In recent developments, American households have been grappling with a sharp 10.6% increase in gasoline prices that took place in August, according to data published on Thursday. This rise has subsequently fueled a 0.6% surge in core inflation, adding to the economic pressure faced by many families across the country.
The fluctuation in fuel prices, whether it’s a drop or a spike, is often a significant talking point among the American public, given that a considerable portion of the population holds a driving license. The current price hike in 2023 is not an exception to this trend.
Despite the ongoing concern, David Kelly, the Chief Global Strategist at JPMorgan, has expressed an unusual calmness towards this development. He conveyed that the current oil price surge doesn’t warrant excessive worry from an economic or investment standpoint looking into 2023.
Historically, oil has been America’s “economic bogeyman” for several decades. Various international incidents have influenced and strained U.S. consumer budgets over time. Notable events include the Arab oil embargo of 1973, the Iranian revolution in 1979, and the first Gulf War in 1990, all of which significantly inflated costs.
In April, OPEC members announced plans to cut production by approximately 1.15 million barrels per day with an aim to stabilize the market. This decision by OPEC members is among the factors contributing to the current hike in gasoline prices.
Adding to the complexity of the situation, Russia, another major oil producer although not part of OPEC, has declared it will refrain from selling its oil directly or indirectly to the U.S. This decision comes after the U.S. imposed price caps on the commodity following Russia’s invasion of Ukraine. However, this move is unlikely to further impact prices significantly as President Biden had previously banned Russian oil imports into the U.S. This ban on Russian oil imports, along with OPEC’s decision to cut production, have both contributed to the present landscape of the American oil market.
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