1. Breaking Down CPI

On Tuesday, the Bureau of Labor Statistics released March’s Consumer Price Index (CPI) report, which showed the inflation rate jumped to 8.5%, the highest spike since 1981. While this was a shock, it was not a complete surprise. Putin’s Price Hike increased oil and gas prices around the world and the Bureau only just captured that impact in the most recent CPI report. Energy prices typically impact around 8% of the CPI. So, when energy prices rise, we see a significant impact on the inflation rate.

Inflation notwithstanding, the underlying economy is in solid shape; the unemployment rate is at a record low as thousands of jobs are added to the market every month. To fully understand both sides of the economic coin, I  sat down with Dr. Ellen Hughes-Cromwick, Senior Resident Fellow and economist on the Climate and Energy team to discuss details of the report and the economic outlook moving forward.

Mary Sagatelova: The inflation rate rose to 8.5% in this new report – should Americans be worried?

Ellen Hughes-Cromwick: “A major downside to this inflation rate is that wage gains are not coming up to match this inflation spike. Workers’ cost of living is rising and because we are not seeing significant wage gains, it’s eating away at their pocketbook income. We are already seeing data that shows people are buying less gas, this could be a recipe for economic growth slowing down.”

MS: While this spike in inflation was anticipated, the more modest rise in core inflation was a surprise. How are you seeing this?

EHC: “Core inflation is a valuation that excludes the more volatile food and energy prices, which makes up the core of the CPI report. The fact that we’re seeing a drop in the core inflation rate, we’re seeing it diverge, this is a good signal for topline inflation dropping in the coming months.”

MS: There’s been a lot of pressure on the Biden-Harris Administration to take action to curb inflation–what are some concrete steps that can be taken to bring down inflation?

EHC: “The Administration’s release from the Strategic Petroleum Reserve (SPR) is having an immediate effect on buffering some of the unexpected shocks to low oil supply. Continuing with that, in tandem with other countries following suit, will help alleviate the pressure in the market on oil and petroleum.

It’s all about helping households with higher energy costs–getting more funding for weatherization, a low-income heating and energy assistance program for low-income families, etc. But the SPR release is the most impactful.

We can’t bring down inflation with a finger snap, but through very stimulative policies coming out of the Federal Reserve, our economy is strong. We’ve seen great GDP growth and record low unemployment numbers, all due to the appropriate fiscal policies and lowered interest rates. The Reserve has a powerful toolkit in front of them and can reverse some of those low-interest rates in a way that won’t hurt the economy or American jobs.”

Read Ellen’s earlier work on steps the Biden Administration could take to address high energy prices, which is still relevant today!

2. Don’t Get Caught in the Republican Web

Rather than offering concrete solutions to help drive down costs, Republicans have been using the increase in energy prices to attack President Biden’s climate policies, like his cancelation of the Keystone XL Pipeline and expansion of clean energy technology.

To help push back on false narratives we’ve seen, we put together some short talking points.

• The Biden Administration has increased domestic energy production to drive down prices by approving permits for oil and gas drilling on public land and expanding the number of operational oil rigs in the US.
• President Biden released more than 120 million barrels of oil from the Strategic Petroleum Reserve to drive down costs for American families and businesses, as well as our allies overseas.
• The Biden-Harris Administration, along with Democrats in Congress, has been expanding a diverse set of clean energy technologies that will save American families an average of $300 a month through cleaner, reliable, and more affordable American-made power, fuels, and vehicles.

For more detail, read our full talking points here.

3. Great Ideas: US & European Partnership

This week, co-founder of Carbon-Free Europe and Senior Vice President for Third Way’s Climate and Energy Program Josh Freed sat down with Matt Robison on his podcast series Great Ideas to unpack the energy market dynamics of Europe and the US in light of a rapidly shifting geopolitical landscape.

Russia’s chokehold on European energy has proven difficult to shake. Despite their best efforts, both the UK and EU still heavily rely on Russia to meet oil and gas demand for heating and electricity. Modeling from our Carbon-Free Europe initiative shows that Europe can rapidly reduce their gas demand, and Russian energy by association, by shifting to cleaner energy sources like solar, onshore and offshore wind, hydropower, and biomass.

The US has the chance to plug into Europe’s struggles, jumping off the momentum of our clean energy build-out. We can support nations in the short term with our cleaner liquified natural gas (LNG) exports while also accelerating clean energy commercialization and export to help supersede the boom-bust cycle of global oil markets. Freed and Robison also discussed Freed’s recent piece in Politico on steps the US can take to become the Arsenal of Clean Energy to the world. 

Listen to the full podcast here.