Gasoline seems to increase ten cents every day. Some pundits say crude will hit $2000 shortly which will place gas at nearly $8.00 per gallon. President Biden is blaming it on Putin but the reality is that decisions made in the last year in the USA have set the stage for a domestic energy shortfall – and therefore much of the resulting inflation. The Ukraine war has accelerated the process but an energy shortfall was baked into the cake.
Oil prices have been the major driver of inflation several times in history. History says there is little that can be done to stop or mitigate its effects. Significant inflation using triggers a recession. What should we expect from this round of inflation:
- An economic slowdown
- Wages Cost of Living Adjustments (COLA) will grow in 2022
- There will be pressure on interest rates
- Lower savings rates as inflation eats into the cost of living
The infographic below does a good job of explaining inflation.
Source: Expensivity
