Consumer Price Index: Falling Gas Prices Are Having a Positive Impact On Overall Inflation – Will It Last?

Oil filling the ECO car in oil station.
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Here’s something you might not have imagined a few months ago: The price of gasoline in the United States is falling so quickly that it is having a positive impact on the overall inflation rate.

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The federal government’s gasoline index for August 2022 fell 10.6% from the previous month, according to the Consumer Price Index for All Urban Consumers, released Tuesday, Sept. 13, by the U.S Bureau of Labor Statistics. It was the index’s biggest monthly decline of the year and marked the second straight month it moved lower.

The gas index’s double-digit drop helped offset steep gains in the prices of shelter, food and medical care, the BLS said, which kept the overall inflation rate to a slight increase of 0.1% for August.

The year-over-year numbers remain ugly, however. The gasoline index rose a staggering 25.6% over the past 12 months, contributing to a 23.8% gain in the energy index and an 8.3% increase in the overall inflation rate.

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Even so, prices at the pump have been on a sharp decline of late. Nationally, the average gas price stood at $3.707 a gallon as of Sept 13, 2022, according to AAA. That’s down from $3.779 a week ago and $3.965 a month ago, and well below the all-time high of $5.016 a gallon set on June 13. Prices are even creeping closer to a year ago when the national average was $3.176.

In some areas of the country the average price has fallen below $3 a gallon, Quartz reported, with the lowest average prices being reported in Texas, Arkansas and Mississippi.

Falling gas prices are mainly the result of a global decrease in oil prices, analysts say.

“Oil stayed consistently above $100 per barrel for most of the summer, but moving into the fall season, prices are now closer to $90 per barrel,” Gargi Chaudhuri, Head of iShares Investment Strategy Americas at Blackrock, wrote in a note shared with GOBankingRates. “Lower energy prices are providing much-needed relief to households that have felt the price crunch this year.”

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However, there is uncertainty over how long oil prices will remain low. As GOBankingRates previously reported, some experts say oil prices could return to around $120 a barrel over the winter. They cite a couple of reasons: Releases from the U.S. Strategic Petroleum Reserve (SPR) are scheduled to stop on Nov. 1, 2022, and the European Union plans to implement an embargo on Russian crude beginning on Dec. 1, 2022.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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