A brief story of changes in America's consumer price index (% change) over the last 5 decades shows that oil scarcity is almost always associated inflation spikes in the country.
The US economy has seen many moments of economic upheaval over the last 50 years. The Consumer Price Index represents the prices of a cross-section of goods.This chart shows the percentage change in the CPI (inflation) over the last 50 years.
Here are the moments the pockets of Americans took a hit due to inflation skyrocketing in those years.
What would eventually become The Great Inflation reached its first peak of 5.8 percent in 1970. The US economy was also in recession at the time. Even though fall in demand usually leads to fall in inflation, the CPI spike wasn't done.
Just as the US came out of the recession, inflation reached a new high, increasing by 11.1 percent. Just like today, there were gas shortages in the US in 1974 caused by the oil embargo of the Arab members of OPEC as a retaliation for the Arab-Israeli war.
The highest inflation of the last 50 years came in 1980 at 13.5 percent. The worth of the dollar had depreciated that $100 in 1970 had the same purchasing power as $208.5 in 1980. The rampant inflation which peaked that year was blamed on the oil crisis of the era, government overspending and a policy that hoped that higher prices would lead to higher wages. What followed was a decade of stability as inflation plummetted.
After one decade of inflation consistently plummetting, the US Monetary Policy of the 90s up until the present yielded a stretch of stable inflation from 1990 when inflation rose slightly to 5.4 percent. At the time, an increasing dependence on oil import threatened an oil crisis.
Inflation currently stands at a 40-year high. The June 2022 figures just released shows a 9.1 percent year-on-year inflation rate, the highest since 1981.
Month over month CPI of all items in U.S. city average.
Even though the current upheaval in the global energy industry is not the immediate cause of the current U.S. inflation, it may worsen it, experts say. Recent news have shown that other countries globally face similar economic troubles as the ban on Russian oil further spikes oil and food prices.
The US economy has seen many moments of economic upheaval over the last 50 years. The Consumer Price Index represents the prices of a cross-section of goods.This chart shows the percentage change in the CPI (inflation) over the last 50 years.
From 5.4 in June 2021, inflation has gradually climbed to 9.1 as economists believe the worst is yet to come. Some experts have hinted at possiblity of a runaway inflation.
This inflation rate means that $1 in June 2021 has the same purchasing power as $1.09 in June 2022.
While the dollar has lost some of its purchasing power domestically, it has increased in value against major international currencies. For instance, for the first time in 20 years, the dollar achieved rate parity against the Euro.
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