RB1!2.9858Inflation has many drivers. The most dangerous and hardest to break is inflation expectations. Once consumers get used to prices constantly rising, they begin to expect more of the same. That can turn into a self-reinforcing spiral that is extremely difficult to stop. The post-COVID inflation cycle is the most recent warning.

If the war drags on long enough, sustained energy inflation will feed into consumer psychology and eventually inflation expectations. Gasoline prices have stayed elevated despite the sharp drop in crude over the past two months and are now back above the key 2.92 level.

The key difference between refined products and crude over the past two months is inventory. Refined-product inventories were depleted long ago, making product prices much harder to suppress through inventory releases.

Crude is different. A sizable SPR release can temporarily push futures lower and create a mirage that fools amateurs into thinking the war is over and the Strait has reopened.