- The surge in oil prices on Monday won't be a problem for inflation, according to Wharton professor Jeremy Siegel.
- Siegel said while oil prices spiked, natural gas prices have been dropping steadily.
- "Natural gas, which is more important for heating and electricity generation, actually bumped to new lows," Siegel said.
The 6% surge in oil prices on Monday stoked investors' fears that inflation could come back strong, but Wharton professor Jeremy Siegel is not particularly worried.
That's because despite the surprise OPEC production cut on Sunday, which sparked the biggest upside price gap for WTI crude oil since April 2020, natural gas prices are still falling.
"Something that's interesting to me: natural gas today, which by the way is more important for heating and electricity generation, actually bumped to new lows. A lot of our energy, at least in the near term, is not going up," Siegel told CNBC in an interview on Monday.
US natural gas prices slumped 4% to $2.12 per million BTUs, essentially testing its lowest level in over a year.
Natural gas has been in free fall ever since peaking around $10 per million BTUs in August, right before the onset of what was a feared to be a brutal winter following Russia's But a mild winter helped reduce demand for the commodity, which led to a downward spiral in prices.
Siegel also pointed out that the Federal Reserve typically focuses on inflation excluding energy prices, and that the US is in a unique position compared to other non-oil producing countries.
"The Fed mostly watches core inflation which excludes the food and energy component. Secondly, the US is virtually energy independent as compared to Europe and Japan and other parts of the world. We do have a lot of offsets. We have a lot of producers that are going to gain [on the jump in oil prices]," Siegel explained.
Ultimately, Siegel doesn't believe the recent surge in oil prices will be a big issue, noting that OPEC made the oil supply cut because of fears of a recession caused by an overly tight Federal Reserve. Not to mention, oil prices are at levels seen just two months ago, which shouldn't serve as a shock to the broader economy.
A bigger issue for stocks, according to Siegel, is if the Fed continues to hike interest rates even as the collapse of Silicon Valley Bank takes time to be felt across the broader economy.
"All the data we're getting now doesn't reflect the chilling [economic] effect of the banking crisis," Siegel said, alluding to the fact that a tightening in lending standards could constrain growth going forward. Until the Fed wakes up to that uncertainty and pauses its interest rate hikes, it could be a sideways chop for the stock market.