Are gas prices being suppressed to keep inflation low?
Published 12:30 pm Tuesday, January 2, 2024
To the Editor:
For the first time I can remember we have had a war going on and gas prices have not shot up. This is especially true when we have had a war that involves the Middle East and particularly if it involves Israel and some Muslim states or a major terrorist attack. This means our government and/or our government in conjunction with other nations is, through some manipulative process, suppressing gas prices; i.e., keeping them below normal levels even though the Muslim countries have reduced production. Initially the prices were mainly held down by withdrawing oil from the strategic national reserves but as these reserves get low/depleted other means must be used as indicated above. The dangerous part of using the oil reserves is it leaves our nation in a very vulnerable situation for any major event that requires large amounts of fuel. Another point is that at some future time the oil bought at discounted prices will have to be replaced. In this case to replace the depleted strategic oil reserves we will have to pay the prevailing higher oil prices. Who will pay for this? It will be the American taxpayers or it will show up as an increase in the national debt which also eventually goes to the taxpayer.
The lower than normal gas prices for the present international situation serves to keep the reported inflation rate as low as it is; i.e., 3% to 4% range. This is politically advantageous for the party in control in an election year. As alluded to above this is the reason the gas prices have not been allowed to rise excessively as free markets would dictate.
Since gas prices have a large effect on the inflation rate calculation, the rate of inflation reported is not what the general public sees when they go to the grocery store, purchase appliances, purchase a car, pay rent, repairs, lumber, etc. If you took gas prices out of the calculation you would see the true consumer’s interest rate. It would be at least double; i.e., in the 6% to 8% range. Of course if gas prices were allowed to rise based on free market economics, the inflation would be much worse. Probably in the 10% to 15% percent range unless we again began using our own supplies via fracking, completing the pipeline and opening more land for oil and gas exploration.
The public would be better served/informed of reality if there were at least two inflation rates reported. One for fuel costs and electricity and one for domestic inflation associated with grocery costs, appliance costs, rent/housing costs, repair costs, other utility costs, lumber costs, etc. These rates should be reported in tabular form along with a combined or composite interest rate. The separate rates would allow citizens to more easily and realistically adjust their budgets.
Of course the inflation rates could be divided into additional categories then combined into a final composite interest rate. You often hear about the housing index or interest rate. In any event these should be tabulated and published for the public to see. This allows the public to see what is actually happening instead of it being covered up in one figure. For senior citizens on a fixed income the social security increases should be more closely tied to the domestic interest rate with special emphasis on grocery costs.
J. Ronald Winter