The numbers are in and on top of everything else Americans had to deal with in 2021, inflation hit a 40-year high at seven percent, the Associated Press reports. By far the fastest rising costs last year? Unleaded gasoline and used car prices, by a mile.
The AP crunched the numbers and found that gas is now 50.8 percent more expensive than it was in December 2020, and used car prices cost 37.3 percent more. The next quickest rising costs were hotel rooms at 23.9 percent and bacon (yes, bacon; this is why we need a sausage-based economy) at 18.6 percent.
We’ve reported again and again this past year about high fuel costs and unbelievable used car prices. While gas prices still haven’t approach the crisis levels consumers saw in 2008, Americans also didn’t learn anything from 2008. We are all back in the gas-guzzling SUVs, making every visit to the pump painful. AAA reports the rise in gasoline costs have several international causes:
Events on the far side of the globe are fueling the recent rise. Social unrest and violence in Kazakhstan, a member of the OPEC+ alliance, have forced that nation to cut production. Before the recent flare-up of violence, Kazakhstan pumped nearly 2 million barrels of crude a day. In contrast, the United States, as the top oil-producing country in the world, pumped an average of 18.6 million barrels a day. Since the global price for oil accounts for nearly half of what consumers pay at the pump, higher oil costs will usually result in higher gasoline costs. The national average for a gallon of gas rose two cents to $3.30.
“Markets, in general, don’t like uncertainty and volatility, and the oil market is no exception,” said Andrew Gross, AAA spokesperson. “The oil production cuts by Kazakhstan demonstrate that in times of tight supply, it doesn’t take much to put upward pressure on the overall price of oil.”
The cause of the meteoric rise in used car prices can be found closer to home. The pandemic pushed people to secure their own form of transportation where they may have previously relied on public transport but were afraid of getting sick.
It wasn’t just used car prices last year, either. New car prices are rising so fast we could barely keep up. In 2019, the average cost for a new cars rose to $40,000 for the first time. A year later, Kelly Blue Book reports car prices are now averaging $47,000. This is due, the AP reports, to that old chestnut, supply and demand:
A significant portion of inflation is still being driven by pandemic-driven mismatches between demand and supply. Used car prices have soared more than 37% over the past year because new car production has been limited by shortages of semiconductors. New car prices jumped 1% in December and have soared 11.8% in the past year.
When new cars got scarce, the public turned to used cars, driving prices up there as well. Another problem is cheap money. Lending is way up in general, but in particular, car and personal debt, which is, in turn, being carried higher and higher on the wings of inflation.
Federal Reserve Chair Jerome Powell told Congress he thinks prices will calm down when shipping and manufacturing snarls are worked out. That’s what the Feds said last year, however, and so far the snarls and price increases remain. There’s also a plan for the Federal Reserve to raise interest rates on things like home and car loans, making debt more expensive in an attempt to cool down the economy.