How Much Do Oil Prices Affect Inflation?

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  1. orsogrigio commented on Jun 3

    Interesting article, indeed. But there is a question in my mind : what is the ‘oil price’ ? I’m saying that one buys oil for doing something (the absolute greatest reason is to provide energy to engines for transportation, both by land and by air). So the price of the utility should be in link with the value obtained. If you have a terrible need for it, you’re going to pay as much as requested, and the requests can go up anyhow. Clear. But the matter is a bit confused when you take into account that , e.g., the Airbus A3XXneo will run on 20 % less oil than a A3XX built in … 2015. The same holds for automotive engines and such. I’m meaning that we are getting an always increasing ‘mileage’ from the same quantity of oil. So we are no longer in a ‘terrible need’ of oil, we are just in a ‘need’ : in short, inflation forecasts are set on a limited interval, and I think are still heavily biased by the ’70s petrol shock fear still looming in people heads, whereas GDP evaluation takes into account the aforesaid ‘-neo effect’, that is what really happenED in near past, and thus effects brought about by price increase are by far less evident. Mr. Ritholtz would certainly (and with sound reasoning, IMHO) discuss it from behavioral point of view. My own point of view is, in general, that in order to get correct answers, one has to put correct questions, and in detail, that technology is changing our world, and in a VERY fast way. Using historic data series is becoming more and more difficult, one could make huge mistakes using data that really picture a different universe.

    • orsogrigio commented on Jun 3

      the last phrase is truncated : please read as ‘really pictures an universe different from the one object of the analysis, and so a mere correlation is valued as a possible causation’

  2. hidflect commented on Jun 4

    It’s rents that drive inflation. You pay rent multiple times a day; the home you live in, the toll road you drive on, the restaurant you eat at, the higher wages you have to pay employees, the car park. Rent, rent, rent. You pay it over and over and by the end of the day when you ask, “Sheez, where did all that money go?:” you have the answer; unproductive payments to idle owners. Do like Germany and make speculation in land more punitive. Notice how Germany has always had low inflation since the ’80’s despite being the economic forerunner of Europe since forever?