It is impossible to ignore the rapid rise in prices at the gas pump.
The economies of the United States and Illinois appear strong, with forecasts for continued growth on both fronts.
But not all the news is good. The return of inflation, the scourge of the 1970s and 1980s, is a threat that should concern everyone.
Federal Reserve officials dismissed the recent price hike as a temporary phenomenon. But what else can we tell them? It is their job to keep tax matters under control.
Unfortunately, rising prices for basic commodities – lumber and food – are causing public concern.
The same is true of the steadily rising prices of oil and gasoline.
A year ago, a gallon of gasoline cost just over $ 2 a gallon. Now it’s $ 3 and up in central Illinois and much higher in the Chicago area, where local taxes punish motorists. In California, it is common for gasoline to cost more than $ 4 per gallon.
Such substantial increases are the equivalent of a brutal new tax which clearly hits low and middle income people the hardest. They often don’t have a choice when it comes to transportation, and increases like the ones in recent years are putting a big dent in their budgets.
Add big price hikes to last year’s economic uncertainty caused by the coronavirus pandemic and economic shutdown, and it’s doubly difficult for those with less means.
The price of oil is, of course, a global problem determined by the law of supply and demand.
Once a problem of both economic and national security for the United States, it is now primarily an economic one thanks to the boom in hydraulic fracturing and the discoveries of vast reserves of oil and natural gas on the home front. . This is a good thing.
But the war on oil motivated by concerns about global warming has made many believe that these fuels are a thing of the past, that the future will be the preserve of wind and solar.
This is simply not the case. Even with strong growth in wind and solar power, the supply will not be sufficient to meet the demand now met by oil and gas.
This is why it was so concerning when President Joe Biden blocked plans to build the XL Pipeline designed to bring Canadian oil to the United States for distribution. It has not only driven thousands of workers from high paying jobs, but has eliminated another source of energy supply for this country.
It was a questionable politically motivated move on Biden’s part and potentially costly in more ways than one. Developers of the pipeline recently sued the US government for $ 15 billion over the administration’s decision to disconnect the pipeline.
Taxes also play a big role in the cost of energy. The Illinois General Assembly, at the behest of Governor JB Pritzer, not only doubled the state’s gasoline tax two years ago – to 38 cents a gallon – but authorized increases annual gasoline tax each successive July 1. On top of that, Illinois is one of only seven states that impose a sales tax on top of the already heavily taxed gallon of gasoline.
All together, Illinoisians pay the third highest gasoline taxes in the country, behind California and Pennsylvania.
In addition to the difficulty these costs pose to consumers, rising energy prices can potentially undermine the economy’s ability to continue to grow. After all, the more consumers spend on essentials like fuel, the less they will have to spend on optional items.
It remains to be seen whether these cost increases are canaries in the coal mine foreshadowing the growing threat of inflation. If it’s not yet time to worry, at least it is time to worry.