Inflation Headed For Another Jump
Beyond supply chain issues that continue to be a problem, one of the biggest contributing factors to inflation really is oil. This is, in part, because almost every single thing we buy is tied to it in some way or another. From transporting raw materials, to the energy used to produce things, to transporting finished goods to warehouses and finally to store shelves—practically everything revolves around it.
When diesel prices are now nearing the $6 per gallon range and beyond depending on where you are, this is going to be passed along in the form of even higher prices.
In the state of Illinois in the United States, it was reported this morning that the average price per gallon of regular unleaded gasoline reached a record $5.27. It was at $5.09 per gallon when I drove past my local Casey's General Store gas station on my way to work this morning.
While much blame on all of this has been passed off as because of the pandemic and the war in Ukraine, the stark reality is that while these are factors, they are not the biggest contributors.
The main reason gas prices in the United States have risen to such high levels rests solely on the shoulders of the Biden administration who, hours after taking the oath of office, reversed all of former president Trump's energy policies.
Policies that just prior to the election had gas prices under $2 per gallon. In fact, just a few months before the election we were seeing a national average of around $1.89. While gas prices did rise a bit right up to the election, to around $2.19 per gallon, the meteoric rises started after Biden erased Trump's energy policies.
There is no way of denying this.
Not only are we seeing the highest case of inflation in over four decades under Biden, the national average for a gallon of gas are at historical highs. In other words, we have never seen gas prices this high ever in the entire history of gas prices.
And there seems to be no end in sight to the pain since it is clear that the Biden administration is not interested in implementing any policies that would help to actually bring gas prices down and help to curb inflation.
The Fed has been raising interest rates in an attempt to slow things down a bit. But it is not enough. Honestly, the only way out of this is a recession. But the thing is, we may be heading for a phenomenon known as stagflation, which is far worse than inflation.
Biden's policies and lack of control over the situation seems to point to that.
Stagflation essentially occurs when there is slow economic growth, higher levels of unemployment, slower increases in the rising of wages while at the same time still being caught up in inflation.
Stagflation is even more difficult to get out of than inflation itself is, and is far more detrimental to the economy as a whole and everyone trying to navigate within it. Stagflation could actually send the economy into a depression, further eroding purchasing power and putting the American people into the poor house.
Beyond that, a depression could cause many businesses to go under—especially small ones—further compounding the situation.
And of course, it's not just a problem for the United States. It's a world problem because the United States is still the world's leading economy, and so everything that happens here affects the rest of the world.
Without a clear path to fix any of the issues we are facing right now, the only logical conclusion is that we are doomed to face even higher gasoline prices as well as higher prices for everything else. Especially food and utilities. This impacts everyone, but it impacts the poor and middle class the most.
The world's wealthy have more ability to hedge against some of this and better deal with it. But they will be seeing a massive pinch as well.
As much as even a recession is unpleasant, I think there are a couple of courses we need to take immediately. One is to of course restore Trump's energy policies. The other is to completely stall the economy. We need to see the Fed increase rates in a massive way—we need a major recession in order to get out of this.
I think the Biden administration even knows this is what needs to be done. But they are avoiding doing it for pure political reasons. We have midterm elections coming up and it seems very clear that democrats will lose power in the House and the Senate. Their chances of keeping the White House seem very grim as well.
At the same time, it is clear to the American people at least, that the writing is already on the wall. The presidency of Biden has been nothing but a pure disaster, and even if they suddenly change course and fix the problem, the damage is already done.
The best thing for the Biden administration to do right now is to focus on the needs of the American people and put their political aspirations aside.
Based on gas prices alone, I think the inflation numbers we will be seeing reported in July from June will be seeing double digits. This ride is far from over. At this point I would not even be at all surprised to see gas prices hit in the $7-$10 per gallon range, and of course in some parts of the country it is already there.
We are living in the days when we are affected by the current situation and inflation turns into a monster. With the decrease in purchasing power, the effect gets heavier.