Soaring petrol prices send US inflation to 40-year high

Soaring petrol prices send US inflation to 40-year high
By Dearbail Jordan, Business reporter, BBC News
Published 1 hour ago

The US inflation rate hit a fresh 40-year high in the year to March after fuel prices soared during the first full month of the Ukraine war.

Consumer prices surged by 8.5% - the largest annual gain since December 1981 - following a double-digit rise in energy prices.

Last month, President Joe Biden banned all imports of oil and gas from Russia following the invasion of Ukraine.

At the same time, US fuel prices reached new records.

The attack on Ukraine began on 24 February and triggered a wave of international sanctions against Russia, which is the world's second largest oil exporter.

US energy prices rose by 32% in the year to March, according to the country's Labor Department.

It also said that food prices had surged over the same period, up by 8.8%. Like energy, food price inflation has been exacerbated by Russia's invasion of Ukraine. Both countries are big exporters of widely-used goods such as wheat and sunflower oil.

'Insane' price rises

Kristen Havlik, from North Carolina, said price increases in her area had been "insane".

"During the first year of the pandemic, my rent went up by $400 a month which was extremely hard to afford as I had lost majority of my income from one of my jobs," she told the BBC.

"My husband and I were privileged to both secure well paying jobs last year but if we had not, we would have had to move outside of our area to afford to keep living in NC."

"We are both still very much working class and now can't save up enough money fast enough to keep up with the insane home-buying market where sellers are making record profits," she added.

"The Russia-Ukraine war has added further fuel to the blazing rate of inflation via higher energy, food, and commodity prices that are turbo charged by a worsening in supply chain problems," said Kathy Bostjancic, chief US economist at Oxford Economics.

The soaring rate of US inflation prompted the Federal Reserve last month to lift its key interest rate for the first time in three years. The US central bank also signalled that the interest will rise a number of times this year.

US inflation rate

Soaring petrol prices send US inflation to 40-year high _124128274_optimised-us_inflation-nc

Soaring petrol prices send US inflation to 40-year high _124128274_optimised-us_inflation-nc

On Tuesday, Russian President Vladimir Putin said that inflation and rising food and petrol prices in Western countries would start to put pressure on politicians there.

Inflation rates were already rising before Russia's invasion of Ukraine as many global economies reopened following the lifting of Covid restrictions. However, prices appear to be accelerating at a time when wage growth is struggling to keep up.

Recent figures show that average hourly earnings in the US rose by 5.6% in the year to March, well below the latest rise in the cost of living.

But some economists believe that inflation may be close to or has already peaked in March.

On a month-by-month basis, inflation rose 1.2% in March compared with a 0.8% increase in February. However, stripping out volatile fuel and food prices, core inflation rose by 0.3% which was lower than expected.

Peter Cardillo, chief market economist at Spartan Capital Securities, said: "The bottom line is inflation is going to stick around for a while, but we could see it begin to reverse in the summer months, provided we get some cooling off in agricultural and energy prices."

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4-12-2022

More than 250m people could be pushed into
extreme poverty in 2022 – Oxfam
Surge in global food prices, ongoing impact of Covid and rising global inequality threaten the poorest.

More than a quarter of a billion people around the world could be pushed into extreme poverty this year amid a surge in global food prices after Russia’s invasion of Ukraine, the ongoing impact of Covid and rising global inequality, Oxfam has warned.

Highlighting the knock-on impact of the war for the poorest people around the globe, the aid charity said two decades of progress were in danger of being reversed as the conflict pushes up prices on wholesale markets, disrupts harvests and impedes exports of vital commodities.

It warned a total of 263 million people – equivalent to the populations of the UK, France, Germany and Spain combined – could be pushed into extreme poverty this year.

Ahead of key international meetings being held next week by the World Bank and International Monetary Fund, Oxfam said that by the end of the year as many as 860 million people could be living in extreme poverty – living on less than $1.90 (£1.46) a day.

The UN said last week that global food prices had reached a new all-time high amid the repercussions
of war in Europe and warned that soaring costs would hit the poorest hardest.

The conflict has driven up prices of wheat, maize
and vegetable oils. Russia ranks as the world’s largest exporter of wheat, while Ukraine – known as the breadbasket of Europe – ranks fifth. Together the countries supply more than a quarter of global exports, with buyers typically concentrated in poor regions such as the Middle East and north Africa.

The UN’s Food and Agriculture Organization, which tracks global prices, said the war had contributed to
a rise in cereal prices of 17% over the past month alone, with the closure of ports hitting wheat and maize exports in the Black Sea. Russian exports have also been slowed by financial and shipping problems.

Oxfam said rising food costs account for 17% of consumer spending in wealthy countries, but as much as 40% in sub-Saharan Africa. The impact will also be felt in wealthier economies, including the US where the poorest fifth of families spend 27% of their income on food, compared with just 7% for the richest fifth.

In a report titled First Crisis, then Catastrophe, it said a wave of governments in low-income countries were close to defaulting on their debts, and could be forced to cut public spending to pay creditors and import food and fuel. It found the world’s poorest countries are due to pay $43bn in debt repayments this year, which could otherwise cover the costs of their food imports.

Oxfam said debt payments for developing countries could be cancelled to help those most at need, while an annual wealth tax on millionaires and billionaires could rake in more than $2.5tn a year. The proceeds could be used to lift 2.3 billion people out of poverty, make enough vaccines for the world, and deliver universal healthcare and social protection for everyone living in low and lower middle-income countries.

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