Marketplace - Spring is coming, and so are higher gas prices

Episode Date: March 14, 2024

We keep a close eye on the price of oil because it feeds so many industries and hints at what’s coming for the global economy. And right now, the price of crude is going up along with gas at the pump. One reason is that OPEC is holding back on supply. Another: Spring is coming. We’ll explain. Also in this episode: The state of American steel, the rise of the AI training industry, and the Taiwanese roots of bubble tea.  

Oil, gas, and bubble tea. I wish I was making that up. From American Public Media, this is MarketFlex. In Los Angeles, I'm Kyle Rizdell. It is Thursday today, the 14th of March. Good as always to have you along, everybody. 85-18. Any guesses? No? All right. Yes, that's a bit vague. I understand. So here are a couple of hints. It comes in barrels. It is denominated in dollars and it touches almost literally everything in this and the global economy. Brent crude today at the close in New York is the topic at hand, that $85.18 a barrel. Crude oil is up about 10% since bottoming out at the beginning of the year, and you have no doubt clocked gas prices, too. Nationwide average of $3.41 a gallon, says AAA. Why and what, oh what does it mean, was the assignment marketplace's Mitchell Hartman got this morning. Gas is up around 15 cents a gallon since mid-February,

more than 30 cents since the beginning of the year, which I could see this morning as the attendant filled up my tank at the local 76 station. You know what, could I get a receipt? $3.99 a gallon. Probably going up tomorrow, maybe even today. To understand the rise in pump prices, says Andrew Gross at AAA, we need to start with the stuff getting pumped out of the ground, crude oil prices on the world market. They did cross the $80 a barrel point this morning, which is a pretty good indication that you're going to see a lot of upward pressure on pump prices here domestically. One thing driving up crude prices,

OPEC is holding back on supply. Meanwhile, Gross says worldwide oil demand is expected to go up this year. There's a rosier global economic outlook. And if economies around the world are doing well, then that means that there will be increased consumption of oil. And one economy that hasn't been doing so great recently could tip the scales. The big wild card remains China. Peter McNally at Third Bridge says China's demand for oil has been underwhelming. And if China picks up and oil supply doesn't respond, then you're looking at higher oil prices, which will feed through to gasoline prices.

Which are likely to keep going up anyway, says Andrew Gross, because of seasons. The days are getting longer, the weather warmer. We see this every year, starting about now, gasoline prices, they tend to peak in June and July. Which we consumers tend to forget every year until the higher spring prices come around and annoy us, says economist Oren Klatchken at Nationwide. Gasoline prices, one of those few things that we all look at every week or so when we go to fill up that we are most sensitive to. And which he says has kept consumer sentiment down. I'm Mitchell Hartman for Marketplace. Speaking of consumer sentiment, as Mitchell was, and just to close the loop from yesterday and our data discussion,

inflation at the wholesale level was the economic indicator of the day today, the producer price index, the PPI. As you've surely heard, up six tenths percent month on month, more than people had been guessing. Most of that increase as it happens, energy prices. Wall Street, as the week heads to a close, a tad sour. We'll have the details when we do the numbers. You make steel through an alloy of iron and carbon. Add other elements as needed to refine the product. You make steel politics by coming out against the purchase of U.S. steel by Nippon Steel of Japan, as President Biden did today, saying it is critical to keep domestic ownership

of one of this country's biggest steel manufacturers. And to be clear, U.S. steel, the company, yes, but also the whole U.S. steel industry has been at least historically one of the most prominent slices of the American economy. Question is, though, how's it doing now? Maybe, as Marketplace's Sabri Benishaw reports, not that great. In the American steel industry's infancy in the late 19th and early 20th centuries, Britain was the king of steel. In the early years, trade protection was critical for the U.S. to get an advantage. James Besson is director of the Technology and Policy Research Initiative at Boston University. The U.S. dethroned the old king and became world leaders. But Besson says

by the 50s and 60s, the industry stopped innovating as much. You know, administration after administration, they had political support for their tariffs, and it was really to cover up the fact that they hadn't been technologically progressive. Today, American steel has innovated significantly, but the trade protections remain. What's kept the industry's earnings up has been tariff protection. Ned Hill is professor of economic development at Ohio State University. He says that without those protections... You're looking at the United States being 55% above the world price of steel.

And tariffs don't actually quite make up for that price differential right now, he says. Gordon Johnson is CEO of GLJ Research. And so you're seeing an increase in imports. Clearly, that reduces demand for domestic steel. Demand is looking soft for other reasons, too, says Johnson. One of them has to do with the new king of steel, China. The U.S. accounts for roughly 4% of global steel consumption. China's 50%. So as goes China, goes the global steel market. China is having a real estate crisis, depressing demand and pushing supply onto the global market. But if this all sounds gloomy, Adam Green, managing director of World Steel Dynamics,

suggests taking the long view. Pricing certainly goes in a cycle. Right now, we are in a temporary lull, he says. Overall, the profitability of steelmakers in the United States is much improved versus where we were just a decade ago. Green says one way U.S. steelmakers have been able to improve margins is by consolidating, increasing market share. One reason U.S. steel has been so eager to be bought.

In New York, I'm Sabri Beneshour for Marketplace. If it hasn't already, generative AI is going to change the way a whole lot of us do our jobs. If, the obvious caveat here has to be, we still have jobs. The International Monetary Fund says that in advanced economies like this one, 60% of jobs are going to be affected by AI. And about half of those jobs might see lower wages or complete automation because of it. So how in the world are you supposed to prepare for a technological revolution that's being compared to the invention of the internet or, going way back, the printing press? One word, people, webinar. Marketplace's Matt Levin takes us inside the booming AI training industrial complex. When generative AI tools like ChatGPT first came out, Autumn Meltzer's team of copywriters and

graphic designers flirted with the tech, even though they were kind of terrified by it. She knew it was time to get into a more committed relationship with AI when she spotted a competitor agency trumpeting how they use it in a blog post. If they're touting it in their blog post, it's a big marketing tool for them. And so I'm like, hey, this is something we've got to leverage as an agency. Meltzer is a creative director for a company called TrueSense Marketing. She's recently enrolled in several AI training courses. There was LinkedIn's Generative AI Skills for Creative Content, which comes with

a paid subscription. There was Simpliv's ChatGPT for Marketers, Content Creators, and Social Media Managers for $149. They're everywhere. I mean, every day I get a new course almost that is being advertised to me, and a lot of them don't apply to what I'm doing, so I can just dismiss them. Meltzer estimates she's spent over 10 hours on multiple webinars, paid hundreds of dollars for them in total. She says half have been pretty good, the other half not so much. But overall, the courses have eased her AI anxiety. It's the enemy you don't know that's the scariest, though, right? And that's why we're going down this path.

What's that quote from Dune? Fear is the mind killer. Well, for the red hot AI training industry, fear is the cash cow. Marnie Baker-Stein is chief content officer for the online learning company Coursera. In 2023, someone enrolled on Coursera in Gen AI content every minute. Every minute of the year. Rival firm Udemy says it's had over 3 million enrollments in AI courses. They actually had a ChatGPT class up and running within 11 days of ChatGPT's public

debut. Coursera's Baker Stein says the training and retraining opportunities tailored to specific jobs are basically endless. UX designer or project manager or, you know, attack and defense specialists in cybersecurity. Or... Now, the key behind this is anytime you want to go and generate a lesson plan... A teacher. You want to start off with real specific things that you're looking for to go into it. That's from a Coursera training called Innovative Teaching with ChatGPT.

The instructor is Jules White, who's a computer science professor at Vanderbilt. A lot of what White teaches is called prompt engineering, basically the art of crafting questions and commands to get the AI to do what you want it to do. This is like the most fundamentally democratizing moment in computing, where anybody can go in and they can have the power of a programmer without having to

know how to program. Powerful tools like ChatGPT and MidJourney are designed to be user-friendly. That's the magic. So can't you just learn by doing? Some people don't learn best that way, and some people learn best through a course. And so it depends on what your learning style is, the way to do it. It's too early to judge how effective these courses might be in actually future-proofing workers, says economist Rafaela Sadun at Harvard Business School. She cautions AI is young. Years from now, a course like ChatGPT for content creators may sound as silly as an expert guide to using your pager. The risk is that you learn something now

and six months from now, it's already obsolete. Sadun says generative AI will require more than retraining white-collar workers how to think about their jobs. It'll require retraining how they think about themselves. She gives the example of a professional writer. As a writer, are you going to accept that Shadrubiti may provide you with some ideas, some creative ideas, and then your role is not anymore to come up with these ideas, but is to select or refine ideas that were provided to you by a technology.

And this is a very different way of doing work. If you're looking for a webinar on how to deal with an AI-induced existential crisis, I haven't been able to find that one yet. I'm Matt Levin for Marketplace. Coming up. Adding ice, adding sugar, and salt in the tea. Okay, honestly, yes. Wait till you hear it. Trust me. First, though, let's do the numbers.

Dow Industrial is down 137 today, about a third of 1 percent, finished at 38,905. The Nasdaq down 49 points, about three tenths percent, 16,128. The S&P 500 gave back 14 points, nearly three tenths percent, 49 and 24. We heard from Sabri about the state of the steel industry in this country. To wit, U.S. steel melted down almost 6.4% today. Universal stainless and alloy products lost five and a tenth percent. Former U.S. Treasury Secretary Steven Mnuchin says he is forming a consortium to buy TikTok and its data, oh, by the way, from its Chinese owner ByteDance.

See how that goes. Meta fell three quarters of 1% today, snapped down about 4.3%. Bond prices fell as well. The yield on the 10-year T-note thus rose 4.29%. You're listening to Marketplace. I'm Kai Risdahl. You have heard, I'm sure, here and elsewhere about the business cycle, yes? There are economic expansions and economic contractions. Recessions is what those contractions are called. There's also, as you're about to hear, supply chain cycles.

Globally, those supply chains have mostly bounced back from the snafu of the pandemic. But there are some signs of late that they may be tightening up again. The consulting firm GEP said this week supply chains are nearing full capacity for the first time in almost a year. said this week, supply chains are nearing full capacity for the first time in almost a year. And also, an index from the Federal Reserve Bank of New York shows rising supply pressures as well. But in the way these things tend to work, that could be a good economic omen for the months ahead, as Marketplace's Henry Epp reports. When people started ordering a bunch of stuff in the early part of the pandemic, companies that moved that stuff were caught off guard. And so they responded by adding capacity to move it all. Trucks, ships, train cars. And truthfully, there was too much. And then a whole bunch of it went to the sidelines.

Dale Rogers is a professor of logistics and supply chain management at Arizona State University. As demand for raw materials and consumer goods dropped off last year, companies idled a lot of those trucks and ships and train cars. But now, more of that capacity is coming back online. And the fact that it's coming back tells you that good things are going to show up in GDP probably before the end of the next quarter. It's coming back because there's greater demand again, coming mostly from two parts of the economy,

says Mukund Acharya, vice president at the consulting firm GEP. One is driven off consumer demand, and the other is the fact that the government is now pushing and investing more. And so we're seeing the increase coming from semiconductors, renewables, construction. The Infrastructure Law and Inflation Reduction Act, Acharya says, are boosting manufacturers, driving demand for the components and raw materials they need to have shipped to them. But since that demand is rising from a pretty steep drop-off last year, the cost of shipping things right now is really low.

James Lamond teaches at the University of Minnesota Crookston. So you're seeing less stress in terms of supply chain driven inflation, but then the people in the middle that are actually transporting them are suffering. Still, the rebound in demand is helping the sector, says Joe Dunlap at CBRE. So holding our breath that we can make it through the calendar this year without any further disruptions that may set us back. And possible disruptions are out there, he says. Wars, droughts, hurricane season, a lot of breath-holding might be in order. I'm Henry Epp for Marketplace. It's a truism in business, almost always, that bigger is better.

For-profit, not-for-profit, technology, media, public or otherwise, by the way. Also, finance. And a year after the collapse, or the collapses of Silicon Valley Bank, Signature, and First Republic, some parts of the banking system are feeling that size thing acutely. So a lot of small and mid-sized banks in this economy are scrambling to figure out how to survive and compete, as Marketplace's Justin Ho reports. There are a lot of banks in this country, more than 4,600, according to the Federal Deposit Insurance Corporation. That is substantially more financial institutions than in any other country in the world. That's David Schiff, head of retail and consumer banking at the consulting company West Monroe. He says over the last year, all of those institutions have witnessed how shaky

commercial real estate loans and rising interest rates on customer deposits have made the business of banking riskier and more expensive. And really forced a lot of banks to look at themselves and particularly smaller banks and say, is it worth the cost of admission to continue to operate independently or should we be looking at alternatives? Thinking is, maybe we don't need 4,600 banks. Maybe they should consolidate, acquire other banks or get acquired. There is definitely a strong industrial logic in favor of bank mergers. That's Meg Tyer, head of the financial institutions group at the

law firm Davis Polk. She advises banks on mergers and other operations, including JPMorgan Chase when it acquired First Republic Bank last year. Tyer says in general, bulking up can help smaller banks stay afloat. It makes it easier to compete against bigger ones for loan business and to improve the technology and services they offer customers. The demands for consumers to have digital services have increased, especially since the pandemic. But even though a lot of smaller and mid-sized banks want to consolidate, we haven't seen that many deals in the last year. Tyer says that's in large part because bankers aren't sure what regulators will do. It is very hard and takes a very long time to get an approval for any kind of merger. And there's a very high degree of uncertainty.

Earlier this year, a senior federal bank regulator said the government is trying to make the approval process more transparent. But Jeremy Kress, a professor at the University of Michigan, says even if more mergers happen this year, we shouldn't necessarily expect the banking system will be more stable. When a bank is having trouble, making that bank bigger is often a risky strategy. What they may be doing is just kicking the financial stability problem down the road. Kress says he's also concerned about what will happen to borrowers if there's a wave of bank consolidation, especially small businesses. Having those local relationships with locally based bankers is absolutely critical for entrepreneurs. And that's what I worry that we lose when small banks consolidate. In other words, Kress says 4,600

banks might not be too many when you think about how many communities they serve. I'm Justin Ho for bubble tea. Take chewy balls of tapioca, throw them in some tea, and boom! It's a $400 million a year industry here, $3 billion globally, and it is growing. Today, the origin story. Marketplace's Jennifer Pak takes us to Taiwan. At the Chun Shui Tang tea house in central Taiwan, the perfect cup of bubble tea is boiled down to a science. A staff fills a tall glass with black tapioca balls two inches up from the bottom. fills a tall glass with black tapioca balls two inches up from the bottom.

Then into a shaker, one inch of ice, no more. Plus tea and cane syrup. Shake until there's a foamy layer, about a centimeter thick. The tea house has been serving bubble tea since the 1980s. The founder, Liu Hanjie, was inspired after a trip to Japan, says his daughter and the tea house chain's managing director, Angela Liu. In Japan, he saw iced coffee, so he thought, why not iced tea? Up until that point, tea was consumed only plain and hot in Taiwan. So this sweet, chewy tea was initially seen as a betrayal by tea lovers, says Angela Liu, among them her grandfather. They think we are ruining the tradition of tea. You are a tea master. How can you sell tea like this? Adding ice, adding sugar,

are you insulting the tea? And so my grandpa, he didn't talk to my dad for three years. All was forgiven once the business took off. But her father isn't taking all the credit. It was a Chun Shui Tong employee who combined the iced tea with her favorite Taiwanese dessert, tapioca balls. Again, Angela Liu. This looks like black pearl. So at that time, we called it pearl milk tea. Another company, Hanlin Tea House in southern Taiwan, claims it invented bubble tea around the same time. Local news reports say the dispute got so heated, the two firms went to court. After a decade plus,

a judge decided in 2019 that bubble tea isn't something you can place a patent on. Personally, I would say, thank God it was not successful, because right now you can see a lot of varieties of the bubble tea shops in Taiwan. That's Po Yi Hung, further north in Taipei City. He's a geography professor at the National Taiwan University. He studies political ecology and the food trade. Can I call you Professor Bubble Tea? Okay, well, of course.

Professor Bubble Tea says the chewy drink was created during Taiwan's economic boom, when its economy was on a tear along with Hong Kong, Singapore and South Korea. A lot of, for example, industry, labor-intensive industry, they moved to Taiwan to build up the factories and made Taiwanese people to get more money. Eventually, the Taiwanese became wealthy enough that their children no longer wanted to work in factories. And when Taiwanese manufacturers went abroad, bubble tea shops followed, first to Hong Kong, then mainland China. Then, the 2000s, the power of globalization, a lot of bubble tea

shops then actually tried to be more internationalized. Taiwanese bubble tea chains set up in Southeast Asia, Europe and the U.S., initially in Chinatowns, but now outside too. As for the Chun Shui Tang tea house, it's been slow at expansion compared to other tea chains. Its subsidiary, TPT, has 25 locations in the U.S., but they're only for takeout. While this tea house is spacious with light wooden furniture and shapes of teapots decorating the walls, again managing director Angela Liu. We want to have a tea house around the world like this, but this is not easy to do. Maybe one day, she says, Chun Shui Tang could be the Starbucks of tea around the world like this, but this is not easy to do. Maybe one day, she says, Chun Shui Tang could be the Starbucks of tea around the world.

In Taichung City, I'm Jennifer Pak for Marketplace. I don't know how David Brancaccio and the gang on The Morning Show feel about bubble tea. Yours truly, not a fan, in case you hadn't guessed. But I do listen to what David and the crew do every single morning on the Marketplace Morning Report. You should check it out. All right, we got to go. This final note on the way out today. First, about which, for the love of Pete, please, please, please, please, please consult a financial professional. Saw this on Bloomberg that Bitcoin has topped both Taylor Swift and Beyonce in Google search popularity.

The cryptocurrency, as you might have heard, is on a tear because of those new ways to trade it. Bitcoin exchange traded funds, ETFs. I think we've talked about those. Also, some technical inside Bitcoin baseball things going on there. New all-time high today above $73,000 apiece. Think it through. That is all I am asking. John Buckley, John Gordon, Noya Karr, Diantha Parker, Amanda Peacher, and Stephanie Seek are the Marketplace editing staff. Amir Bibawi is the managing editor. I'm Kai Risdell. We will see you tomorrow, everybody. This is APM. a renewed focus on literacy. We have gotten this wrong in New York and all across the nation.

And it's happening because of a podcast. I think your podcast has changed my life. And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.