The signs pointing towards current inflation levels have been around for quite some time. Last summer, the White House’s economic advisors even wrote a blog post in which they examined the building price pressures and compared them to historical events. Although much of the press was making comparisons to famous oil shocks in 1973 and 1979, the advisors concluded that a better comparison was the post-WWII period. That is when supply shortages met pent-up demand, which inflated inflation. This argument was quite persuasive, but the war in Ukraine and the resulting surge in oil prices has led to a frightening question: are we now witnessing a 70s oil shock on top of a post-WWII supply crunch? Last week, Bank of America raised its inflation forecasts for much of the world. In America, BoA now expects inflation over 2022 to average 7%, up from its prior forecast of 6.3%. In the Euro Zone, the bank expects inflation to average 6% this year, well above its previous forecast of 4.4%. This sharper increase in Europe has to do with its dependency on Russian gas, which constitutes 45% of the bloc’s gas imports.
This extended pandemic + war combo is unprecedented, and economists expect sustained inflation as a result. That said, inflation is inherently unsustainable, so maybe it’s best to say “more sustained” inflation. Typically, inflation levels like these boil for a bit before levelling off, and governments/central banks can take some of the heat off. The war added fuel to the fire, but these levels too will eventually scale back. But it is still imperative that governments of key economies act swiftly and decisively; otherwise, we are just going to have to get used things costing more and more.
Electric Vehicles – New Frontier
Even though electric vehicles are increasingly commonplace, we still have yet to take full advantage of one of their best assets: design flexibility. Most of their mechanical components are not situated where fossil-fuel engines have always been. Instead, electric motors, which are much smaller than gasoline engines, are mounted between the wheels. Transmissions, which are obligatory for gasoline engines, do not take up precious passenger space. Since drive shafts are no longer necessary, there is no need for a tunnel in the middle of the floor, and rear passenger seats are no longer positioned to make room for fuel tanks. The EV’s power source — the battery — is heavy and large but of minimal height. Situated within the area protected by the wheels, it serves as part of the chassis — a structural member. Because of all of these differences, it is only a matter of time before we transition away from the concept of what constitutes traditional car design. Fewer restrictions means more freedom, which will likely make for a much better passenger experience. That said, we have had EVs for a while now, and we still have not seen mainstream EVs with truly unique designs.
This is a fascinating commentary on how we as humans tend to stick with what we know. Even when there is significant business motivation for us to innovate, consumers do not necessarily want us to change things on them too quickly. The auto industry has slowly had to convince consumers to buy into EVs, and now that the tide has finally turned, they finally have the leeway to start challenging the mass notion of what a vehicle represents.