Business News for Friday, Dec. 10, 2021
Credit…Philip Cheung for the New York Times
The surge in inflation in the United States was driven in part by a sharp rise in energy prices over the past year, although it has weakened somewhat in recent weeks.
According to the consumer price index, the 12-month change in energy prices as of November was 33.3 percent, almost five times the headline inflation rate.
Gasoline costs rose 6.1 percent last month – a burden on households, especially at the beginning of the holiday travel season – and by 58.1 percent last year.
The price of heating oil, used for industrial and domestic heating, rose 3.5 percent last month, although that rate was far less than the 12.3 percent increase in October. If this easing continues, it could provide some relief to households bracing themselves for crippling winter heating bills, but heating oil is still up 59.3 percent on an annualized basis.
In better news, electricity prices rose a more modest 0.3 percent last month – a 1.8 percent hiatus in October but still 6.5 percent higher than a year earlier.
Unlike some other commodity sectors, the increased energy prices in the market are quickly being passed on to consumers who have become accustomed to cheaper energy prices in recent years and are now annoyed by the sudden pressure on their budgets.
“Households are facing higher prices every step of the way,” said Greg McBride, chief financial analyst at Bankrate, a private finance company. Recent leaps in energy, food and housing, he said, “are putting household budgets under severe pressure”. These three issues make up more than half of the weighting in the consumer price index. Energy alone makes up 7.5 percent.
Since energy and food prices are notoriously volatile, the government publishes separate inflation figures, including and excluding these categories. Including all categories, the one-month increase in November was 6.8 percent; without food and energy it was 4.9 percent.
The rise in consumer prices is likely to intensify debates in Washington about how to continue the uncomfortably high inflation rate – especially for core expenditures such as energy that households cannot do without – and how policymakers can deal with it.
Republicans in Congress and oil and gas industry lobby groups have filleted the Biden White House for higher energy prices; However, independent industry researchers have identified the overall weak relationship between a given government’s support for renewable fuel and the fossil fuel price curve.
The George W. Bush administration, for example, was known for its links to the oil and gas industry, but during Bush’s second term, energy prices were often higher than they are today. And the Obama administration – whose clean energy initiatives were prominent – benefited from a fracking boom in the private sector that has increased supply and made gas and home heating relatively cheap for years.
Good news about energy prices has been unusual for consumers lately. But recent moves in the market have shown that the weather could at least give them a temporary hiatus. Natural gas, which heats nearly half of U.S. households, nearly doubled in early fall but fell more than 10 percent this week after the government’s weather forecast forecast a warmer-than-expected winter.
Several states had some of their warmest December days on record. And according to the National Oceanic and Atmospheric Administration’s Climate Prediction Center, above-average temperatures could prevail throughout the south and most of the east for most of this winter.
“If it’s a warmer winter, our usage estimates will go down, and if usage goes down, the price of fuel will go down,” said Mark Wolfe, executive director of the National Energy Assistance Directors’ Association, a group of state officials who help households in need Afford. “That’s a good sign.”
Much like retailers, energy producers have struggled with economic imbalances caused by the pandemic shock and a sluggish resumption of activity.
An analysis by the Federal Reserve Bank of Dallas earlier this month found that oilfield activity in the region had increased steadily over the past month and a half, but that “supply chain delays with significantly larger backlogs, rising costs and materials” and equipment lead times of up to worsened 10 months for some types of machines. “