We are seeing record gas prices and the highest levels of inflation in 40 years.
There are a lot of questions on how this has already impacted and will continue to directly impact families across the country and our community.
Mannik Dhillon, a specialist with Victory Capital, joined Leading SA Sunday to discuss the current problems with gas and inflation.
“The consumer price index, or CPI, as is called, tracks a basket of goods and services that we all have to consume where we knew we normally consume on an everyday basis. I mean, these are things like food, energy, transportation costs, even some health care services, and energy is a big component of it. And as we’ve seen lately, that’s been a big driver of the consumer price index increasing and what you saw in that 7.9% number. And it’s that energy component has increased over 25% year over year. The energy component so is pretty meaningful and it impacts the bottom line of all San Antonians,” Dhillon said.
There are several reasons for the rise in prices ranging from groceries to gas.
“It’s supply and demand; prices follow supply and demand forces. And both, you know, decreasing supply and increasing demand can push those prices up. And unfortunately, what is happening since the bottoms of the pandemic is both of those things are happening right. We’re facing global supply chain issues that are decreasing supply while demand is still up and increasing post the pandemic lows. And so that’s pushing prices up. The other thing is we all hear about the Federal Reserve and what are they doing in terms of interest rates and the easing that they put into place to help the economy during the pandemic has also pushed up demand and that increases prices over time. And then we can’t ignore the fact that energy prices, particularly as of late, have been impacted by the conflict that’s happening between Russia and Ukraine,” Dhillon said.
Gas prices are reaching record highs, and while the Russian invasion has had a big impact, that’s not the only factor in the recent rise.
“In the days leading up to and after the invasion, we saw energy prices particularly spike. But let’s not forget, we’ve been seeing energy prices and gasoline prices tick up for some time. This is not a new phenomenon in the last few weeks. And right now, though, however, because of the conflict curbing Russian imports of oil impacts the supply of oil globally. And while we in the United States may not be a big consumer of Russian oil, oil is a global market and it pushes up those input prices, what you see at the pump. Most of that is actually oil and there’s other taxes and things that get baked in as oil turns into gasoline, but it is correlated,” Dhillon said.
Dhillon said we knew not to get used to the gas prices of the beginning of the pandemic, and as more and more people get out and about, the prices will only rise.
“With the increased demand because of the easing stance of the Federal Reserve and everybody coming back out of the pandemic, right people coming back into the office is traveling more. That increases the demand for fuel. And so that’s why it’s been ticking up until even the recent conflict, and that’s something we have to pay attention to as we think about, you know, where do we go from here,” Dhillon said.
So what can be done to ease some of the inflation?
“We all expect the Federal Reserve to increase rates to help tamp down inflation. The question will be how fast have an effect that have takes, you know, the conflict in Russia, the longer it continues, the supply of global oil is going to be impacted,” Dhillon said.
As for gas prices, don’t expect any big relief anytime soon, Dhillon said.
“We are entering into the summer months. Gasoline consumption and demand increases then, so it may not be, it may not be an immediate relief. You know, ahead from an inflation perspective, particularly the energy prices,” Dhillon said.
You can also watch the full interview with Dhillon in the video player above.
