I got a real shock this week when I called my local oil company to set up my home heating oil pricing plan for the coming season. Every year it offers an option to set a price cap on deliveries for the coming year. Under this option the price of home deliveries can not go higher than a set figure but can be lower if prices drop next winter.
Imagine my amazement when the company representative told me that I could lock in a maximum price of $6.50 per gallon. That is an increase of $2.70 per gallon over the previous year’s price of $3.78, an increase of about 70%. In the previous year I had been able to lock in a price of $2.76 per gallon, largely due to the pandemic. In other words, if I use 1000 gallons per year, my maximum cost will be $6500 compared to last year’s cost of $3780.
If you think that gas prices at the pump have skyrocketed, just wait till winter comes and you have to heat your home. One of the reasons I like to use oil is because I can set a maximum price and budget accordingly. If you use natural gas, you have no such option and will have to pay whatever the market demands throughout the winter. Of course, you can not use renewables like solar and wind to heat your home, even in sunny California. Electricity is an option but that has always been more expensive.
The front page headline in today’s Wall Street Journal announced that “Inflation Hits Four-Decade High.” According to the Labor Department the consumer Price Index increased by 8.6% from May 2021 to May 2022. During the same period energy prices increased 34.6%, and groceries jumped 11.9%. an editorial indicated that eggs are up 32.2%, chicken 16.6%, milk 15.9%, and even soup was up by 13.9%.
What has caused this record inflation? Treasury Secretary Janet Yellen has finally admitted that she and Federal Reserve Chairman, Powell, erred last year in dismissing the obvious inflation as “transitory.” But neither she or anyone else in the administration of President Biden will admit that any of their policies or actions were in any way responsible. The President, who never takes the blame for anything, points his finger at Vladimir Putin. He will never admit that his determined efforts to limit the supply of oil and natural gas has taken the country from energy independence under President Trump to the point where he has to beg Saudi Arabia, and Venezuela to ramp up their production of fossil fuels.
Economists disagree over the causes of inflation, but there is obviously a monetary component. A substantial increase in the supply of any commodity, whether it is coffee or oil, will inevitably cause its price to drop. Why shouldn’t the value of our currency decline, if the government substantially increases the printing of money, especially if it is deeply in debt to begin with?
The stimulus checks we received during the pandemic put dollars in our pockets, but the dollars we received were obviously a factor in the inflation we are now experiencing. After all, the Federal government did not have the stimulus money in some kind of rainy-day account. It had to print and borrow. In a way, it is like those people who max out their credit card, and then use another one to pay it off. Instead of looking to the Federal government to deal with inflation, we should realize that the government itself is largely the cause of rising prices.
The multi-Trillion spending packages that Democratic and Progressive politicians promote inevitably lead not only to higher taxes, but also to more inflation, the most severe tax of all since it does not distinguish between rich and poor. By now it is clear that only a small percentage of these stimulus packages went to infrastructure improvements. A large amount went to shoring up the almost bankrupt pension funds of Blue states whose Democratic politicians have based their careers on pandering to the demands of public service unions, their main source of political contributions.
Ironically, injecting billions of dollars in these pension funds may have avoided bankruptcy but the resulting inflation will eventually erode the spending power of the actual pensions these retirees receive. Last year every person on a pension has seen the purchasing power of their pension check go down by 8.6%
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