, war in Iran?" and a lot of people are striking out 'cause people said, "Oh, it's gonna take one week. It's gonna take two weeks, and we'll be done in three weeks."
You know it's not over. It's not over yet. So where's the end? We've all been promised a short intervention, but I've also heard that my whole life about interventions in the Middle East. So You know? I don't wanna be right.
Rob Brayton: You know, Nick, I think going back to your question too, you know, when we think about, yeah, we have this valuation and the currency that's certainly different today than what it was.
Oil Priced in Gold [17:00]
Rob Brayton: One of the things I was looking at here is that if it... For reference for anybody who's watching, I like to use the website PricedInGold.com, and because crude is a commodity, it holds a specific value, right? So you- when you consider that, and you then price it in another item like gold, you can kind of see what those real fluctuations are.
And when we think about the 1970s, we are somewhere near, like, three grams of gold to a barrel of crude, and now we're actually at about half a gram. So, like, that's the difference. It's not actually higher per se. So like, the overall demand for oil is probably a little lower than what it was back then and, and that's why we don't see quite as big of a, as, or massive as a fluctuation even though we've seen these big changes within the currency.
What's the Optimistic Way Out? [18:00]
Nicky P: All right. Well, tell you what you guys, you know, this is a pretty general topic, one that I think we really just haven't covered a lot, so I wanted to bring it up. What's our as- optimistic way out of this one though? What are, what are we really thinking of? Thinking of starting a business of our own, starting doing something that's in our hands.
What are we, what are we thinking of?
Dry Powder [18:00]
Luke Tatum: Yeah. You know, I think y- we always on this show are harping on, you know, the need to have reserves in, you know, off to the sidelines, to have dry powder, as we like to phrase it, that kind of thing. Having savings that you can use to mitigate this type of situation so that you don't have to dramatically change your behavior whenever, you know, something changes in the world of geopolitics.
Build Another Revenue Stream [19:00]
Luke Tatum: But also, you bring up starting your own business, you know, becoming an entrepreneur, those kinds of things. I think it's worth considering, especially if you work in an industry that's tied to some of these things, you know, how else you might be able to provide for yourself and your family, right?
What other... I don't necessarily like the term side hustle as much, but what other thing you could be developing, a revenue stream, you know, that you could have a skill that you could have that's highly marketable in any economy, those kinds of things, so that you can save, so that you can provide in times that, you know, maybe there's going to be layoffs in certain industries.
Maybe, I mean, we're seeing that with AI, and I don't wanna turn this into another AI episode. But, you know, the world is changing rapidly, and it may be time to consider starting your own enterprises elsewhere, your own thing that you own and control, right? Where you don't have to worry about some of these shocks that may come down the pipe.
What do you think, Rob? I mean, is that more or less where you're at as well?
Capital Attracts Opportunities [20:00]
Rob Brayton: Yeah, totally. The other thing to think about in a situation like that is having capital. Capital attracts opportunities. And when you get into a situation where, you know, things are more so, or I should say unstable, so to speak- There's going to be opportunities, and if those who are capitalized or well-capitalized, they're gonna have that option to scoop up some of those opportunities when they're present.
Or if you have something new kind of emerging in the market, you know, maybe there's an opportunity from an AI-based business or something like that, that you could jump into and be highly successful with. That, that's the advantage of having capital available to you. And I mean, it doesn't matter, I mean, obviously we have a system and we have a process that we want people to use and utilize to be able to do that, but really it comes down to are you capitalized?
And w- I'm not talking about stuff that's locked away that you can't do anything with. It's, you gotta have liquid access to be able to do something now because when opportunities come up, you gotta be able to capitalize on them and you gotta be able to do it quick. So having that liquid access to capital is pretty critical.
Luke Tatum: Yeah. In times of turmoil, you know, instability, opportunities, money in general, people are gonna gravitate towards stability. And, I mean, if you have the reserves, if you have the capital, you're stable compared to other people, right? You're liquid, you're ready to go to do what needs to be done when other people aren't.
That is an attractive quality. It's an attractive position to be in. And, you will find it will be easier to manage and easier to prosper in those types of situations. So perhaps it is time to think a little further ahead, a little bit more long-term, and to see how you can come out on the other side of situations like this, better than you went into them, because it's possible.
So Nick, any closing thoughts? Any final words here?
Nicky P: No, no. I think we've touched on everything I wanted to touch on.
Outro and Free Toolkit [22:00]
Luke Tatum: Okay. Nice short episode. So, thank you all so much for joining us for another episode of Between The Lies. And we have a few resources for you. If you'd like to learn more about our process, our approach to these things, and make sure that you're as well-equipped as you possibly can be for the ups and downs of this crazy world that we all share, we've got a free toolkit for you over at perfectspiralcapital.com/podcast.
You'll find the link below in, in the description box, and we'd love to have you over there. All we ask is your email address, and we are going to give you all kinds of resources to make sure you're, perfectly positioned going into the future. And also, I wanna give a shout-out to Rob's separate channel at Rob Brayton PSC for Perfect Spiral Capital.
You can find all his excellent analyses over there, so be sure to go subscribe to him. That's all I've got. So until next time, y'all. Thanks so much for watching. We'll see you soon
