On The Money — Yellen says US can do little to ease gas prices

Treasury Secretary Janet Yellen (and Goldman Sachs) say it’s time to brace for more pain at the pump. We’ll also look at growing economic stormclouds abroad and concerns about the federal unemployment system. 

But first, watch Matthew McConaughey’s gripping remarks on gun violence in the White House briefing room today. 

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Subscribe here.

Yellen: ‘Virtually impossible’ to insulate from surge

Treasury Secretary Janet Yellen said American consumers will be at the mercy of oil companies this summer, with an analysis released Monday by Goldman Sachs showing crude oil is expected to reach $135 a barrel.

Speaking to the Senate Finance Committee on Tuesday, Yellen took heat from Republicans for inflation that’s near 40-year highs, with gasoline prices up almost 50 percent over the last year. 

“Given the global nature of these markets, it’s virtually impossible for us to insulate ourselves from shocks like the ones that are occurring in Russia that move global oil prices,” Yellen said. 

• Goldman Sachs researchers wrote in a Monday note that prices for Brent crude oil could go as high as $135 per barrel this summer, up from about $120 currently, which would send gas prices even higher.   
  
• Yellen said that the Biden administration’s decision to release one million barrels of oil from the U.S. petroleum reserve per day has made an impact on gas prices, but the administration cannot overcome global trends.  
  
• She also told lawmakers that Congress has the tools to “ease the cost burdens that households are experiencing” due to rising prices. 

The background: Inflation has been most prevalent in the energy sector, where consumer prices have risen more than 30 percent in the last year, more than three times the increase in consumer prices for all other products and services.  

Tobias Burns has more here. 

THIS TOO SHALL PASS?

World Bank slashes growth forecast, warns of stagflation 

The World Bank slashed its forecast for global economic growth Tuesday and warned the world could face “a protracted period of feeble growth and elevated inflation” due largely to the fallout from the war in Ukraine. 

• Economists at the World Bank expect global gross domestic product (GDP) to rise 2.9 percent in 2022, down from the 4.1 percent growth rate the bank projected in January and a 5.7 percent jump in GDP last year.  
  
• Ongoing interest rate hikes in the U.S. and other major nations would also weigh on developing nations and those with high debt loads as they see borrowing costs rise and economic activity slow. 

“Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely, with potentially destabilizing consequences for low- and middle-income economies,” wrote World Bank Group president David Malpass.

“It’s a phenomenon—stagflation—that the world has not seen since the 1970s.” 

Sylvan has more here. 

‘CRITICAL WEAKNESSES’

US unemployment insurance system at ‘high risk’ for waste, fraud: GAO 

The U.S. Government Accountability Office (GAO) warned on Tuesday that unemployment insurance systems were at “high risk” for fraud, waste and mismanagement.  

• The unemployment insurance system, which is already scheduled to be updated next year, has “critical weaknesses” in terms of how it “carries out its mission and also includes options panelists suggested for transforming the system,” the office said. 
  
• The office also said that the recent “unprecedented demand” for unemployment assistance prompted a need for the systems to be enacted quickly, causing “serious challenges for states and a greater risk of improper payments, including those due to fraud.” 

“The widespread problems plaguing the Unemployment Insurance system are extremely troubling,” Gene Dodaro, who heads the GAO, said in a statement on Tuesday. 

Monique Beals breaks it down here. 

NOT YOUR NITROGEN

Why the fertilizer market could be Russia’s hidden leverage 

Economists and policymakers say Russia may have some thus far hidden leverage on Ukraine — and the global food supply. 

They worry that self-imposed export restrictions on fertilizer by Russia, the top global provider of the product, could further drive up the cost of food and damage global harvests in 2023 and beyond.

• Russia’s invasion of Ukraine has been a factor in the 30 percent surge in international food prices and 10 percent rise in U.S. food prices over the last year, as supply chains continue to sputter in the wake of the coronavirus pandemic. 
  
• But the price pressures exerted on agricultural markets by Ukrainian exports like wheat and sunflower oil have been so far mostly caused by issues with their transportation, with cargo ships stuck in blockaded ports that Russian authorities say need to be cleared of mines. 

Tobias has more.

Good to Know

Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) introduced legislation on Tuesday that will create a regulatory framework for digital assets such as cryptocurrency.  

The proposed legislation would assign regulatory authority over digital asset spot markets to the Commodity Futures Trading Commission, which regulates commodities markets.  

Here’s what else we have our eye on: 

• Sen. Raphael Warnock (D-Ga.) is pressuring Senate Majority Leader Charles Schumer (D-N.Y.) to hold a vote on legislation to lower the cost of insulin.   
  
• Electric vehicles are falling into the price range where experts say mass adoption can happen — and partially electrified hybrids are already there.
  
• Autonomous vehicles are already on U.S. roads, but the fast-growing industry will have to overcome fears from policymakers and the general public before driverless cars and trucks are widely adopted. 
  
  

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow. 

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