Oil prices are surging with few signs of slowing down Brent crude
oil.
The global benchmark for energy markets surpassed $100 a barrel after Russian
President Vladimir Putin ordered an attack on Ukraine.
Oil has climbed pretty rapidly over the past year and it's climbing further with
Russia's invasion of Ukraine.
The main reason why is there is a concern that this conflict could disrupt
energy exports into global markets.
The supply and demand dynamics have contributed to the jump in oil prices and for consumers
when oil becomes more expensive,
so do other goods and services.
Here's how it works.
There's many different ways that that the energy price rises were saying will
feed into higher inflation.
The cost of living in the US rose to 7.5% in January from a year earlier,
a nearly four decade high,
economists at Moody's analytics estimate that inflation is costing the average US household an
additional $276 a month.
This stems from higher prices across a range of products,
including gasoline.
The biggest reason why gasoline prices went up is because of oil and one of the
biggest reasons why inflation was so high was because of gas prices.
Americans are paying about twice as much for gasoline now compared to early in the COVID-19
pandemic and with demand for oil projected to continue outstripping supply.
There's little promise of relief ahead for us households,
it's not just in what we're paying gas at the pump,
but this really can have a dramatic effect on all types of price increases across the United States
For those hoping to take long postponed vacations.
The increases in oil could affect airfares while airline ticket prices have stayed
relatively stable during the pandemic travel booking site Hopper forecasts an average
7% increase in domestic airfare each month until June citing higher
jet-fuel prices.
As one of the reasons if oil goes up and airlines are paying more for
oil to power airplanes,
they're going to raise prices on airfares.
Sky high fuel costs also affect the prices of the food we grow in the ground,
they'll fit into your plate because remember we put a lot of ethanol into our
car and we need a lot of diesel to plant and harvest.
Farming and food processing can be energy intensive accounting for a significant share of production
costs.
Farmers in the US will spend an estimated $16 billion
2022 a 35% increase from
2020.
This has consequences for supermarket shoppers who have already seen food prices increased
7% since around this time last year.
Much of that increase can be linked to the cost of getting food from the farm to shelves.
The same can be said for any other product that is moved by ship,
train or truck.
Oil is one of those commodities that really feeds into every part of the supply chain
and therefore impacts the inflation.
If your business and you need to spend more just to ship goods across the US
that's going to become more expensive than.
Oftentimes,
businesses will pass on those additional costs for that product onto the consumer
trucking companies and other logistics firms have already been dealing with higher costs which
include rising salaries in a tight labor market.
And according to a survey conducted by Business Research group,
the conference board,
72% of C.
E.
O.
S.
Of large U.
S.
Companies Said they expect to pass on higher labor and transportation costs to
customers within the next 12 months.
Consumer spending accounts for more than two thirds of U.
S.
GDP and if consumers have to pay more for staples like food and
gasoline,
they might be forced to cut spending on other items.
I don't think anyone is expecting the economy to enter a downturn because of this,
but I think the idea is that we're going to have slower economic growth than we did
last year,
in part because of oil prices,
it is tapping the economy of momentum