Why is there inflation?

[AlaskaMoose]

I live in NH and worked in HR for a manufacturing company for most of my career - retired now. NH has always had low unemployment and it has been difficult filling jobs since 2010. Right now the unemployment rate is the lowest it’s been since they started tracking it. Everywhere you look, jobs remain open. Supermarkets have deli and bakery departments closed for days - no labor. There aren’t enough people here to fill the jobs. During Covid it also seems like anyone that could afford to retire did.

The global price of oil remains super high and the oil companies keep rolling in the dough - no need to refine more oil. And if they did, they’d sell it where they can get the most for it - overseas.

So with the price of oil and labor super high = inflation.

To be fair to the US oil companies, the price of oil is set in the international marked.

OPEC vs. the US: Who Controls Oil Prices?

The U.S. and OPEC both dominated the global oil markets for a spell but must now deal with a diverse array of producers and consumers.

www.investopedia.com

In the short term, OPEC and U.S. shale producers continue to compete for global market share. Unlike OPEC, U.S. companies are subject to antitrust provisions barring them from coordinating supply plans. Shale drilling incurs higher production costs than do the traditional vertical wells in Saudi oil fields.19 Shale resources also have steeper decline curves, meaning production from shale wells declines faster than from conventional ones.20

Alaska does benefit from the high price of oil, as the State generates most of its revenue from oil production, and also because several years ago Alaska leaders designed what is called, "The Permanent Fund Dividend."

But as you can see below, the present administration has restricted oil production in Alaska.

Biden Administration Continues to Shut Down Alaska’s Domestic Energy Production with “No Action” Decision – Mike Dunleavy

gov.alaska.gov

That said, in no way or form I am implying that the US Government is responsible for the high price of oil around the world, because it is not so, and also "politics would derail this thread". The article above pertains to Alaska oil production, and not about the price of oil.

 

[MacBH928]

$15 minimum wage (the correct minimum wage is zero and this push for $15 means nothing now)
Cutting off domestic oil supply chain
Increased Fuel costs lead to increased production costs
People not willing to work anymore leading to understaffing and further increased production costs and supply chain issues
Pumping the economy with cash due to COVID
Raiding your home equity to buy stuff you can no longer afford

What could possibly go wrong?

And no, it’s not Ukraine.

-How come people are not willing to work? How will they survive? pay rent? mortgage? utilities? medical care?

-People seem to complain about inflation and economy but in reality i do not see any degradation in life standards. They are still waiting for the next iphone and fighting over the last piece of PS5 they can get.

Corporations are making more money because they are more sophisticated than they were in the past with revenue management. Airlines are a prime example. They finally figured out how to make money.

Corporations are not going to reduce their profit margins. They will make money when they can and lose money when they have to. if anything, they see a massive recession coming and are prepping for it so they can survive the recession. Are you saving for it? You better be. This one is going to be brutal.

-How airlines are making money now? They got a KO in COVID am not sure how so many are still operating.

-Whats the point of saving money when there is inflation, the purchase power of your money will only go down.

 

[Nhwhazup]

-How come people are not willing to work? How will they survive? pay rent? mortgage? utilities? medical care?

At least where I am, people are working. We just don’t have enough people to fill the open positions. NH has less than 20k people on unemployment and over 65k open jobs.

-People seem to complain about inflation and economy but in reality i do not see any degradation in life standards. They are still waiting for the next iphone and fighting over the last piece of PS5 they can get.




-How airlines are making money now? They got a KO in COVID am not sure how so many are still operating.

-Whats the point of saving money when there is inflation, the purchase power of your money will only go down.

 

[PinkyMacGodess]

It seems that we are going in wrong direction, and forecast point to a a tough economic future by the end of the year. Cutting off oil exploration and production hurts all of us. The article below was published a couple of years ago, but...

How Gas Prices Affect the Economy

Although economists may argue about whether gas prices have an effect on the economy, there is a connection between consumer confidence, spending habits and gas prices.

www.investopedia.com

The US oil production was reduced by 8% in 2020. What is holding back oil production?

What Is Holding Back U.S. Oil Production?

Here's why U.S. oil production has been slow to recover following the pandemic-induced production crash.

www.forbes.com

Personally 'we' should be paying a lot more for oil products. It's not an endless supply, and eventually it will be gone. Corporations that make petroleum based plastics and refuse to incorporate recycled materials in their manufacture are being so incredibly short sighted. They are being given, in many areas, material that they can reincorporate in virgin raw material and save on the use of that 'new' material. It would seem to be 'common sense' to reuse existing material. One manufacturer hysterically declared that they are int he business of 'creating' plastics', not 'reusing' plastics. Such shortsightedness is tragic. All those plastic grocery bags are smoking through petroleum and other raw materials that usually end up draped on trees and filling landfills. (The corporation that can figure out a way to excavate the many landfills around the planet and separate the existing materials from the honest 'garbage' could make a mint off the whole mess. It would be nearly free money!)

I keep thinking that the planet will end at some point, and how stupid will it be if it ends at the hands of 'the most intelligent beings' on it. What a tragic joke. Humans are no more intelligent than a rock it seems. We act more like a parasite than living creatures that want to live a long life and not kill ourselves with our pollution.

But if you think inflation is epic and 'world shaking', wait until we reach the point where oil is over. A post petroleum world will be throwing us back to the stone age and it will be a potentially society destroying event. Imagine wars over the last drops of oil. Imagine oil wells littering the land in your hometown.

(Also, having been in the oil exploration business, I can say that the comments from insiders in the industry were that the US has massive areas that have shown large concentrations of petroleum, that are not being extracted 'for some reason'. That some reason is likely 'profit'. They can charge more for the oil products coming from foreign sources because adding another level of greed is easy. So all the bleating over 'we need America oil' is likely mostly about striping protections from national parks and allowing drilling and extraction, and reselling of prime public land. Imagine your favorite national park having dozens of drilling rigs on it, or strip mined! So much public land has been privatized in the west that people hiking find themselves trespassing due to old maps, but I digress. Why is there inflation? It's easy to hide the grift, the greed, the quest for profit. Disasters, panic, etc, make for more profit) YMMV

 

[Motionblurrr]

The catalyst to all of this, is the coronavirus pandemic that started in early 2020. A 1-in-a-100 year pandemic, during a heavily intertwined global market and the USA being very capitalist--is why we're here.

It was out of our control. Out of everyone's control. Sure, you could look at China and say they weren't very transparent about the whole outbreak coming from Wuhan--but it was too late anyway, people were traveling the world when it spread. Why argue about it when it was popping up in our backyards within weeks?

If they didn't print money during the pandemic, or not give stimulus checks--you would have a FAR worse outcome than inflation that we all have now. I remember reading about it when the pandemic started to really grip the world; the question was "should we be printing money like this? wouldn't this cause inflation?" and they showed what would happen if they didn't and a LOT of homeless people, nothing being bought, basically the economy would come to a screeching halt and it would probably never start back up, or never be the same way it was. I wish I could find that article again, it was written by an economist.

Basically, the US had to decide; hmm should we risk inflation or collapse of the western world and economy and have to start completely over? If the US fell, everybody on earth would be worst off like dominos.

The gas prices is pure gouging from the oil corporations, since during 2020 they saw record losses all around. I guess making up for lost profit?

 

[AlaskaMoose]

-How come people are not willing to work? How will they survive? pay rent? mortgage? utilities? medical care?

-People seem to complain about inflation and economy but in reality i do not see any degradation in life standards. They are still waiting for the next iphone and fighting over the last piece of PS5 they can get.




-How airlines are making money now? They got a KO in COVID am not sure how so many are still operating.

-Whats the point of saving money when there is inflation, the purchase power of your money will only go down.

All the airlines can do is to increase the price of air travel and the transport of all goods.

 

[Thirio2]

I worked in refining for 45 year. We had sophisticated computer programs that looked at product prices, crude prices, and what products we could make from each crude. When product prices were high we made as much of that product we could. If another refinery had a problem we tried to take advantage of their misfortune. I doubt things have changed that much. There are some refineries that shut down during Covid that didn’t start back up, and a president that campaigned on shutting down the oil industry didn’t help. We are now reaping the consequences of that action. Add to that printing money we don’t have to pay people to not work and we have the classic definition of inflation, too much money chasing too few goods.

 

[AlaskaMoose]

I worked in refining for 45 year. We had sophisticated computer programs that looked at product prices, crude prices, and what products we could make from each crude. When product prices were high we made as much of that product we could. If another refinery had a problem we tried to take advantage of their misfortune. I doubt things have changed that much. There are some refineries that shut down during Covid that didn’t start back up, and a president that campaigned on shutting down the oil industry didn’t help. We are now reaping the consequences of that action. Add to that printing money we don’t have to pay people to not work and we have the classic definition of inflation, too much money chasing too few goods.

That's how businesses are conducted. And about domestic prices for fuels, the local and Federal governments could very well stop the fuel taxes temporarily. But by doing so the fuel taxes enriching their coffers disappear, and this in turn strain the national and local economies. It is like a dog chasing its own tail

About four or five months ago, a 36-ounce can of dehydrated eggs (powered eggs in a can) cost $36.00 at Walmart. I just purchase a can of it today, and paid $96.00 for it. It is at Amazon for $115.00. My wife stocks-up on dehydrated and canned foods, bottled water, and other in case of an emergency. A 6-pack bag bagels cost around $7.00, and a 8-pack of hotdog buns $6.00 "something" last week. She recycles these products before each expires. We also like to keep over 35 gallons of gasoline stored in the sheds.

 

[hungryghosty]

Many goverments, though not all, around the world have paid the incomes of a huge percentage of their working population through covid furlough schemes over the past 2 years. Given this was money literally printed out of thin air (with no producivity/assets created as a result of it) I can't help but wonder how much of the inflation we're experiencing now is a direct cause of furlough schemes?

 

[Nhwhazup]

The catalyst to all of this, is the coronavirus pandemic that started in early 2020. A 1-in-a-100 year pandemic, during a heavily intertwined global market and the USA being very capitalist--is why we're here.

It was out of our control. Out of everyone's control. Sure, you could look at China and say they weren't very transparent about the whole outbreak coming from Wuhan--but it was too late anyway, people were traveling the world when it spread. Why argue about it when it was popping up in our backyards within weeks?

If they didn't print money during the pandemic, or not give stimulus checks--you would have a FAR worse outcome than inflation that we all have now. I remember reading about it when the pandemic started to really grip the world; the question was "should we be printing money like this? wouldn't this cause inflation?" and they showed what would happen if they didn't and a LOT of homeless people, nothing being bought, basically the economy would come to a screeching halt and it would probably never start back up, or never be the same way it was. I wish I could find that article again, it was written by an economist.

Basically, the US had to decide; hmm should we risk inflation or collapse of the western world and economy and have to start completely over? If the US fell, everybody on earth would be worst off like dominos.

The gas prices is pure gouging from the oil corporations, since during 2020 they saw record losses all around. I guess making up for lost profit?

So true.

 

[MacBH928]

Basically, the US had to decide; hmm should we risk inflation or collapse of the western world and economy and have to start completely over? If the US fell, everybody on earth would be worst off like dominos.

yeah well inflation will collapse the economy. Look at Zimbabwe , Venezuela , and Lebanon.

About four or five months ago, a 36-ounce can of dehydrated eggs (powered eggs in a can) cost $36.00 at Walmart. I just purchase a can of it today, and paid $96.00 for it. It is at Amazon for $115.00.

This. This is what I am talking about. triple prices in 5 months. This kind of inflation happen over decades periods of time, like 30-40 years now its happening in few months. How long do these companies think people will be able to afford these prices?

 

[K two]

To be fair to the US oil companies, the price of oil is set in the international marked.

OPEC vs. the US: Who Controls Oil Prices?

The U.S. and OPEC both dominated the global oil markets for a spell but must now deal with a diverse array of producers and consumers.

www.investopedia.com

Alaska does benefit from the high price of oil, as the State generates most of its revenue from oil production, and also because several years ago Alaska leaders designed what is called, "The Permanent Fund Dividend."

But as you can see below, the present administration has restricted oil production in Alaska.

Biden Administration Continues to Shut Down Alaska’s Domestic Energy Production with “No Action” Decision – Mike Dunleavy

gov.alaska.gov

That said, in no way or form I am implying that the US Government is responsible for the high price of oil around the world, because it is not so, and also "politics would derail this thread". The article above pertains to Alaska oil production, and not about the price of oil.

The real question to ask is - Who benefits????

 

[AlaskaMoose]

The real question to ask is - Who benefits????

In the US? Local and Federal governments, and to a lesser degree anybody involved in the production and sales of petroleum-base fuel products. The gasoline tax percentages collected by governments remains the same regardless if gasoline is cheap or expensive.

Fuel taxes in the United States - Wikipedia

en.wikipedia.org

Another:

Gas Taxes and What You Need to Know

Gas taxes are imposed by the federal and state governments on motor fuel purchases, with most of the money going toward road infrastructure projects.

www.investopedia.com

 

[MacBH928]

Even if oil prices got higher, this does not mean total price gets double and quadrupled as we are seeing now. Its price gouging whats going on.