Oil Prices Drive Inflation Above Wages: A Blip, Not A Trend

LeadershipLeadership StrategiesOil Prices Drive Inflation Above Wages: A Blip, Not A TrendByBill Conerly,Senior Contributor.Forbes contributors publish independent expert analyses and insights. Bill Conerly connect the dots between the economy ... and business!Follow AuthorMay 13, 2026, 07:30am EDT--:-- / --:--This voice experience is generated by AI. Learn more.This voice experience is generated by AI. Learn more.Man pumping gasoline, checking prices.gettyThe increase in consumer prices exceeded wage growth over the past 12 months, with near panic from some reporters. The numbers show wages rose 3.6% but consumer prices increased by 3.8%. This disparity is a short-run blip, not a long-lasting trend.The long run trend is that employee compensation rises faster than inflation, but with exceptions. The recent run-up of inflation came mostly from energy, where prices rose by 18% in the past 12 months. The rest of the Consumer Price Index rose just 2.8%.Historically, sharp run-ups in oil prices often coincide with total inflation exceeding wage growth, but only briefly. When inflation rises persistently, it’s invariably due to excessive stimulus in the economy, which often goes on and on and on. In these cases, wages rise faster than prices. But a bump in inflation that is caused by a spike in oil prices does not persist.High oil prices breed their own reversal. The run-ups of 1973 and 1979 pushed oil up to $40 a barrel. That led to energy conservation by both consumers and businesses. More importantly, it led companies to search for more oil. By 1986 oil was below $12 per barrel. That brought overall inflation below the pace of wage gains. Another oil prices surge came again in 2008, due to the growing world economy pushing petroleum demand up faster than supply increased. (This was a little-noticed contributing factor to the Great Recession.) When oil prices reversed course, falling 42% in a 12-month period, inflation not only fell but turned negative for a while. Wag...