U.S. Ukraine Policy Leads U.S. Inflation-Rate Higher

As-of the latest reported month, which was May 2022, the annual inflation-rate in the U.S. for “Fuel Oil” is 106.7% (see “Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city average”, which document also notes that “The index for fuel oil more than doubled, rising 106.7 percent; this represents the largest increase in the history of the series, which dates to 1935.”). The second-highest rise is for “Gasoline (all types)” 48.7%. The third-highest is “Utility (piped) gas service” 30.2%. Those are the three highest-inflation-rate categories among the 14 categories that the U.S. BLS (Bureau of Labor Statistics) tracks (which 14 categories also include the following 11: Food at home, Food away from home, Electricity, Commodities, New vehicles, Used cars and trucks, Apparel, Medical care commodities, Shelter services, Transportation services, and Medical care services). All 14 of those categories together inflated at an annual rate of 8.6%, as-of May 2022.

Clearly, then: fuel oil, gasoline, and pipelined gas, accounted for a huge portion of that 8.6% annual U.S. inflation-rate. (Moreover, within “Transportation services,” “the index for airline fares rose 37.8 percent” during that 12-month period, and this was largely due to fuel-costs; so, portions of the other 11 categories — such as “Transportation services” — were rising because of  the far sharper increases in fuel-costs.)

Why did this explosion of fuel-costs happen?

Look further into that table, and the answer is clear. Almost all of the soaring inflation-rates for these three categories were during the four months of February, March, April, and May, of 2022.

What was happening throughout that time, and what had caused it during the lead-up to it?

On 17 December 2021, Russia had presented to the U.S. Government and its NATO anti-Russian military alliance a set of formal demands to adhere to the promises that the U.S. Government and its NATO allies had made to the final Soviet leader, Mikhail Gorbachev, prior to Gorbachev’s decision to end the Soviet Union, end its NATO-mirroring anti-American Warsaw Pact military alliance, and end their communism: the promises that NATO would expand “not an inch to the east” (toward Russia’s borders). Gorbachev didn’t want U.S. missiles to be stationed on or near Russia’s borders, any more than American President JFK had wanted Soviet missiles stationed near America’s borders in Cuba in 1962: either way, that would constitute a mortal threat to the given nation’s national security. And, so, America had promised this to Gorbachev. As a result of those promises, the Soviet Union and its Warsaw Pact and its communism all were ended, within less than two years, in 1991.

On 7 January 2022, The U.S. Government and its NATO said no to Russia’s demands to honor those promises: said that any nation has a right to join the anti-Russian military alliance if it wants to and if all existing NATO members accept that nation as a new member — Russia has no right to demand otherwise. The U.S. and its NATO flat-out refused to comply, or even to discuss and negotiate with Russia about the matter.

Then, on 24 February 2022, Russia invaded Ukraine (the nation that has the nearest border of all to Moscow) to prevent Ukraine from ever becoming a NATO member-nation. For Ukraine to become a NATO member would be as-if Mexico or Canada were to have joined the Warsaw Pact, but all of NATO was now saying that this is nonetheless okay for NATO to do to Russia.

A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., May 5, 2022

America’s (and its NATO-member allies) had left Russia no alternative than force, in order for Russia to prevent Ukraine from joining NATO.

The U.S. Government promptly slapped yet new sanctions upon Russia, now targeting especially its fuel-exports. Germany cancelled the giant Nord Stream 2 natural-gas pipeline, which had just recently been completed.

As the news-analysis site Vox explained on May 18th:

The EU gets nearly a quarter of its energy from natural gas, and almost half of that comes from Russia, the world’s largest gas exporter. As the EU’s largest economy, Germany is Russia’s biggest customer, paying Russia’s state-owned gas company about 200 million euros a day since Russia’s war began. So while Germany has even sent Ukraine weapons in a historic shift of military policy, through its gas supply, Germany is also helping to pay for the war it’s trying to stop.

It’s inherently hard to pivot away from piped gas. Unlike oil and coal, which can be sent anywhere in the world, gas pipelines cost billions, take years to build, and physically connect producer and buyer directly, making them long-term commitments. That was the origin of Germany’s dependence on Russian gas, which over time has only deepened. Today, as the world tries to punish Russia through sanctions, that dependence is getting in the way.

The only way that the U.S. Government was able to get the EU to cooperate with America’s anti-Russian policies was by selling to Germany and other EU countries U.S. oil and LNG (liquefied natural gas). But that’s far costlier in Europe than is the pipelined gas from Russia (because transportation costs are a large factor in fuel-costs); so, in order for Europe to buy any of these costlier U.S. products (gas and oil), the U.S. Government has needed to rush these fuels to Europe — ship them there immediately — all at terms which will win enough support from European Governments so as to make the U.S.-imposed sanctions against Russia hold, and yet still be profitable for U.S. oil and LNG producers — who naturally won’t sell their goods at a loss to themselves — to sell across the Atlantic. But this means taking those goods off of the U.S. markets. Consumer prices for these fuels in the U.S. naturally soared, as a result.

This was not a decision that was made by U.S. President Joseph Biden alone — he has had almost 100% support in the U.S. Congress (both Parties) for the anti-Russia policies (just like their support for the anti-Iran policies, and the anti-Venezuela policies, and the anti-China policies — and for the policies against any other Government that isn’t hostile toward Russia). He has also had virtually 100% support from the U.S. news-media for these policies.

All of these are bipartisan U.S. policies. Both of America’s political Parties are solidly behind these foreign policies: America’s anti-Russia policies. However, America’s consumers — and almost all American businesses — are losing from these foreign policies, because of the resulting shortages that are produced by those sanctions. Those shortages drive up the living-costs for Americans, and are overwhelmingly supported by the U.S. Government and its news-media, based on the argument that these foreign policies are necessary in order to defend democracy, human rights, and fight against corruption, around the world.

Reposts are welcomed with the reference to ORIENTAL REVIEW.
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