The latest figures show that price increases for energy groceries and consumer products in many parts of the world are barely backing down due in part to the higher transportation costs created by expensive oil.

As if all that weren't bad enough.

Russia's actions in Ukraine have the potential to make things worse.

The EU and G-7 formally committing themselves this week to phasing out Russian oil.

But a rapid embargo of Russian oil would potentially send prices further up at a time when ordinary families are already feeling the pinch.

Just take a listen to some of the comments we heard at a gas station here in Berlin.

What can you say about it?

The prices are crazy and I don't believe that this just has to do with the war in Ukraine or something like that.

They're just trying to make money.

It's just crazy.

There's never been anything like this before.

I've been in Germany for 30 years and have never paid prices like this.

It's really extreme.

It's not so bad for me because I drive a small scooter, but I basically just leave my car at home.

I bought my scooter extra because of this to get around the city.

If they don't want to lower the gas prices, then they should lower the value added tax.

That's what I think.

How can a normal person afford to drive a car, it's becoming a luxury.

Alright.

Some voices, they're from a gas station here in Berlin and here in studio with me is my colleague DW business cassandra, cassandra.

Welcome.

Um, why does oil have such an outsized influence on living costs beyond just gasoline?

There's pretty much if any part of your supply chain involves a combustion engine or plastic oil is directly connected to it.

On top of that, A lot of economies right now are coming out of the pandemic.

If you look at the price of oil, there is a pretty nice correlation between when vaccines started to roll out, economy started to reopen and oil started to increase.

That really accelerated in the last six months or so.

The second, the third or fourth quarter of 2021 it's accelerating even more.

So there was already an increase in demand for oil based products, including gasoline.

And then the invasion of Ukraine happened.

The West slapped a bunch of sanctions on Russia.

And we're at this point now where demand is going up, but supply is starting to shrink And anyone with even a surface level understanding of economics knows that that means higher prices.

Then should we assume that the oil sanctions that are now being announced on Russia due to come into full effect at the end of this year?

Will that make prices go up even higher.

The signs right now are a little bit mixed.

But as I'm reading it, it seems fairly probable we've gotten some mixed messages so far.

Eu Commission President Ursula von der Lion tried to signal that the six month ramp that they've got until crude oil, the crude oil embargo begins.

That that would give people time the different nations and their partners to find some alternative routes.

But the german economy minister was not so optimistic.

He said that there could be a shock.

There's a possibility of supply shortages coming and that this could be, there could be frankly, a real impact.

That also german industry trade group B.

D.

I told Bloomberg that replacing Russian oil that that's not easy.

You can't just switch the tracks, so to speak, there's logistics involved and that would increase costs and that they expect prices are going to increase as well.

So the question here is how quick can these different countries get their backup plans in place?

If they do that over the course of the six months, there could be less of an impact, more muted impact.

But they can't get their ducks in a row in time.

There could be a bigger impact and china right now is a little bit of a sleeping bear, so to speak.

They they've been experiencing several lockdowns right now.

So there's less demand there.

But if they kind of shake that off come out of hibernation, so that's even more pressure.

Exactly.

And that could increase prices even faster at the same time, there are lots of other countries that are sitting on plenty of oil outside of Russia.

Right?

When we think about the oil cartel.

Opec which really does dictate prices in production, why can't they just bring out more oil?

So Opec had a meeting earlier this month but from reports that we're hearing about it it was very short apparently just 15 minutes and there was no talk of the Russian invasion of Ukraine at all.

So when we're thinking about Opec really the message from them, even if it's a little bit behind the scenes seems to be this isn't our problem.

They don't view this as a fundamental supply issue that they need to solve.

And don't forget not Opec but Opec plus the kind of wider group there that includes Russia.

So that could be a big reason that we're not really hearing them addresses exactly.

So they had this meeting earlier this month They did announce a modest increase in barrels per day production 432,000 but that's really more in line with their plan to start to unwind their pandemic curbs.

It's not really reaching out a helping hand to Europe.

So it's not in response to the war.

Alright.

Dw businesses Cassandra sent my colleague thank you very much.

Well earlier this week the U.

S revealed its latest inflation figures which dipped slightly in april but the overall trend of climbing prices showed little sign of retreat.

The annual rate of 8.3% for April is just slightly lower than the month before, which itself represented a decades long high and yet it's the first dip in price growth over the last eight months.

Well despite that seemingly good news, the high rate of inflation is putting plenty of pressure on average american families with gasoline prices at record highs.

This month, us President biden described inflation as the number one threat to the U.

S.

Economy saying his administration is working hard on solutions.

That's a good online is easy, easy in these bottlenecks and making our supply chains more secure is a major focus of my economic strategy.

So things move more quickly prices go down, not up, you know, some parts of my plan, I've been able to get done on my own.

I mean just without congressional approval, some parts are being held up by congress.

All of my plan is focused on lowering costs for the average family in America to give them just a little bit of premium.

We asked our financial correspondent in new york James Sweeney why the U.

S.

Can't just pump more oil to bring prices down.

Take a listen to what he said, americans everywhere are complaining about rising prices, especially gasoline prices that are pushing americans already living paycheck to paycheck towards the break.

Now many maybe blaming higher prices on supply chain problems which makes a lot of sense when everything is more expensive.

But it's actually the price of war that's been driving inflation, Inflation is currently at 8.3% for April still at a level not seen in more than four decades.

And when broken down oil prices are what's accounted for.

A majority of the increase.

The conflict in Ukraine for starters doesn't help as there's a lot more oil demand now that most of Europe is not buying Russian oil and there's refining issues turning crude into oil.

Well actually turning crude oil into gasoline and getting it into your local station requires a number of steps each with its own cost.

The refining typically accounts for around 18% of the per gallon price according to the Ap I but that percentage can climb quickly.

Many refineries on the Gulf coast and can be flooded or otherwise damaged during hurricane season and forced offline which can cause prices to spike.

There's also less space to refine that way.

By the way, hurricane season begins in June and runs through November.

It's coming up.

And do we even need to discuss gasoline prices, which this week alone continues to set records on an almost daily basis with refining and supply and demand issues and per gallon taxes.

These reasons alone are enough to answer why the US just can't pump itself out of trouble.

Alright, our financial correspondent James Sweeney there and with me now is Karen Pittle she's director of Germany's fo center for energy.

Climate and resources in Munich.

Karen, thank you for joining us.

What we've been hearing so far, Opec isn't producing more, the US isn't pumping more and we're about to see this oil band go into place over the following six months I'd say where is all of this leading us in terms of prices, Can we say that with with any certainty?

No, basically we can't, I mean there's a number of issues like you said Opec the US and how much is produced.

But then there's also the question um in the remaining time until the embargo, how much can actually Russia also sell elsewhere?

Because that frees up other amounts.

Now the um estimation is that Russia won't be able to sell everything instead of pipeline via ship.

But the more it sells, the less the supply situation escalates and the lower the price increase will be also at the same time, of course if we are going towards a global recession or at least a dampening of growth, then that would also mean less demand.

So it's really hard to say.

I think it's fair to assume that prices will be increasing its just not sure.

How much is there a case for oil majors to invest more in drilling at this time to increase production.

That is a very good question.

Of course prices are really high at the moment.

At the same time there's of course the threat of climate policy where economies basically pledge all around the globe to lower their use of fossil fuels.

So it's a, it's a short term long term situation, but my best guess would be that we actually see um investment in drilling in exploration picking up over the next one or two years.

The flip side of that, of course, is that countries like Germany allowing expansion of drilling.

Could we, I anticipate that in the months ahead.

Um you mean for home produced oil and gas?

I'm not so sure, um there is a large majority really um in favor of climate policy and who is really opposing um drilling and um producing more at home.

So I don't see really Germany investing in this kind of long term um commitment, especially with respect to gas, because our conventional resources are almost used up and we would have to go into fracking and there's a lot of um distrust and opinion against this, this type of drilling and exploration in Germany.

I have to ask you, Mario Draghi Italy's Prime Minister throughout this interesting idea this week, after meeting with joe biden, he said that maybe there should be an opec of consumers that is a large number of consuming countries, oil consuming countries working together to bid prices down.

What do you make of that?

Is that feasible?

I've heard that a couple of times, basically as a means to cap prices and the oil or in the gas market, I'm a little skeptical with respect to that.

Um there's always uh it's, it's kind of a, um, voluntary alliance and you always face the danger that countries who actually want to have more needed for the industry want to have more for consumers actually break out of that type of cartel.

But the interest, the idea is interesting and of course it would be something to discuss, especially um, with respect to the G seven, whether there is some ground on which a fundamental agreement can be based that can be trusted.

Finally, I have to ask you, should we anticipate that what we're seeing right now with energy prices, Will that change the way that we consume energy for the long term or will this be sort of a blip in a longer road?

I mean with respect to oil price, it's really hard to say how they develop in the long run.

I mean, since I've been dealing with these issues, I've heard they will never increase again or they will never fall again.

So it's really hard to say how long it's actually gonna last.

This basically this price spike on gas markets, the estimation is that it's probably going to be a long, more long term increase.

So I do think that the higher prices will change the way we use energy household wise, but also in the industry investing more in energy efficiency switching to other types of fuels.

But of course if this price hike is really more of a short term nature than what we have seen in the past is that energy savings, fuel savings.

Um, don't last that long.

Many people have reverted back to their old behavior.

All right, Karen pedal with Ufo's Center for Energy, climate and resources in Munich.

Thank you so much.

And that's all for our business special on oil and rising inflation.

We've got plenty more business videos elsewhere on our DW News Youtube channel.

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You can also find find out more online at www dot com slash business.

Thanks for watching.