Price Hike

Gang and I went to Costco today, and got surprised at the gas price. About two months ago, a fire at a refinery in Richmond pushed the gas price to above $4 per gallon, which was bad enough but we gradually got used to. Recently it seems to get worse - now it's around $4.8 per gallon. Even Costco Gasoline, which has a reputation for offering lower-than-neighbor gas prices charges at $4.4 today. We checked on Google later, and it seems that the gas price has been increasing by 10c per day since Oct 1st due to a blackout of a refinery in Torrance. California is not the only state which suffers from high gas price, but it tops the list by an average price of $4.61 per gallon. If all these changes in price happened two months ago, I'm not sure if we'd still go for the current Honda Accord, or choose a compact with higher MPG at the cost of convenience.

I probably shouldn't be worried since gas price fluctuates all the time, since we may be just not lucky enough to see several accidents hitting the fragile energy system in California. By contrast, the price hike in living goods is more stable and continuous. The price of items at Costco has increased substantially since my first visit. I remember I once bought great cherries at around $1.2 per pound, but this summer the cheapest package asked for $3 per pound. Other daily necessities have increased by a few bucks as well, vegetables and fruits in particular. The straw that breaks the camel's back is Kirkland's caramel almond vanilla ice-cream, which totally changes my consumption preferences for ice-cream. Luckily the cheesecake and tiramisu are still good.

So, high inflation and high unemployment - this is not what Phillip curve told us. (Btw, I don't really buy the idea of the adjusted Phillip curve: you never know where the π* and u* are in the real world!) Maybe the economy is recovering, in an unobservable way; or it's a good idea to have Bernanke to adopt an inflation-targeting policy and get prices fixed first. Whatever it is, things do look good right now. If cities are equipped with good public transportation system, I'm always happy to go by bus pass; but if the government can't have enough buses running, I do not see why people should be happy with paying $4.8 for a gallon.