According to Google Trends data, Americans are searching the word “recession” more than at any other time since 2004. This makes sense, given the current collision of rising prices, elevated unemployment, and a reeling stock market.
Last week, the S&P 500 entered bear market territory — a decline of 20% or more from recent highs, and the exchange’s January heights. This now two-quarter fall broaches the symbolic (and psychological) hurdle that defines an economic recession. Last Friday, the Bureau of Labor Statistics announced that the consumer price index — a significant inflation gauge — rose 8.6% through May, marking its highest jump since December 1981.
We can throw out statistics all day, but Reddit user DataIsBeautiful helps visualize how much more raw goods like cotton, corn, wheat, oil, and gas cost since 2020. Using data from several leading economic evaluators (including Morningstar and Bloomberg), DataIsBeautiful created a bar graph that animates two-and-a-half of falling and frighteningly rising prices for 10 critical commodities.
DataIsBeautiful’s moving graph ends at an astounding 233.5% rise in prices at the pump since January 2020. The U.S. Energy Information Association indicates that retail gas prices averaged $2.58 two-and-a-half years ago, which meant that filling up a midsize sedan cost around $38. As of June 13, prices averaged $5 per gallon, which meant it’s now $73 to fill up the same car (and even more if you live in California). Why has fossil fuel jumped so much? An almost unprecedented combination of economic forces and geopolitical actions, the economy’s rapid post-pandemic recovery, and a huge oil producer deciding to attack its agricultural neighbor.
Gas prices bottomed out at $1.78 per gallon in May 2020 as most of the planet shut down due to the COVID-19 pandemic. Prices shot up throughout the second half of 2021 when vaccines become more available and people were again able to travel. Prices began to stabilize in early 2022 when Russia invaded Ukraine. Russia produces more oil than all but two other countries, and now this flow is slowing to a trickle as European sanctions escalate.
Up over 110% in the last two years, this conflict has had a debilitating effect on wheat prices as well. This is what will happen when Ukraine, the “breadbasket of Europe,” comes under attack. A staple found in a huge variety of foods, a lower wheat supply leads to higher grocery bills. According to Axios, the grain’s price also spiked after India announced a mid-May ban on wheat exports to combat its own rising prices and demand for the commodity.
In concert with the above factors, a decades-long megadrought in the western U.S. and continuing low water levels across the world are pushing corn prices up. Bloomberg notes that dry weather in Brazil has led Arabica bean prices to more than double over the past year. Arabica beans makeup 60% of the world’s traded coffee, but it’s more difficult to deliver them across continents with supply chain turmoil and almost absurd freight costs. Roasters are ripping through reserve inventories as stockpiles dwindle to their lowest levels in two decades. Cotton is also suffering this supply side nightmare, leading to doubled prices in the last two years. Megadroughts in West Texas sap product from the plant. In turn, it’s much more expensive to ship what’s been harvested to textile factories in Southeast Asia.
The complexity that led to thriving 21st century consumer markets is wobbling at multiple weak junctures and the global economy is suffering from interconnected maladies that lead to food and commodity shortages, leaner wallets, and less goods available. The hard times spread the social fabric thin, but this is the mildest of consequences. So many places throwing sparks threatens to create a conflagration. Leaders must step up to extinguish the flames right now, or else humanity faces dire potential ramifications for ignoring so many warning signs. The upside is that there is still an opportunity to make drastic and lasting structural change. Humanity can navigate this tempest to assure a more resilient, sustainable planet, but the window grows smaller by the day.
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