No, It’s Not “Greed” or “Price Gouging” that’s Driving up Gas Prices
Both consumer prices and producer rose near to multi-decade highs last month. Price inflation rose to 8.6 percent while wholesale producer prices rose by more than 10 percent.
In both cases, a significant factor behind rising prices—but certainly not the only factor—was high energy prices. This has been reflected in prices related to transportation and shipping. Prices for air travel, for example, have seen some of the biggest price increases in recent months while gasoline (naturally) has fueled sticker stock for households across the nation.
Perhaps most notable to the average consumer has been the increase in gas prices. In June, gasoline prices have risen on average to a new nominal high of over 5 dollars per gallon.
Short of recession (or depression), relief will likely have to come in the form of increasing supply. The easy-money policies of the central bank have fueled spikes in demand for nearly all products, but this leads to a problem: rising demand has not come with rising production. In other words, the regime can easily increase the supply of money, by simply creating money out of thin air. But the regime can’t do the same with oil or gasoline. Unlike fiat money, oil and gasoline must actually be extracted and processed.
So, we end up with increasing supplies of dollars chasing oil and gas supplies that are increasing at a much slower pace. The result is rising price inflation.
Unfortunately, there does not appear to be much relief on the horizon. US bans on Russian oil have disrupted global oil markets and cut off the US consumer from ready imports. This certainly hasn’t helped bring crude oil prices down. But when it comes to gasoline prices, another sizable factor is the fact refineries are running below past capacity. Even when US markets have access to crude oil, gasoline production lags.
Much of this is being blamed on logistical problems stemming from covid lockdowns and the collapse in demand that occurred in 2020. As governments across the US forcibly closed businesses and issu
Article from Mises Wire