There is absolutely no question that all of us shudder these days, when we fill up the tank. The per gallon cost seems to increase hourly or at least several times per day. When other problems arise in our daily lives, from the garbage disposal to the weed wacker, we know whom to call. But, when 20 bucks today fills less than a half tank of my Prius, while a year ago, it topped it up, who can fix it?.
The answer is no one organization and definitely not one person. The solution requires different people from different countries with different, sometimes clashing, interests, to agree. Think of the US Congress’ near legislative dysfunction in 2022 and you’ll understand the dimensions of the challenge to lower American gas prices. And it’s not just in the US, they are up around the world. Well, in Kent County, on June 17, 2022, they dropped by 10 cents.
But, it’s not just gas, I’m reminded, It’s inflation and that’s government’s responsibility. That’s true, but it’s the responsibility of many governments, not just America’s. Prices for everything are rising, they say.. Well, not everything, but for a lot of important items from milk and fruit to lumber, to used cars, prices are up over 8% from last year.. And then higher gas prices raise transportation costs for delivery of lots of things we buy, and that’s passed on to us too. .. . ,
Inflation is usually defined as the loss of purchasing power of currencies. There are several explanations for this phenomenon, but for our situation, the reasons appear to be what economists call Cost-Push inflation. This occurs when production inputs and directly related supply chain costs suddenly rise. The events of the past two plus years provided systemic shocks to global production and trade.
Our current debilitating context began in late 2019 and early 2020, when the Covid-19 Pandemic and its successor variations, began to infect millions of people around the world. The hospitalizations, serious illnesses and mounting death tolls quickly impacted the global workforce and affected all economic sectors. Supply chains broke down, major ports became seriously backlogged for lack of people to unload cargoes or drivers to haul the containers to market. Delays and shortages mounted and demand declined leading to price rises across the board. This situation is a classic example of Cost Push Inflation
But, back to the price of gas. Demand for oil/gas has been rising for the past six months. But, In major producing countries , US and foreign corporations that earlier cut production in the face of declining demand dropped, have happily watched as the prices of gas everywhere kept climbing. They have been reluctant to increase production in response to increasing demand, for a simple reason: their production costs are lower and their sale prices are astronomical.
In a March 2022 survey of 141 U.S. oil producers asking them why they were holding back production, 59% said they were under investor pressure. The bottom line is, oil companies are seeing huge profits and are using the money for stock buybacks to raise stock prices. BP, Shell, Exxon-Mobil, Chevron, Total Energies, Eni, and Equinor will give between $38 and $41 billion to shareholders through buyback programs this year..What’s not to like?
And then on February 24, 2022 a major oil and gas producing country, Russia, invaded a major grain, fertilizer and vegetable oils exporter, Ukraine. Four months on, the death and destruction imposed on the Ukrainian people has introduced another global shortage – life threatening – food.
Tom Timberman is an Army vet, lawyer, former senior Foreign Service officer, adjunct professor at GWU, and economic development team leader or foreign government advisor in war zones. He is the author of four books, lectures locally and at US and European universities. He and his wife are 24 year residents of Kent County.
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