Banner Generated by ChatGPT.Inflation caused due to increased Crude Oil Prices now visible in the Economy
Inflation has arrived after months of elevated Crude Prices >100$
Prolonged high prices of Crude Oil has bought inflation into the economy. From 60$ rate in Jan Crude Oil’s since April has been making moves between 104$ to 120$ price range.
Crude’s Oil oscillates on higher support price range of 104$ in recent times.Tradingveiw>>
Since the closure of the Strait of Hormuz from Feb 27th– Crude price has been volatile moving between 95$ to 120$ - never cooling down and always maintaining its unsettled volatile price pattern.
Markets sensed this uncertainty – and expected inflation to set in eventually.
Now, derivative products of Crude – Gasoline and Diesel have risen reflecting the arrival of inflation in the economy.
Inflation impacts in the USA with visible increase in the cost of living
USA, a main participant in the Iran-Israel war as a allied partner of Isreal – has Gasoline prices increase on average by over 50% costing $4.52 per gallon. Diesel prices for this major World Economy has also risen by over 50% costing averaging $5.65 per gallon across USA.
Ouch! And the inflationary impact of this fuel price rise on American households is also visible.
Iran War Energy Tracker has estimated that expenditure of American Households have increased by $282 since war, due to fuel costs causing this additional price load.
This additional burden of American Citizens cumulatively adds up to $37.1 billion.
This is inflation that has raised the cost of living in USA.
Energy cost tracker -
Fuel Prices tracker - https://gasprices.aaa.com/
Fuel price rise is a Global phenomenon with countries all over the world facing significant rise in fuel costs.
Dissecting Inflation playing out in the Economy
Inflation Flow - From Crude Oil Price rise to inflation in the Economy
Gasoline Price Rise -
Consumers have direct visibility of this price increase when they spend to fill petrol in their personal vehicles.
This impacts their activities involving leisure travel, outings which may decline as additional costs having thinned out their spending budget.
Diesel Price Rise -
Diesel price rise leads to hike in prices of goods circulating in the Global Economy as this fuel powers logistical, manufacturing, farming activities across economy.
This price increase is not visible to customers as its passed on to customers as service charge or added on to the price of the goods they purchase.
Diesel price impact ripples across economy as all products across segments get affected with diesel costs added on in supply chain processes.
Supply Chain Cost Component -
- Freight operation costs add up to cost of products.
All goods delivered via plane, truck, ships to customer purchase centres (shops, super markets) from warehouse will be priced higher as increased logistic cost will be factored in.
Manufacturing Cost Component -
Products and components assembled in the production process using machinery powered by diesel will cost higher due to increased diesel price.
Increased Farming Costs -
As tractors and machinery fueled by diesel are used in farming activities – even food like paddy, fruits, vegetables, cereals will cost more.
Increased Lifestyle Cost -
Increased cost of travel by plane, trains, buses will be reflected in ticket price.
Diesel cost component is included in most of the products used by customers – as diesel has powered some aspect of the product either in manufacturing or delivery phase and this cost gets added on to final product brought by customers.
As a consequence Consumer Price Index CPI inflation increases with hiked diesel prices. RSM US estimate computes that for every 10% increase in diesel price – CPI increases by 0.1%.
Elevated costs due to increased cost of other Energy Resources
The Strait of Hormuz Closure has also increased price of Natural Gas – so cost of cooking gas spikes.
Fertilizer prices too go up as its procured as a derivative product from Natural Gas. This can further increase costs of food and farm products.
A Higher Base Price Floor For Crude Oil from now
Earlier inflation was a possibility if Crude Oil price did not cool.
Now with prices oscillating between 100$ to 120$ continuously since Feb 27th - inflation has spread into the economy with fuel prices heating up due to Crude Oil price impacts.
Analysists estimate the base line price of fuel to stay elevated by 10$-20$ more than pre-war levels. Crude and Natural Gas production capacity has declined due to damages caused to Energy infrastructure in the Middle Eastern Region.
This amounts to the possibility of Crude’s Base price being between the range of 80$ to 100$.
Reference -:
The main article that inspired this write up revealing that inflation has entered the economy today!
This Is How Much the Iran War Is Adding to Every American’s Fuel Bill