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Quick surge in gas prices should not add to rising inflation, USC economist says

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The Colonial Pipeline shutdown has allowed Attorney General Alan Wilson to to implement the state’s price gouging statute. (Patrick Bush / Aiken Standard) 

COLUMBIA — The price spike on gasoline should be too short-lived to add much to inflation, even as other parts of the economy are pushing costs higher, a University of South Carolina economist said May 14.

The added pain at the pumps related to the hacker attack on the Colonial Pipeline should end within weeks, and it is usual at this time of year for gas prices to increase anyway as summer vacation season starts, economist Joey Von Nessen said.

The federal Bureau of Labor Statistics underlined fears about inflation nationally when it said May 12 that consumer prices had risen 4.2 percent in April over the year before.

That increase reflects how parts of the economy that came to a screeching halt last year now are seeing a strong increase in demand, Von Nessen said.

"We are experiencing economic whiplash," he said.

The increased demand and higher prices are focused on areas of leisure and hospitality, he said. 

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People who are stuck at home for a year during the coronavirus pandemic have started taking flights, staying at hotels and renting or buying cars. Prices in those areas are being pushed upward by the surge in demand, Von Nessen said.

Overall, inflation is likely to keep rising in the next few months, driven by these parts of the economy, Von Nessen said.

More permanent inflation could become a problem if higher costs start spreading to other sectors of the economy. Higher costs for labor and in-demand materials such as lumber and steel could help push all prices upward if they continue, he said.

The order from Gov. Henry McMaster to pull South Carolina out of added federal unemployment benefits related to the pandemic should help businesses facing shortages of workers, he said.

Workers for jobs that pay $16 per hour or less were receiving more in unemployment benefits than they would while working. The end of that benefit on June 30 should make going back to work at restaurants or other jobs with similar pay rates more inviting, Von Nessen said.

Gas prices across South Carolina rose by 18 cents a gallon on average between May 10 and May 14 to $2.86 amid the panic buying from the pipeline outage, according to the AAA.

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