It is commonplace in American media and among so-called economists to conflate “inflation” with relative price increases. While changes in prices due to market volatility do add to the general calculations of price indexes, the conflation hides the true causes of increasing prices, leading to two nefarious outcomes. Misguided government policies and misinformed public perception.
The latest example is the surge in oil prices during 2026 as a result of conflicts in Iran. In January, Brent crude hovered around $66 per barrel. By October it had crossed $100 per barrel. American media and the expert class have conflated the increase with inflation, as Paul Krugman wrote in his Substack on October 16, “the rising price of diesel cascades through the economy, raising business costs and driving inflation across a wide range of products.”
Relative prices are the comparisons consumers make to decide where to allocate their finite resources. As the price vector of all products in the market shifts up and down, some products will be relatively more efficient to acquire than others.
In this period, the vector of fuel prices has been up, indeed driving added costs downstream—from farming to transportation and cost of living at the pump. The conflation however is to call this phenomenon “inflation.”
In Planning for Freedom, Mises already warned us, “What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation.”
Once oil prices settle down, and they will eventually, the experts will say the “inflationary pressure” of energy will have subsided, however, a vector change in price is not inflation, it’s just a change in relative prices. Oil over $100 per barrel is not a continuing rise in general prices, what it is is a temporary rise in energy cost that will come down if the vector changes direction. This is distinct from the printing of money, causing an increase in the volume of money chasing the same amount of goods and services, permanently eroding purchasing power from the public.
It is an unfortunate reality that the American economic class continues to obfuscate this concept even though the information is readily available. According to the St. Louis Fed, average inflation of the pre-Fed period (1790-1913) was 0.4 percent and that was a time of rampant price volatility including events such as the War of 1812, the Civil War, and a number of crises related to land and railroads.
As Hayek aptly presented almost 50 years ago “There is no such thing as cost-push inflation; all inflation is brought about by what that agency of government [the central bank] is made to do. Nobody else can do anything about it.”
All things being equal, the average consumer’s purchasing power remains the same if the price of gas at the pump goes up, the only difference is that they will purchase less quantity of it, however, comparatively to other prices in the market, they can still purchase the same quantity of lumber, for example. That is not inflation.
The conflation of inflation with rising prices of particular goods prevents the appropriate solution to their causes. Clearly, in this article’s case, the cause can be pinpointed to the Iran conflict, however, applying the conflation broadly to any changes in relative prices permanently keeps the public from pinpointing the real cause of the decline of their purchasing power, which is always and exclusively the printing of money.
