October’s Consumer Price Index showed prices rose 0.4% from the previous month, keeping the annual inflation rate on track for a 4% increase, driven mainly by food and energy costs.
Inflation Stays High Amid Global Tensions
Economists link the stubborn price growth to the ongoing conflict in Iran, which has pushed oil markets higher and added pressure on household budgets.
Despite solid employment numbers, wages have shown little movement, leaving many families with reduced purchasing power.
A recent analysis described the situation as “a pay cut” for everyday Americans, noting that higher costs at the pump are unlikely to ease soon.
Energy Demand and Supply Shocks
In a PBS interview, Austan Goolsbee, a Federal Reserve Bank of Chicago economist, warned that inflation persistence is tied to the war’s impact on energy prices and lingering tariff effects.
“Now, what we have been dealing with is a series of shocks—some from oil prices, some from tariffs, now some from the demand side, and a lot of those things were supposed to go away,” Goolsbee said. “And they might still go away and prove transitory, but whenever you start hearing the word transitory, the hair on your neck should be standing up a little bit, because we went through that, where it was supposed to go away. And we found out that, when you have major disruptions to the supply chain, those oftentimes end up being far more persistent than […] the theory says they’re supposed to be.”
He highlighted demand-side pressures, including a surge in electricity use by data centers supporting the artificial-intelligence boom, which raises energy consumption in several U.S. regions.
The AI-driven expansion also inflates costs for construction, computers, electrical equipment, and semiconductor production, extending the price impact beyond fuel.
Historically, sharp oil price spikes have prompted policy shifts, yet the current mix of geopolitical risk and technology-driven demand creates a more complex inflationary environment than the 1970s oil crises.
Limits of Domestic Drilling
Energy commentator Tim McDonnell argues that reliance on oil and gas makes the U.S. economy vulnerable, because price volatility cannot be fully offset by increased domestic drilling.
He wrote that “the inherent volatility of oil and gas prices is a persistent vulnerability in the US economy that can only be solved by limiting exposure to these energy sources.”
McDonnell added that while drilling shifts some supply-demand balance to U.S. control, it “can’t shield American consumers from global price turmoil.”
An ECB official has labeled the phenomenon “fossilflation”, highlighting how energy market swings can shape political outcomes and economic stability.
