Why Are Our Costs So High?

If you’ve been around lately and seen the ridiculous costs of gas and food, you might be wondering why things cost so much. Is it Biden’s fault or is it Trump’s fault, and what exactly is going on?

News Talk KIT

Why Does Inflation Occur?

Inflation occurs when there are too many dollars chasing too few goods. The inflation rate measures the percent change in how much goods cost over the last year. For example, during the Biden administration, extra money was printed and given to Americans to stimulate the economy with the American Rescue Plan.

The goal was to help the unemployed during the COVID pandemic. What this did was put too many dollars on the market compared to goods available, and thus costs rose.

Right now, the opposite is happening. There are too few goods compared to the amount of dollars. When President Trump launched the war in Iran in February, Iran shut down the Strait of Hormuz.

Logistics Of Iran War

The strait is where 20% of the world’s oil supply passes through. Shortly before the war, 20 million barrels of oil passed through the strait per day. Now that is down to 13 million! The rest of the oil today is now sitting on tankers untouched or going other ways, such as through pipelines, which means it takes longer to hit the market.

This restriction on supply forces oil companies to bid their prices higher, or else people would buy up the remaining oil on the market too fast, causing a shortage. Companies are not price gouging you; they are only conveying the scarcity of the product. High oil prices mean high gas prices, and high gas prices mean higher costs for goods, as gas is needed for transportation.

Until we reach a deal with Iran or win the war, your costs look like they will remain high!