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Inflation in the U.S. has jumped at its fastest rate in 40 years, the Labor Department announced last week. Costs of food and fuel have been rising – and while there may be fluctuations in prices, gasoline prices are expected to remain high for a while. Ryan Dezember from the Wall Street Journal joins Hari Sreenivasan to discuss.
When the Labor Department announced last week that inflation had increased at its fastest rate in 40 years, it may not have come as a surprise to consumers who have seen rising costs in goods and commodities like fuel.
And while some prices might fluctuate over time, the rise in gasoline prices is likely to stick around for a while. For more, I recently spoke with Ryan Dezember from the Wall Street Journal.
So, Ryan, when we hear these abstract ideas of inflation, people understand gas prices, they understand the price at the pump and how that's affecting them personally. How did we get here?
We've come out of the pandemic and we've all started driving around and the demand for oil and gasoline has risen much faster than supply. The industry had to shut down to adjust to much lower consumption during the pandemic, and they haven't quite caught up to demand yet.
And then will they catch up to demand by the time summer travel season starts, where people take longer road trips using more gas or fly?
Well, that's the big question, right? Jet fuel for flying that has not caught up yet, so we would expect that to continue to rise for consumption of jet fuel, which will create more oil demand. Now, when people start driving in the summer, you know, that's a lot of optional travel and we're getting to the sort of prices that can affect household budgets and decisions, do we drive to Florida for vacation? Maybe not if oil is $100 a barrel and a gallon of gasoline is $4.00. We're looking at a situation where it's hard to see a solution in a lot of supply coming online before summer. The U.S. industry is kind of just waking up from its pandemic slowdown and the countries, the OPEC nations and their market allies have had a lot of trouble pumping enough oil to meet what they've told the market they'll produce and that could even get worse, depending on the situation in Russia.
That's what I was going to say. Speaking of OPEC nations, what's happening in Russia and Ukraine right now, if there is a war, hopefully there's not. But what does that do to the amount of oil and natural gas that Russia produces? And then what's the ripple effect of that?
Yeah, so Russia is one of the world's largest energy exporters, and we got a glimpse of what will happen on Friday in the market when after the White House warned Americans in Ukraine to leave, the price of oil shot up a few dollars a barrel. What that's telling us is that traders in the market believe that any sort of escalation in the situation along the Ukrainian border will affect oil supplies that will reduce what Russia is able to put on the market, whether it's through their own ability, which they've already had trouble living up to their quotas or meeting their quotas for production. And also, you have the prospect of sanctions by Western nations.
So we should remind people that the price of a barrel of oil doesn't necessarily mean you're going to feel the gas price the same day, that happens, what, a couple of weeks later? So the prices that might have happened on Friday afternoon in the oil market, when are we going to feel that at the pump?
Well, that's the price for barrels that will be delivered to market next month. And by market, we probably mean like pipelines, refiner companies that will take a barrel of crude oil and turn it into gasoline, diesel, jet fuel and all the other products that come from a barrel of oil. You know, Wall Street put out forecasts early in the year, calling for much higher oil prices based on the supply and demand situation. Already, they've sort of torn up those forecasts, raised their prices, they think we're going to be around $100 a barrel, which in the summer, and we're already almost there. The main U.S. price for a barrel of oil, West Texas Intermediate is trading around $92, $93 a barrel. That's working out to a national average gasoline price of about $3.50. And we haven't seen those kind of prices since 2004, before OPEC and the U.S. shale industry got into a price war, which sort of drove prices down because everybody was trying to pump more oil for market share. We got really used to low fuel prices in America. That's a long oil bust, and it has really altered the U.S. producers' ability to ramp back up quickly. You think about people who have left the industry, companies that provide services and equipment who may have gone out of business or scrapped old equipment during the oil bust. There's just not that much equipment there. Halliburton's CEO, they're one of the biggest companies that serves oil producers and helps them get the oil out of the ground, their CEO told investors they're already sold out of the equipment and the services they sell to U.S. producers in Texas to crack open wells and get them flowing.
Ryan Dezember of The Wall Street Journal, thanks so much for joining us.
Thanks for having me.
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Hari Sreenivasan joined the PBS NewsHour in 2009. He is the Anchor of PBS NewsHour Weekend and a Senior Correspondent for the nightly program.
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