US Chamber Bulletin - Producers See Double-Digit Prices Increases in MarchApril 14, 2022
- Taxing energy companies won't lower gas prices now but would raise them in the future.
- Business costs rose at the highest rate ever recorded.
- Businesses of all sizes need to protect themselves from ransomware attacks.
- Scientists are working on creating a vaccine that prevents COVID-19 infections.
- Small business owners face challenges, including inflation, worker shortages, and supply chain delays.
Developments That Matter
Higher Taxes on Energy Companies Won’t Lower Gas Prices
With high energy prices, some in Congress are once again proposing a so-called “windfall profits tax” on energy producers.
Why it matters: Basic economics and history have demonstrated that such a tax wouldn’t reduce gasoline prices today and would actually raise prices in the long term.
Details: This type of tax was enacted in 1980. In 2006, the non-partisan Congressional Research Service found that this led to domestic oil production declining and imports increasing.
- By making domestic production more expensive, the country turned to cheaper imports, undermining efforts to make the nation more energy secure.
Be smart: Global markets, influenced by supply and demand, set the price of crude oil.
- The current rise in oil prices, which drove up gasoline prices, is caused partly by surging demand as the world recovers from the pandemic. Supply chain disruptions and workforce shortages have hampered the energy industry’s ability to increase production quickly.
- Geopolitical instability caused by Russia’s invasion of Ukraine is the other major factor driving prices higher. Russia is a major producer and exporter of oil, providing roughly 10% of global supplies before the invasion, and sanctions and bans have removed a significant portion of that supply from the market.
- And: Policy choices can artificially constrain energy production, such as halting needed pipelines, barring oil and natural gas lease sales, and pressuring banks not to finance oil and gas projects.
Bottom line: A punitive energy tax wouldn’t change the demand for oil, but it could prevent new producers from recovering the costs of new production to help meet demand and stabilize prices. Instead of higher taxes, we should encourage more production at home. The administration should immediately end its ban on leasing and permitting on federal lands and finalize a new offshore energy development program. Also, new critical energy infrastructure is necessary to transport U.S. oil and natural gas around the country and to our global allies.
Double-Digit Rise in Producer Prices in March
This week, the Bureau of Labor Statistics reported that the prices of what companies use to do business rose 11.2% annually last month and 1.4% from February.
Why it matters: Inflation continues to be the key issue facing the economy. The increase is the largest in the data series’ history, dating back to late 2010.
- Producer prices have exceeded consumer prices for several months now (see chart), so the higher reading is no surprise.
Key takeaway: Prices for goods rose 15.2% annually while prices for services rose 8.7%. Service prices are likely to rise faster as the economy shifts further into the post-COVID new normal, putting upward pressure on overall inflation.
Be smart: High inflation – and the impact of raising interest rates to fight it – is causing some to predict a recession is coming. While a recession is far from certain, this is something to keep an eye on as we move forward.
—Curtis Dubay, Senior Economist, U.S. Chamber of Commerce
Top Of Mind
Understanding Ransomware Attacks
Businesses of all sizes are targets of ransomware attacks. Here is what they need to know to be protected.
Why it matters: “Businesses of every size are targets of ransomware attacks. It is no longer something that only large organizations have to worry about,” said Christopher Roberti, Chamber Senior Vice President for Cyber, Intelligence, and Supply Chain Security Policy.
What we’re doing: We’re focused on educating businesses on best practices and tactics they can use to protect themselves and their customers.
- Last year, we hosted a webinar with Secretary of Homeland Security Alejandro N. Mayorkas and top cyber experts.
- Our small business platform, CO–, published an article on what small businesses need to know.
- We answered the 10 questions businesses need to know about cyberattacks.
Discover & Deliver: Seeking to Halt COVID Infections Altogether
The scientific community is setting its sights on the next goal in the fight against coronavirus: creating a vaccine that halts infections altogether.
What’s new: The innovative community is currently testing vaccine candidates delivered via a nasal spray, attacking the virus where it frequently takes hold.
- Scientists across the country – from the National Institute of Health to Cornell University to a small biotech company in Georgia – are actively testing a series of intranasal vaccine candidates.
Why it matters: While the current COVID-19 vaccines remain remarkably effective at preventing severe disease and hospitalizations, the scientific community recognizes that we must build upon our existing knowledge to find new ways to stop coronavirus in its tracks.
Bottom line: As we have seen throughout the pandemic, the innovative community will continue to follow the science where it leads us to go.
— Kelly Anderson, Executive Director, Health and Drug Policy, Global Innovation Policy Center
How Small Businesses Can Weather Financial Uncertainty
Recently, entrepreneurs talked to CO–, the Chamber’s small business platform, about weathering financial uncertainty.
Why it matters: Two years in, small business owners still face incredible challenges, including inflation, hiring shortages, and supply chain delays.
- Be transparent: With rising costs due to supply chain issues and inflation, be as transparent as possible with customers.
- Track metrics: Be prepared for difficult times by knowing your financial situation. For instance, every business should understand its cash flow on both a cash and an accrual basis.
- Simplify: Take a back-to-basics approach. Simplify your infrastructure, the number of suppliers, and the number of product variations.
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Chamber In Action
- Vote for the Chamber for The Webby People’s Voice Award. And ask your friends and colleagues to do the same.
- Join Chamber President and CEO Suzanne Clark and other top business leaders in Welcome.US, a national effort to help families fleeing from Afghanistan and Ukraine.
- Today in Real Clear Policy, Sean Heather, Chamber Senior Vice President for International Regulatory Affairs and Antitrust, breaks down the Department of Justice’s irresponsible rhetoric around antitrust legislation and the harm it poses to American innovation and security.
- The Chamber sent a letter to Members of Congress expressing strong support for both the “No Free TRIPS Act” and the “Protecting American Innovation Act.”
- The U.S. Chamber Foundation and the Mason City (Iowa) Chamber partnered to host the first National Civics Bee, the first of six in communities across the nation to encourage more young Americans to engage in civics. Watch here.
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