It’s impossible to ignore rapidly increasing prices at the gas pump.
The economies of the U.S. and Illinois appear strong, with forecasts of continued growth on both fronts.
But all the news is not good. The return of inflation — the scourge of the 1970s and 1980s — is a threat that should concern everyone.
Officials at the Federal Reserve have dismissed recent rising prices as a temporary phenomenon. But what else can they be expected to say? It’s their job to keep fiscal matters under control.
Unfortunately, rising commodity prices — lumber and food — are drawing public concern.
So, too, are the steadily rising prices of oil and gasoline.
A year ago, a gallon of gasoline cost a little over $2 a gallon. Now it’s $3 and up in central Illinois and much higher in the Chicago area, where local taxes punish motorists. In California, it’s common for gasoline to cost over $4 a gallon.
Increases that substantial are the equivalent of a new and brutal tax that, obviously, hits lower- and middle-income earners the hardest. They often don’t have a choice in terms of transportation, and increases like the ones over the past years put a big hole in their budget.
Throw big price increases on top of the past year of economic uncertainty caused by the coronavirus pandemic and economic shutdown, and it’s doubly difficult for those of lesser means.
The price of oil is, of course, a worldwide issue determined by the law of supply and demand.
Once both an economic and national-security issue for the United States, it is now mostly a matter of economics thanks to the fracking boom and discoveries of vast supplies of oil and natural gas on the home front. That’s a good thing.
But the war on oil driven by concerns about global warming has prompted many to think that these fuels belong to the past, that the future will be the preserve of wind and solar.
That’s just not so. Even with strong growth in energy from wind and solar, there will not be enough supply to fill the demand now filled by oil and gas.
That’s why it was so concerning when President Joe Biden blocked the XL Pipeline construction project designed to bring Canadian oil to the U.S. for distribution. It not only threw thousands of workers out of good-paying jobs but eliminated another energy-supply source for this country.
It was a questionable decision driven by politics on Biden’s part and potentially costly in more ways than one. The pipeline’s developers recently sued the U.S. government for $15 billion because of the administration’s decision to pull the plug on the pipeline.
Taxes, too, play a big role in the cost of energy. The Illinois General Assembly, at Gov. J.B. Pritzer’s urging, not only doubled the state’s gasoline tax two years ago — up to 38 cents a gallon — but authorized annual gas tax increases every successive July 1. On top of that, Illinois is one of just seven states that charges sales tax on top of the already heavily taxed gallon of gasoline.
All together, Illinoisans pay the third-highest gas taxes in the nation, trailing only California and Pennsylvania.
Aside from the difficulty those costs pose for consumers, rising energy prices have the potential to undermine the economy’s ability to continue to grow. After all, the more consumers spend on necessities like fuel, the less they will have to spend on discretionary items.
It remains to be seen if these rising costs are canaries in the coal mine that foreshadow the growing threat of inflation. If it’s not time yet to worry, it’s at least time to be concerned.