Inflation Is Very Likely

If the price of oil remains over $140 a barrel, I expect that there will be significant inflation. That's because the cost of petroleum is a large part of the products we consume, from food to durable goods. Why? Not is the oil is needed to make and transport the finished products , but many of the starting materials for products that we use are petroleum based.

For example, Dow Chemical just raised its prices by as much as 25% for the second time in a month, which impacts other companies, such as consumer products (e.g. detergent, shampoo, diapers) maker Procter & Gamble. P&G recently announced that the cost of its products may rise by over $2 billion in the next fiscal year, due to rising energy and raw material prices.

While many manufacturers have minimized price increases to date, the higher cost of oil will have to eventually trickle down to the end consumers, resulting in higher prices for everyday goods.

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This is not financial advice. Please consult a professional advisor.

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