I posted this tweet last night and it seems to have been both popular and the inspiration for a lot of comments:
Who has caused inflation? Was it nurses, teachers and rail workers? Or might it have been Shell? What do you think?
— Richard Murphy (@RichardJMurphy) February 2, 2023
The question I posed was genuine. If the likes of the government and Bank of England were to be believed then the causes for inflation are Covid, war in Ukraine and those terrible workers who do not wish to see it cut their disposable incomes.
The reality is that few real shortages were in fact created by the war in Ukraine, whilst Covid supply chains have long since been resolved (chips apart). There were no real reasons for price increases in that case bar one thing, and that was the profiteering from fear that was exploited by many suppliers of basic commodities, like oil companies.
Since many oil, gas, food and construction raw material costs are now back at pre-war prices the idea that there was a fundamental cost increase as a result of it that they needed to cover by increasing prices is shown to be wrong: they simply profiteered at cost to society at large, as Shell's profits clearly demonstrated yesterday.
So, is responsible for the inflation we have? We should start with the oil companies. Then we should move in to the banks. They are the war profiteers.
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Wholeheartedly agreed.
And the government has been raking it in too.
It’s all part and parcel of the ‘exploitation economy’.
Shell’s UK prices are regulated! Should the government, therefore, be taking some or all responsibility for inflation?
What part of Shell’s price is regulated?
I read this excellent article about it; https://www.taxresearch.org.uk/Blog/2022/08/29/we-could-massively-reduce-the-price-of-energy-in-the-uk-by-changing-the-way-we-regulate-energy-prices/
Thanks
I think a distinction should be made here between the effective regulation of prices in domestic energy supply to UK households (which is regulated by Government, ironically to give freedom to the energy producers – like Shell, and not the misnamed ‘suppliers’, because the Government created a phoney deomestic energy market): and the supposed regulation of Shell’s profits – which are global, and quite different. An awful lot is being conflated here. The fact this can happen even among readers of this Blog is a demonstration of the degree to which neoliberalism has created a shambolic mess; with the economy, and even how people think
Morning. Came to your site via a ‘who owns BoE’ search…
Interesting subject. It’s unlikely to be strikes, we are not back in Maggie days by a long shot. Maybe we need to look one step earlier. The reason the suppliers were able to increase prices to consumers (in the UK) was the price cap raise, inflation then led to the interest rate rise. The ultimate controller of this mechanism seems a little mysterious, however it must somehow be the Government via its regulator (in theory).
Now, barring conspiracy – we could say for example that following the ridiculous Covid ‘loans’, the amount of interest monies flowing to whoever owns the loan rose 16x almost overnight – pretty good motivation to encourage it. Or we could say let the gascos raise prices, the costs revert to normal, they make a super profit, we stealth tax that. We (Gov) look great sticking it to the company – although for every 20p we get they got 80p – and hey presto we ‘taxed’ consumers without them noticing it, does the job and is good for the polls.
The price cap, supposedly, looks at the raw material costs. Which as you say are back to normalish levels, why then are we expecting the price cap to stay here is is for 2023/24? Are the markets (oilcos or hedge funds or whoever) messing with the futures markets to maintain apparent high prices?
Whatever is happening there is a giant transfer of wealth via interest and gas prices from millions, maybe billions of ordinary joes to a small set of someones. Reminicient of the wealth transfer via oil prices of the 70s…. I’m not a big conspiracy fan, but something smells off somewhere
I think you are misunderstanding the price cap – which is on what may be charged to consumers and is not on what producers may charge
Maybe. I understand what the price cap is supposed to be – nevertheless it still ends up being what the producers have charged because they are permitted to. I don’t see anyone, even those who have significant ‘green’ energy generation unaffected by gas prices charging under the cap
I am sorry – but your claim there is regulation on oil prices is not true
Pretty sure I did not assert oil prices are regulated. More that gas suppliers have been permitted to raise prices to the cap, irrespective of the price of their supply (which has fallen)
Gas prices are not regulated either – the government pays the excess over the cap
By definition inflation IS rising prices. If prices were not raised there would be no inflation…. so you ask exactly the right question… who is doing the price raising? It is not workers, it is companies.
Why are companies raising prices? Because they can! This what they do and always have done…. and under cover of war and disease and the volatility they have caused companies have managed it very well (at least on an economy-wide basis) because despite everything corporate profit margins have been maintained.
Before, they bought inputs for £1.00 and sold the output for £1.10; now they buy for £1.10 and sell for £1.21. This means margins are unchanged but profit in absolute terms is higher. Shareholder (rentiers) are maintaining or their position in real terms at the expense of workers.
Now, this is overly simplistic because we know that there is huge variation in how companies are doing, We need to distinguish between “price makers” and “price takers”. Price makers have the power to dictate prices that the price takers are forced to live with. In practice it tends to be (but not always, and things cam be fluid) large companies in industries with a small number of players.
Shell profits have ignited this argument and rightly so. Even if the UK part of their business is small, their business (and profits) are happening in someone’s country.
Thanks
Exactly – asking for a justification for such prices rises is not just not a function of the exploitation economy we are in. Government is just a facilitator of that.
It’s been the war, or that fact that we’ve taken it for granted or are using it too much – it’s our fault instead.
Another cause for our inflation over which we have little control.
Shipping during COVID-19: Why container freight rates have surged.
https://unctad.org/news/shipping-during-covid-19-why-container-freight-rates-have-surged
I do wonder to what degree profiteering night have been at work here? It’s complicated, but I’m sure that some probably took advantage.
Also, let’s not forget that it was fantasy of those supporting Brexit to say that it would be cheaper to trade with those further away from us. The pandemic blew that one out of the water.
The price has been falling heavily of late
Totally agree Richard but I also think that the right-wing economics that has left Britain with no meaningful self-reliant security in either food or fuel has also been a large contributary factor causing Britain to be the worst affected of all the major economies.
As ever you can rely on Wrong-way Johnson to be championing such stupidities. I remember speeches he made railing against those that suggested we needed more self-reliant security in these areas.
Rather, like the appearance that he made in front of the Defence parliamentary committee in 2021 when he ridiculed the idea that the steppes of Russia would ever again see Tank battles.
Greed and profiteering pure and simple. During WWII this would have resulted in imprisonment at the very least. Just a bunch of spivs.