Inflation is here with an increase of 0.6 % during the month of March, after a slight rise in February. This generalized rise in prices is the largest experienced in a month since August 2012, which also recorded the same figure.
During the last 12 months, cumulative inflation totaled 2.6 %. The increase was mainly due to higher energy prices, which in turn, was driven by higher fuel costs.
Still, relative to March 2020, food prices are up 3.5 %, along with the price of new and used automobiles which rose 1.7 % and 9.4 % respectively, showing that the Federal Reserve’s expansionary monetary policy is beginning to put upward pressure on prices. However, it is fuel prices that are really driving up the cost of living in the United States.
Gasoline and other fuel prices drive up Americans’ living costs
According to the U.S. Energy Information Administration’s (EIA) monthly fuel price survey, in ten of the cities surveyed, the price of a gallon of gasoline is already over $3. Seattle, San Francisco, Los Angeles and Chicago.
Diesel and other fuels have also seen their price rise in recent months, causing the price of energy in the United States to soar by as much as 5% in less than a month, and since March 2020 has accumulated 13%. gasoline price
There are four factors that affect the price of gasoline: crude oil prices, oil refining costs, distribution and marketing costs, and fuel taxes. Since distribution and marketing costs and taxes have remained relatively the same, the increase in the price of gasoline is due to refining costs and the price of a barrel of crude oil.
China, the Suez Canal and the OPEC cartel
Indeed, oil refining costs have risen, seeing margins grow from 18¢ cents a gallon refined in November 2020, to plus 33¢ by February 2021. The reason: the Xi JinPing government in China is leading a campaign against private refiners for alleged “tax evasion” and “non-compliance” with industry regulations.
Since April 2020, China refines more oil than the United States. Yet, with the restrictions imposed by Xi King Pin’s government, supply has been reduced and this has pushed up refining costs.
Also, more than 50 refiners are being audited and some have stopped operations, which has limited the supply of crude oil refining at a global level.
Even so, the main reason for the increase in the generalized price of fuels is due to the increase in the price of a barrel of crude oil, which has increased its value for 17 consecutive weeks, taking the price of a barrel of Brent from $43 at the beginning of November 2020 to $67 by the end of March.
Although many eyes point to the blockage in the Suez Canal, which affected up to 9% of the world’s global oil supply, the fortuitous impact of the stranded ship only explains a small increase in the price of gasoline and diesel.
In truth, those mainly responsible for the rise in crude oil prices are the Organization of the Petroleum Exporting Countries (OPEC) and a coalition of 14 other countries led by Russia. The cartel now known as “OPEC+”, at the beginning of 2021 decided to limit oil supply and cut production by up to seven million barrels per day.
Although the restriction is gradually being lifted, its effects are still being felt in the price of a barrel of oil, in the international markets, in gasoline and in the American consumer’s pocket.