ICYMI: Politico: Another eye-popping inflation reading is ahead. Next year could look very different.
|Key Point: “Prices of everything from oil and natural gas to wheat and corn have already started falling from their peaks earlier this year. That trend is likely to continue in 2022, lowering gas prices and stabilizing food costs for consumers, a potential boon for President Joe Biden’s party as it seeks to maintain control of Congress.”
Politico: Another eye-popping inflation reading is ahead. Next year could look very different.
Republicans have pounded Democrats for months over spiking gasoline and grocery costs, a phenomenon they’ve dubbed “Bidenflation.” By the time next year’s elections roll around, that line of attack may lose its punch.
Prices of everything from oil and natural gas to wheat and corn have already started falling from their peaks earlier this year. That trend is likely to continue in 2022, lowering gas prices and stabilizing food costs for consumers, a potential boon for President Joe Biden’s party as it seeks to maintain control of Congress.
But the prices felt most acutely by voters could be telling a better story for Democrats heading into the midterms.
“The politically relevant part of inflation is almost the exact opposite of the economically relevant part that the Fed is focused on,” said Jason Furman, a professor at Harvard Kennedy School who was a top official in the Obama administration. “People care about the prices they pay, and especially the prices they pay most frequently and most transparently, which are gasoline and food.”
The White House has already started to seize on the sizable drop in crude oil prices that began in late October, sparked by a global boost in production and fears about the Omicron variant of the coronavirus that might dampen demand for travel. The administration has also cited its own decision to release 50 million barrels of oil from U.S. reserves.
“Gas prices are down somewhat,” White House Chief of Staff Ron Klain tweeted on Wednesday. “They are projected to come down more…”
The U.S. Energy Information Administration this week projected that gasoline prices will decline to an average $2.88 per gallon next year, down from $3.39 in November.
Republicans have used that concern so relentlessly to criticize Biden’s big-spending plans — Sen. Rick Scott of Florida called the issue a “gold mine” for the party — that White House Press Secretary Jen Psaki has accused them of “rooting for inflation.”
But oil prices have likely peaked, barring unforeseen shocks, said Al Salazar, vice president of intelligence at energy analytics firm Enverus. The Organization of the Petroleum Exporting Countries is ramping up production, which will put downward pressure on prices, and major economies are turning to other energy sources to meet their heating costs for the winter, which could also be warmer than previously expected.
Still, a decrease in commodity prices across the board — from steel to cotton — could help bring down overall inflation readings because they’re critical to so many goods.
Skanda Amarnath, executive director at the worker advocacy group Employ America, said the trend might also suggest other reasons to be optimistic about the outlook for prices, if it indicates that supply chain issues are beginning to get resolved.
“Next year, we’ll be more mature in the recovery with less fiscal boost,” he said. “Growth will be slower next year, and at the same time you’re seeing that there are pretty tangible pieces of evidence that production capacity, particularly in Asia, is likely to improve. The signals you’re getting from commodity prices seem consistent with the story of healing.”
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