The latest inflation release showed no change in February with the Consumer Price Index holding at 2.4%. That would be good news, except the February data does not reflect the significant disruption in supply resulting from the military conflict in the Middle East that commenced on the last day of February.

In February’s data, electricity and natural gas were up 6.3% year over year, and medical services are up 4.1% mostly because of rising insurance and labor costs, as many immigrants take the lower-skilled jobs like personal care aides. Food and shelter are both up around 3%.

As I mentioned earlier this month, gasoline prices have been working in our favor, pulling down the overall inflation rate, not only because we all use gasoline for our own transportation, but because gasoline including diesel is used to transport just about everything we consume.

Before the Middle East conflict that began on Feb. 28, gas prices were down 5.6% year over year.

On Wednesday, the Brent crude oil price — which is the global benchmark — stood at about $91 per barrel, whereas it was roughly $60 per barrel before March. To stabilize markets, the International Energy Agency and its member countries including the United States, Japan and several European countries, have announced a coordinated release of roughly 400 million barrels from strategic oil reserves, the largest such release of reserves ever attempted.

The goal is to increase supply temporarily and prevent a sharp spike in global energy prices. Yet even with that extraordinary intervention, oil prices remain elevated, hinting that most experts are expecting a prolonged conflict and disruption to supply.

Some individuals have asked me why U.S. gas prices go up if we are energy-independent and have the world’s largest oil reserves. The answer is quite simple: U.S. oil producers are private companies that trade globally. If global oil prices go up, U.S. companies sell that oil at those elevated prices. This is why American oil prices as measured by the U.S. West Texas Intermediate prices also have gone up so dramatically.

Diesel gas prices have increased more, because fewer refineries for diesel exist since the pandemic. Europe also uses diesel more so than the U.S., and their increased demand impact global prices.

I’ve also been asked why energy shipments through the Strait of Hormuz, which is at the center of the conflict, matter so much if only 20% of energy transports traverse through this strait. Not only gasoline goes through the strait. Other critical resources including liquid natural gas go through this channel, and only about one-third of these commodities can find alternative routes. Hence, it is not just a matter of rerouting these necessary goods.

Experts have estimated that each sustained, $10-per-barrel incremental increase adds 0.2%-0.3% to inflation. This means that today’s roughly $30-per-barrel increase would add approximately half to a full percentage point to annual inflation, hypothetically bringing today’s CPI to between 3% and 3.5%.

During the pandemic, I stated that I did not think inflation was transitory simply because there were too many different forces acting upon price levels. As of today, I feel the same way.

We have tariffs extended (despite the U.S. Supreme Court decision) via other presidential powers that can hold for up to 150 days. We have immigration restrictions increasing labor costs and ever-increasing health insurance costs due to an aging demographic, to name a few.

Hence, unless something changes quickly, I think there is high probability that these inflationary pressures may be entrenched.

Tatiana Bailey is executive director of the nonprofit Data-Driven Economic Strategies. Other Gazette articles, TV segments, DDES monthly economic dashboards with technical explanations, and how to sponsor their work can be found at ddestrategies.org.