Oil prices: Biden, Xi might share a common goal - Yahoo Finance

Oil prices: Biden, Xi might share a common goal

China’s demand for oil out of the Middle East has increased and the nation shares an apparent shared interest with that of the US — keeping oil prices as low as possible.

Yahoo Finance Senior Columnist Rick Newman weighs in on this shared interest and the impact energy market fluctuations have on consumer perceptions of stability.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

- We were just talking about the Chinese effect on oil. Let's talk about China's oil demand rising. President Biden worrying about gasoline prices. We've also got a ready supply of Mideast oil. All of this is something that both leaders can agree on as they continue the dialogue that began at that rare in-person meeting yesterday.

Rick Newman has been watching that for us. So we know there's not much they can agree on because not much came out of yesterday. But lower oil prices are good for both.

RICK NEWMAN: I mean, this is the thing I kept thinking of as I watched the coverage of Biden and Xi meeting. Oh, they made a little agreement. This is actually important. The militaries are going to communicate--

- Right.

RICK NEWMAN: --more. They are going to talk more about shared interest in climate change. But there's a huge shared interest both presidents have that nobody's talking about, which is keeping oil prices low. And ironically, President Xi of China may have more ability to do this than President Biden here in the United States.

We've had massive shifts in the flow of oil around the world during the last few years. Some of that is just where the new customers are. Some of it's relating to the war, you know, sanctions on Russia and Russian oil. But the United States used to be the biggest customer of the Middle East oil exporters. No more. The biggest customer of Saudi Arabia, Iran, and most of the other big producers is now China.

So as this war has erupted between Israel and Hamas-- I mean, of course, at the beginning, there was concern, what if this spreads to oil markets? We saw a little bump in oil prices. They're now way lower. And you have to believe that behind the scenes, China does have some influence with Iran. They're its biggest customer.

The question has been all along-- Iran is behind all the mischief makers in the Middle East-- is Iran going to do something Iran? Iran, I mix it up. Is-- are they going to do something to make this a bigger war? And you've got to believe that China is sitting there saying, we really don't want to see oil prices go above $100 per barrel because that is in China's interest just as is in President Biden's interest to keep oil prices low.

I can tell you, the White House is obsessed with gasoline prices. They saw what happened to Biden's popularity when they went all the way up to 5 bucks. Biden's popularity went down. Has not come back up. And they know they have to do everything to keep gas prices low in 2024.

- So, Rick, do you think now the gas prices are coming under pressure here, maybe even heading lower, good news for Biden?

RICK NEWMAN: Absolutely. I mean, there's a direct correlation. The guest from Opus was talking about-- he said gasoline prices are special. They had-- they have an-- out a massively outsized effect on consumer psyches. You know, people-- the average household spends only 3% of its budget or so on gasoline, way more on food and way more on housing.

There's just something about those gasoline prices, you know, 2-foot high numbers everywhere in the country. Even if you don't drive that much, if you see-- and with these threshold numbers have a big effect. When it goes over $4, people just think something's wrong. God forbid, it should go over $5 as it did in 2022. That's like a disaster. So that just tells people something's wrong. I have a different metric. I go by the price of avocados. When avocados are like--

- Why avocados?

RICK NEWMAN: --less than-- you got to have a household supply of avocados. I mean, they-- when avocados are like $1.50 or less, life is good to me.

- Yeah. I'm in the same--

RICK NEWMAN: And when it's like $2 or more for an avocado, you remember when like the cartels--

- Yeah.

RICK NEWMAN: --got control of the avocados or something? I was like, oh. But for more people, it's gasoline prices.

- Where do you go for your avocados? Where do you get the best price?

RICK NEWMAN: Wherever the best price is. And I don't care about organic either.

- I go to TJ's. That's usually where--

RICK NEWMAN: Sure. Sure.

- --I find the cheapest avocados.

RICK NEWMAN: Yes.

- That's good. Yeah.

- Avocados.

- The avocado index, yeah.

- Yeah.

- Yeah, I haven't been--

- It's the Rick index.

- --eating enough avocados lately. This is a good reminder for me. Thank you, Rick Newman.

RICK NEWMAN: Good. Gasoline--

- If nothing else works--

RICK NEWMAN: Gasoline--

- --gasoline--

RICK NEWMAN: --and avocados--

- --and avocados.

RICK NEWMAN: --the only things that matter.

- Exactly.