Why Fuel Prices Are Not Gassing Inflation

Published on: 03/15/2022

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss how the Russian oil ban could be impacting inflation.




Welcome to another edition of Chart Talk.  I’m Tony Ogorek.  I’m here with Portfolio Manager Jeff Viksjo.  And Jeff, the United States just decided to ban any imports of Russian oil.  The President has mentioned that, obviously, this is going to have an impact at the pump, and it may also impact global energy crisis. And so, a lot of people think that, because of that fact, we’re going to see a further spike in inflation.  So, we have a chart here that address that supposition.  So, let’s take a look at it.  What do you see here?



Yea and Tony we had an inflation problem before the Ukraine crisis even began.  Inflation’s at a 40-year high and the Fed is worried about bringing it down.  And so now that we are all seeing gasoline prices going up, they’re above $4 here locally, the thought is well “isn’t that just going to cause inflation to go even higher and spiral out of control?”.  And this chart would say no.  This, basically, shows you how we spend our money. The allocation of the dollars.  And this is also the allocation on how the Government calculates that inflation number.  And you can see, fuel is a very small part of what we spend our money on, it’s less than 5%.  And this also means it’s only 5% of what the ultimate inflation number’s gonna be.  So, yes fuel prices are going higher.  We see them.  They’re very easy to spot.  They’re volatile. We all see the signs and the billboards as we drive by, but it’s gonna be a very small part of what inflation is.



And you know what’s really interesting, Jeff, is the convenient thinking that many people have, because surely, you’ve heard people bragging how much more their house is worth.  You know, because the prices have just gone up very significantly over the past year.  But then they also complain about gas prices.  But boy, the money they’ve made on increases in their house should cover, very greatly, any increases that they’re experiencing in fuel prices.  So, interesting perspective.

Thank you Jeff, and thank you, for joining us for this edition of Chart Talk.



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