Oil and Gas - The Mother of Inflation - GineersNow Petroleum magazine

C O V E R
S T O R Y
An entire generation of customers who are used to low or no
inflation finds this to be a tremendous shock. According to
Bloomberg Economics, US households will have to spend
an additional $5,200 this year, or around $433 per month, to
maintain the current level of consumption.
The causes of the price hikes are widely known: the Covid-19
outbreak disrupted supply chains, causing shortages of
items; Russia’s invasion of Ukraine reduced supplies of
essential commodities; and at the same time, the government
provided companies and consumers with trillions of dollars
in relief. How long this excruciating period of high inflation
will persist and whether it will have any lasting effects are
unknown. Understanding what causes inflation and placing
the current situation in perspective are useful places to start
when seeking solutions.
Components of the consumer price index
All the necessities—energy, transportation, food, and housing—
are experiencing the highest inflation pressures. From roughly
$40 per barrel in 2020 to more than $120 per barrel now, the
price of West Texas Intermediate crude oil increased by over
twofold. The Automobile Association of America said that this
has caused the cost of a gallon of regular-grade gasoline to
increase from around $2.15 to roughly $5.
The same is true with food. Anyone who has visited a grocery
shop will confirm that costs are rising at double-digit rates
for practically everything. Price drops for products like pasta,
some meats, fresh vegetables, bread, and butter were
common only last year.
The highest price rises, however, were for goods that made
up a lower percentage of the average consumer’s spending,
if we take that into account. Nevertheless, when all personal
expenditure was included, above double-digit price increases
over the previous three months were present in at least 16
percent of purchases, including rises of 49 percent for motor
fuel and 107 percent for fuel oil in May.
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