Monday, July 11, 2022

Adaptability needs to be the rediscovered strength of market economies

Actually, today’s oil price isn’t that high. The recent peak of $128, after inflation, is still $33 lower than the price in April 2011. For all the talk of Ukraine, 55% of the current increase since last December occurred prior to the Russian invasion. Even more important to note: The rise in retail gasoline has been disproportionately large in relation to the underlying oil price hike. If gasoline had risen as much in April 2011, consumers would have paid the equivalent of $6.72 a gallon (in fact, they paid about $5 in 2022 dollars).

So something else is going on and that something is a normal adjustment to an abnormal event: a two-year global pandemic that knocked gasoline demand for a loop. It caused dozens of refineries to be idled, some of which (especially in the U.S.) were so creaky that it made no sense to restart them. Then, on top of these supply-demand effects, add 13% cumulative inflation since early 2020.



from Hacker News https://ift.tt/ta4xUjC

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