Would you like to see a weird inflation mystery? Here it is:
Our recent inflation surge peaked at 16% in June 2022 and then crashed to zero in one month. Since then it's stayed pretty steadily around an average of 3%.
This is almost entirely due to energy.¹ The price of oil peaked in June and then abruptly turned down. Everything else peaked in mid-2021 and has been declining slowly but steadily ever since.
¹And a little bit to food, which followed a path similar to oil but not as dramatic.
I thought I read something from Krugman that if you remove energy and housing we're at 0% YoY
See there you libruls go again with your "facts" and your "math" and your "logic," when everybody knows that only Donald Trump, with the powers granted to him by Jesus and the Founding Fathers, and wielding his Sharpie that even changes the weather, can save us from the horrible Biden Inflation Catastrophe that is killing everyday Americans in their beds!!! This is just the way things are -- I read it on Facebook AND heard about it on Fox AND the radio -- and when I hear people saying Wrong Things like this post, it makes me SO ANGRY I WANT TO SHOOT SOMEONE!!!
¹And of course, food prices are themselves highly dependent on energy prices, since it takes a lot of equipment and vehicles and so on to produce, prepare, and transport food. I suppose someone must calculate "food prices minus the effects of underlying energy prices" -- people calculate everything -- but I'm not sure how accurate it is.
What was the mechanism by which the Inflation Reduction Act induced such a dramatic and rapid decline in energy prices? …
This makes me wonder how much impact *ANY* policy or rate increases actually had.
I know you're joking, but anyway…
The Inflation Reduction Act had provisions for subsidizing renewable energy development, which might have helped, but it didn't become law until August 2022. There were probably other influences in July 2022. A lot of things were happening with crude oil supply and demand, and covid was surging in China.
I would hypothesize that this is directly linked to Biden's decision to sell from the Strategic Petroleum Reserve. Biden announced the sales on March 31, 2022. The price of West Texas Intermediate crude peaked at $122 per barrel on June 6; by July 8, the price had dropped to $102 per barrel, and it continued to fall over the next year.
When did the sales start? Clearly the announcement itself wasn't enough, the price continued to rise through April and May.
At the same time we also have: https://www.opec.org/opec_web/en/press_room/6948.htm from June 30, 2022:
Emphasis mine.
At https://ycharts.com/indicators/world_crude_oil_production we have monthly production numbers - click on 3Y to get 2022 included. Within 2022, May was a low point at 79.3 million barrels. And rose steadily from there through November.
Thanks for mentioning this. A couple of days ago I ran across a hyperbolic article claiming that Biden was the world's greatest oil trader (selling high and buying back at today's lower prices) and practically broke OPEC by doing this but couldn't remember where I saw it, or when the release was done.
Well, if the oil price fall really *is* connected to SPR releases (which isn't inconceivable in a market that's particularly sensitive to marginal changes) that's another feather in Biden's cap that he's not likely to get credit for. Competence can be underappreciated, especially in an era of such blowhards.
Stumbled across this Chris Hayes interview on the topic:
https://www.youtube.com/watch?v=9-q2PWkZKIA
but, but, but....
BENGHAZI!!!
1. When prices stabilize, people are not impressed because they've not dropped (for the most part) to where they were before the pandemic (or where we thought they were).
2. Different sectors respond differently, so there's always a new outrage. Housing prices are up! Mortgage rates are high! Cars cost more! Insurance rates are skyrocketing! Cities and towns are writing more tickets! The roads are in terrible shape, potholes are everywhere! Why is everything closed down for construction--I can't get anywhere! Why are spending money on transit when the roads need work! Where's all this traffic coming from when I have things to do!!!
3. There's no "deep state", but a bunch of very rich companies and individuals that want or privatize profit while dumping the risk on the public--best way to make money. Increase in severe storms mean more deaths and billions in damages to your state--look, there might be 5 trans kids playing in high schools sports!!!!
Why does the "Inflation Rate" chart go back to the beginning of 2020, but the "Everything Else" chart not even go back to the beginning of 2021?
A lot of people got really used to the ahistorically low inflation rates in the decade and change since the financial crisis, and consider 3% to be intolerable. I can't count the number of takes I've seen that boil down to "two percent should be a CEILING and we still aren't back under it."
This is before you even get into the folks who go "this is a lie, inflation is like 10%, and the REAL unemployment rate is like 20%."
How does this line up with the war in Ukraine? Summer 2022 was when the front lines had more or less stabilized after the Ukrainians were able to kick the Russians out of the front around Kyiv.
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