"Yet we are also seeing signs at least within energy prices that the inflationary pressures pushing prices up may not get much worse than where they are at today. Energy price inflation may have already peaked, and other prices may be on the verge of peaking."
I like the detailed analysis but this reasoning could use more emphasis on the effect of prolonged high energy prices on other prices.
We can see this already with Spirit. High energy prices killed them, now the ultimate discount airfare provider is gone. There's less competition, and that means higher travel costs.
That's the choice other discount retailers now face: either pass the costs on or go bankrupt. The result for the consumer either way is high prices.
Spirit was particularly vulnerable, but the longer this lasts, the more other companies will fall into the Spirit bucket.
Supply shocks (and whether we call it a price shock, cost-push inflation, or stagflation, the driving force is still a dramatic supply chain dislocation) are always going to be hardest on marginal producers. Spirit Airlines is a good example of that.
Some supply chain dislocations are eminently preventable, such as the cratering of the global economy during the COVID Pandemic Panic. Others are more problematic.
The oil supply shock resulting from the war with Iran is definitely a problematic situation. Is it better to weather a period of economic upset to deal with a major global security threat, or should economic stability take precedence?
The answer, of course, is the stuff if which policy debates are made.
Ultimately, businesses need to always be assessing and reassessing their supply chain risks, and be developing logistics plans for supply chain dislocations. Spirit Airlines was a low cost airline, but it was also a bankrupt airline forced to liquidate because their proposed merger with JetBlue was blocked by Congress. Airlines are eternally exposed to the risk of a supply chain dislocation in aviation fuel, and supply dislocations because of events in the Middle East can surely be anticipated.
It was never Spirit Airlines fault that aviation fuel prices surged. It was always their problem, one of many that they ultimately failed to address.
By the way, Peter, I expect Trump to do “something” while he is in China on his high-profile state visit. What, no one knows, but it will be a move that will impress on Xi and all of the world that Trump is still a vital, powerful man - even though he’s about to turn 80 - and that Trump IS the Top Dog of the world and Xi better realize it!
If you get any inkling, in the next few days, of what it might be, please clue us in, Peter. Your powers of perception are mighty!
If Trump sees a need to take an action he's going to take an action. While he appreciates how to play the optics of a situation, he is less driven by optics than his predecessors.
That's what makes him the powerful and consequential figure that he is.
Yes! Still, if he is going to implement some kind of “shock and awe” campaign in the Strait of Hormuz, initiating actions right in front of Xi would be impactful. You well remember how Trump responded to the chemical attacks in Syria - right in front of his stunned guest!
"Yet we are also seeing signs at least within energy prices that the inflationary pressures pushing prices up may not get much worse than where they are at today. Energy price inflation may have already peaked, and other prices may be on the verge of peaking."
I like the detailed analysis but this reasoning could use more emphasis on the effect of prolonged high energy prices on other prices.
We can see this already with Spirit. High energy prices killed them, now the ultimate discount airfare provider is gone. There's less competition, and that means higher travel costs.
That's the choice other discount retailers now face: either pass the costs on or go bankrupt. The result for the consumer either way is high prices.
Spirit was particularly vulnerable, but the longer this lasts, the more other companies will fall into the Spirit bucket.
Supply shocks (and whether we call it a price shock, cost-push inflation, or stagflation, the driving force is still a dramatic supply chain dislocation) are always going to be hardest on marginal producers. Spirit Airlines is a good example of that.
Some supply chain dislocations are eminently preventable, such as the cratering of the global economy during the COVID Pandemic Panic. Others are more problematic.
The oil supply shock resulting from the war with Iran is definitely a problematic situation. Is it better to weather a period of economic upset to deal with a major global security threat, or should economic stability take precedence?
The answer, of course, is the stuff if which policy debates are made.
Ultimately, businesses need to always be assessing and reassessing their supply chain risks, and be developing logistics plans for supply chain dislocations. Spirit Airlines was a low cost airline, but it was also a bankrupt airline forced to liquidate because their proposed merger with JetBlue was blocked by Congress. Airlines are eternally exposed to the risk of a supply chain dislocation in aviation fuel, and supply dislocations because of events in the Middle East can surely be anticipated.
It was never Spirit Airlines fault that aviation fuel prices surged. It was always their problem, one of many that they ultimately failed to address.
By the way, Peter, I expect Trump to do “something” while he is in China on his high-profile state visit. What, no one knows, but it will be a move that will impress on Xi and all of the world that Trump is still a vital, powerful man - even though he’s about to turn 80 - and that Trump IS the Top Dog of the world and Xi better realize it!
If you get any inkling, in the next few days, of what it might be, please clue us in, Peter. Your powers of perception are mighty!
If Trump sees a need to take an action he's going to take an action. While he appreciates how to play the optics of a situation, he is less driven by optics than his predecessors.
That's what makes him the powerful and consequential figure that he is.
Yes! Still, if he is going to implement some kind of “shock and awe” campaign in the Strait of Hormuz, initiating actions right in front of Xi would be impactful. You well remember how Trump responded to the chemical attacks in Syria - right in front of his stunned guest!
If Operation Epic Fury had not already happened, it would be a very Trumpian move order it started while he was in China.
At this point "shock and awe" are already off the table.
Come on, Mr. President, get this war WON and DONE!