The cost per gallon of gasoline — practically a billboard for high costs — hovered around $4.30 on Wednesday, with economists warning the pressure on energy markets is sure to get worse, along with other related costs filtering down to people’s pocketbooks as Russia’s invasion intensifies.
February’s rise in inflation was driven largely by the cost of gasoline, shelter and food, according to the agency. The gasoline index rose 6.6 percent in February after falling 0.8 percent in January and accounted for almost a third of the increases.
The sharp increase in prices is a worrisome sign given widespread expectations among economists and policymakers that gas prices are becoming even more expensive as Russia’s war intensifies, compromising global energy markets. Before cutting off imports of Russian oil, the United States had agreed with other world powers to release more oil from their strategic reserves to bring down prices. Yet, in working to penalize Russian President Vladimir Putin and Russia’s economy, the White House has been warning Americans will likely also feel a sharper sting.
Indeed, the White House has zeroed in on the invasion as a culprit for more recent higher prices.
“Today’s inflation report is a reminder that Americans’ budgets are being stretched by price increases and families are starting to feel the impacts of Putin’s price hike,” President Biden said in a statement on Thursday, pointing out that recent inflation reflects “an increase in gas and energy prices as markets reacted to Putin’s aggressive actions.”
The newest inflation data frustrated Republicans. Even as geopolitical tumult in Europe rattles the global economy, especially raising gas prices, GOP lawmakers attributed the price spikes instead to Biden and his economic agenda.
“This isn’t just due to what’s happening in Ukraine,” said Sen. Deb Fischer (R-Neb.) during a press conference Thursday. “It’s due to the administration’s policies.”
Flanked by fellow Republicans, Fischer said he had hammered farmers in her states, who saw the cost of fertilizer spike by about 200 percent. In doing so, she sought to scrap one of the Biden administration’s more positive indicators, stressing inflation is “erasing any kind of increase American workers have seen in their wages”
Republicans also criticize the Federal Reserve for moving too slowly. The Fed is expected to raise interest rates next week in an effort to start cooling the economy off, but it will start with only a moderate hike and has yet to outline what comes next.
All six major grocery categories became more expensive in February compared with the month before. The index for meat, poultry, fish, and eggs increased 1.2 percent. Measures for cereals and bakery products rose 1.1 percent.
Rent climbed 0.6 percent in February compared with the month before, up slightly from January. For months, the rising cost of housing has flashed warning signs, especially since the cost of new homes and rent isn’t expected to come down once the pandemic ends or supply chains clear up.
Inflation also continued to spread through household furnishings and operations, car insurance and airline fares. Hotels (up 29 percent), furniture (17.1 percent), chicken (13.2 percent) and new cars and trucks (12.4 percent) saw their annual price increases on record.
There were exceptions to the march upward: Prices for used cars and trucks have been up a whopping 41.2 percent compared with 2021, but they dipped slightly in February compared with a month prior.
Officials in the White House and Federal Reserve say they have been hoping for signs in the monthly inflation snapshots for supply chain improvements. Indeed, monthly comparisons had ticked down from October to November and stayed level in December and January. But February went the other way, rising 0.8 percent compared with January’s rise of 0.6 percent.
“People are feeling really bad about how things are going, and they should be in a very real sense,” said Michael R. Strain, director of economic policy studies at the right-leaning American Enterprise Institute. “Gas prices are a huge part of people’s budgets. You’re going to see prices moderate in some sectors…but the headline [inflation measure] is going to continue to go up if the situation in Europe continues.”
In Missouri, Sharon Burnett is staring down rising energy prices as the manager of Saint Louis Trolley, which takes bookings for local weddings, corporate events and tours. Burnett said the cost of fuel had been rising well before the war in Ukraine. Plastic parts for her company’s trolleys have also been caught up in global supply chain snarls.
Customers are pouring in, and so far, Burnett has managed to keep prices steady. But higher gas prices and a war an ocean away could soon force her hand.
“If gas goes up to $5 or $6 a gallon, we’re going to have to raise prices, but right now, we’re holding on,” Burnett said.
At Crowbar, a concert venue in Tampa, Fla., owner Tom DeGeorge has been forced to raise prices on everything from tickets to drinks at the bar. Higher gas prices in recent months have pushed up his transportation and delivery costs. Beer and liquor suppliers are raising their prices, and the cost of plastic cups has more than doubled over the last year, DeGeorge said. Security guards that used to make $70 per shift now earn up to $100.
For now, DeGeorge said ticket sales are high – he’s got 29 events on the books this month. But he worries that people will stop tolerating higher prices, especially as rents in Tampa soar. A ticket that used to go for around $15 often hovers closer to $20 now.
“I’m walking that fine line where I’m trying to make ends meet, but I’m also cognizant of the fact that people are struggling to make ends meet themselves,” DeGeorge said. “So how far do you take it?”
By many measures, the US economy is particularly well-situated to weather economic turbulence. The job market is tight and has made remarkable gains over the past year, with the unemployment rate ticking down to 3.8 percent in February, and bank account data shows people are significantly better off financially now than before the pandemic.
Joe Brusuelas, chief economist at RSM, said that the economy hadn’t overcome high energy costs of the past few months by the time Russia invaded Ukraine, prompting the United States and its allies to siphon itself off from Russia’s economy — namely its supply of oil.
“Americans have rallied to support the Ukrainian people and have made it clear we will not be part of subsidizing Putin’s war,” Biden said Tuesday, explaining why he was banning the import of Russian oil. “This is a step that we’re taking to inflict further pain on Putin, but there will be costs as well here in the United States.”
Controlling inflation is the job of the Federal Reserve, which for months has been grappling with when to cool down the economy through the first interest rate hikes of the coronavirus era. The Fed is slated to modestly raise rates at its policy meeting next week, teeing up a series of increases in 2022.
But it’s entirely unclear how quickly those moves will work their way through the economy. Rate hikes operate with a lag, and for now, the Fed is expected to raise rates by only 25 basis points.
Plus, while the Fed’s tools can’t end a pandemic or mend a broken supply chain, they also cannot end a war or shield the global economy from the fallout. In Ukraine, shortages of wheat, corn and aluminum are expected to push food prices higher for American consumers.
Andrew Van Dam and Tony Romm contributed to this report.