A further major problem then emerged, i.e. the extreme volatility of gas prices, the result of a “bullwhip effect”, which is the response of demand to uncertain supply, consisting of ordering more, ordering earlier and replenishing gas stocks.
As a result of these dynamics, US consumer price inflation increased from below 2 per cent in February 2021 to a peak of over 9 per cent last June (fig. 6). Core inflation (i.e. net of energy and food products) took the lion’s share of this increase, peaking at almost 7 per cent last year.