Gasoline prices in August

Rising Gasoline Prices Drive August Inflation Beyond Expectations

Energy prices, notably gasoline, emerged as a pivotal driver behind the Bureau of Labor Statistics’ Consumer Price Index (CPI) surging by 3.7% on a year-over-year basis in August, surpassing economist projections of 3.6%. The CPI report underscored, “The index for gasoline exerted the most significant influence on the overall monthly surge in all items, contributing to over half of the uptick.” 


In the month of August, the energy index experienced an unprecedented 5.6% spike compared to the preceding month. This marked acceleration from July’s modest 0.1% uptick is attributed to the rally in oil prices and the surge in pump prices, which reached 2023 highs. Among the energy components, the gasoline index witnessed the steepest price surge, ascending by 10.6% in August, following a 0.2% increase in July. Concurrently, the electricity index demonstrated a modest 0.2% rise in August after witnessing a 0.7% dip in July. Natural gas experienced a 0.1% uptick over the month, following a substantial 2.0% increase in July. Fuel oil also saw a notable uptick, rising by 9.1% in the last month.


Notwithstanding the month-over-month spike in energy prices, the index reflects a 3.6% decline compared to the same period from the previous year. All components within the energy sector, save for electricity, are on a downward trajectory on a year-over-year basis.


Oil prices have witnessed a robust three-month rally, soaring by approximately 30% since late June, attributed to a blend of OPEC+ production cuts and unilateral output reductions by Saudi Arabia and Russia. Adam Turnquist, Chief Technical Strategist for LPL Financial, emphasized in an investor note, “The equation is straightforward — diminishing supply and escalating demand translate to higher prices.” West Texas Intermediate (CL=F) surpassed the $89 per barrel mark, while Brent crude futures (BZ=F) held steady above $92 per barrel on Wednesday, representing the highest levels since November 2022.


Collectively, escalating energy prices, particularly in the realm of gasoline, have wielded significant influence over consumer prices since August. These augmented prices stem from a confluence of OPEC+ production cuts, unilateral output reductions, and surging demand. This amalgamation of forces has culminated in a rapid ascent in gasoline prices and the energy index over recent months. Consequently, the surge in energy prices, inclusive of gasoline, has contributed to an August inflation rate surpassing earlier projections, driven by amplified demand and trimmed OPEC+ production levels.

Source: Yahoo finance

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