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Category: Economics

Why Are Prices Going Up?

Have you noticed the changing cost of basic necessities? It seems like every time you go to fill up a tank of gas or buy food you are paying more than you did last week. High inflation is catching everyone’s attention, but the question remains: why are the prices going up so much? 

The Pandemic

The coronavirus pandemic, or COVID-19 pandemic, plays a key role in recent global inflation. Since many countries were disrupted by key workers being off sick – or by preventive measures taken by governments, this only added to serious supply chain problems.

Limited Supply of Fossil Fuels

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Closing down pipelines and fossil fuel production also plays a critical role in inflation. Since the government put additional regulations on certain businesses or even shut down projects related to fossil fuels, the cost of gas and diesel has increased by roughly 43.6 percent when compared to the previous year. Increased fuel costs result in higher prices on goods.

The limited supply of fossil fuels does not only impact gas prices. It also affects the cost of utilities on a home, food on store shelves, and even furniture and bedding. Since gas and the byproducts of making gas are used in a variety of household products and items, you can expect higher prices at the store.

Problems in the Supply Chain

Supply chain problems that began with the pandemic contribute to inflation due to simple supply and demand. Since the supply chain for many goods is delayed by months, it is harder to find certain items in stores. The high demand for the items combined with the limited supply results in higher prices for the products. 

The War in Ukraine

The war between Russia and Ukraine contributes to inflation in the United States and around the world. Since the war started, Russia and Ukraine have not been part of the global market in relation to commodities. 

In the case of Russia, the war has resulted in lower supplies of metals, oil, and gas. Since the country was a major supplier of fuel and metals, it is causing a low global supply and driving up prices. Ukraine is a major supplier of wheat and corn, which is driving up food prices. 

While the limited supply of commodities plays a role in inflation, it is not the only problem caused by the war. The war in Ukraine is complicating the supply chain throughout Europe. It is amplifying the problems with the global supply chain that started with the pandemic by slowing down the transportation of goods. 

Inflation is a complex problem that stems from multiple factors. Regulations from the government, changes to the tax code, increased government debt, the global pandemic, and a fuel shortage play a role in the high inflation rates. By understanding the cause of increasing prices, it is possible to take measures to address the problems and prevent further ballooning in the future.