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Highest inflation rate in 40 years largely driven by oil

According to the latest United States Bureau of Labor Statistics Consumer Price Index report, the cost of everyday items increased by 9.1% over the past 12 months.

BOISE, Idaho — A dollar won't get you as far as it did a year ago, according to the latest United States Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) report.

The cost of everyday items has increased by 9.1%. According to the report, this is the highest inflation rate since November 1981. However, two industries stood out among the rest facing abnormally large increases:

  • Energy: 41.6%
  • Food: 10.4%

When removing these anomalies, the CPI has lowered since March, according to Idaho State Associate Economics Professor, Karl Geisler. For this reason, Geisler attributes the current inflation rate to the high cost of energy.

Geisler is specifically focused on gasoline.

"Whether it's a key ingredient, like oil going into making plastics, or fuel to move other components and final goods around the country, energy is a critical cost that really pushes other prices up," Geisler said.

Geisler attributes the rising cost of goods - including gas - to three main factors:

  • Demand-Pull Inflation
  • Cost-Push Inflation
  • Generous Corporate Rounding

Demand-pull is when more dollars are chasing the same amount of goods. As the government prints more money, the value of that currency unit naturally lowers.

Cost-push is when a business decides to start charging more for a product.

Generous Corporate Rounding is a unique factor, according to Geisler. Between the two traditional factors, large corporations will see how far they can push prices to maximize profits.

"If you're large enough and you have significant market share in your industry, some of those firms are adding on top of what they're already doing," Geisler said. "That's why corporate profits have been higher than usual over the last seven months, even adjusting for inflation."

Sen. Mike Crapo, R-Idaho, held a press conference alongside other Senate Finance Committee Republicans to address solutions to the rising cost of oil. The rising cost of goods will force the average American family to pay an extra $5,200 a year for the same products, according to Crapo.

Geisler did not have a specific figure from his own calculations. However, Geisler said Crapo's number sounds accurate.

"If we want to move away from oil-driven inflation cycle, we need to do something about moving our economy further away from the use of fossil fuels," Geisler said.

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