Get ready for non-transitory inflation. 10 things about to shoot up in price.
Electricity In 2020 38% off all natural gas used in the United States went towards generating electricity. There are 1793 gas-powered electric plants in the US. While utilities generally buy most of their natgas through long-term fixed rate contracts, the low spot price that we experienced since 2015 has led to utilities increasing their gas spot purchases and decrease their long-term contracts. With natural gas recently nearing $5.5 per mm btu’s, higher electric costs are baked into the cake. In the past 12 months natural gas prices rose over %130. Assuming a prolonged period of increased gas prices, electricity rates will soon start shooting higher.
Heat It’s about to get way more expensive to heat your home. About half the homes in the US use natural gas for space heating and hot water. This sector alone was responsible for 15% of natgas consumption in 2020. For the same reasons as above, the decline of long term fixed-price supply contracts, prices are headed much higher.
Taxes Unbeknownst to many people, their largest annual expenditure is taxes. It’s not just direct taxes like income, state, real estate, etc., but it’s also indirect taxes levied by federal, state and local governments upon a myriad of businesses and services that are hidden from consumer view. A large portion of your utility bill goes to pay state taxes. Your cellphone bill contains a number of federal, state and local taxes. Tolls and other miscellaneous taxes are also part of the mix. Many of these governmental subdivisions employ expensive union-based labor. As inflation escalates, these employees will get automatic cost of living wage increases. This will increase already staggering pension costs. Therefore, governments across the board will be increasing their already high tax burden. And it will result in higher taxes on everything, even if federal income taxes don’t go up. Get ready for a major upside surprise.
Transportation A large part of our personal budgets are consumed by getting from point a to point b. The cost of doing this has risen and will rise even higher. With gasoline prices up a whopping 85% in the past 12 months, commuters are already feeling the bite. Politicians often increase gasoline excise taxes when seeking more revenue. Same with liquor excise taxes. With electric vehicles expected to capture higher market share, these taxes will have to be raised to make up the difference. In addition, tolls will also increase, to pay higher operating and labor costs in running and maintaining highways, bridges and tunnels.
Appliances As chip shortages continue, raw material costs rise and global labor costs take-off to compensate for the near universal loss of purchasing power, appliances costs will increase greatly. The costs of repairing household appliances have already gone up substantially as replacement parts have become scarce due to supply chain issues. In addition, poor economic conditions are reducing the number of outlets where appliances can be purchased. If you’re thinking of buying that new refrigerator, maybe now is a good time.
Automobiles Prices of both new and used vehicles have increased greatly during the past 12 months. Expect this trend to keep going for a long time to come. A large portion of the cost of an automobile is labor and legacy costs. Virtually all auto workers are unionized and they are currently or will shortly be receiving cost of living adjustments (cola). Many auto retirees receive cola’s as well. For legacy automakers, their cost-structure is a straight line higher.