Don’t be fooled. The rise in the price of oil is not boosting inflation. It is a claim that is politically convenient, but wrong.

Yes, the oil price is rising again. Yes, it is obvious at the petrol pump. Yes, oil prices feed through into many goods and services prices as the cost of energy affects transport, industry, manufacturing, distribution and so on. Yes, the consumer price inflation index will increase, based as it is on the price of a basket of consumer goods. Then the political leaders, sensing consumer discontent, will blame rising oil prices for the cost of living pressure and shift that blame to someone else.

But that is wrong. When the prices of oil dependent goods and services rise, consumers do not have the economic ability to pay the extra cost and leave all other expenditures unchanged. So, they must reduce expenditure on some items to fund the higher expenditure. In other words, the relative prices in the economy will change. Production will adjust to the new demand, a new point of temporary stability will emerge until the next disruption. And so it goes.

In the adjustment phase, there is not a matched coincident reduction in other expenditures. It is not easy, nor quick, to adjust household expenditure on many of the normal costs. So the use of buffers, savings, takes up the slack until other adjustment is possible. The use of those buffers is not measured in the official inflation statistics and so is not obvious to the typical political commentator.

To be genuine inflation, there must be a generalised permanent increase in prices across the whole economy. This occurs all the time and spectacularly so in times of rapid money supply expansion. The money supply is expanded by political will, not by consumer economics. Inflation can occur if and only if the money supply is increased at a rate higher than the economic growth rate. The political leaders don’t want you to know that. So they blame oil. Or Putin.