Energy prices continued to fall in December on a year-over-year basis, offering relief to Americans struggling to heat their homes and fill their gas tanks.
The energy component of the Consumer Price Index fell 2 percent compared to December 2022, the Labor Department reported Thursday.
But the energy index rose 0.4 percent month-on-month in December, following a 2.3 percent drop in November and a 2.5 percent drop in October, driven by electricity costs, which rose 1.3 percent since November, and an increase in the gas index due to seasonal adjustments. The rise in the energy index helped fuel a slight pick-up in headline inflation, which was 0.3 percent monthly.
Transportation costs, which had been a prime example of persistent inflation that led the Federal Reserve to raise interest rates 11 times in two years, rose 0.2 percent, a modest increase after falling 0.6 percent in November and 0.9 percent in October.
Airfares rose 1 percent in December, a busy time for air travel. According to a recent report from the International Air Transport Association, consumers “can expect airfares to continue to drive up costs, particularly oil.”
The decline in energy inflation has been driven by a weak domestic and global oil market, rather than by Federal Reserve policy actions. Brent crude oil, the international benchmark, was hovering around $79 a barrel on Thursday morning, after approaching $100 last summer amid high demand and prolonged production cuts by major oil producers. oil of the world.
Although the gasoline price index rose 0.2 percent in December, oil market weakness and seasonal effects have depressed gasoline prices since last fall: As of Thursday morning, the average price of a gallon of unleaded gasoline was $3.08, 74 cents cheaper than Oct. 1. and almost 20 cents cheaper than a year ago, according to AAA.
Michael Pugliese, senior economist at Wells Fargo, cautioned against reading too much into a single report, particularly when it comes to energy prices, which are often volatile. He noted that the slowing energy price increases have occurred across a variety of energy types, not just gas.
“Those prices, based on the trend, are clearly not increasing as much as they were before,” he said.
High gasoline prices may generate headlines and upset elected officials, but diesel costs tend to matter more for overall inflation. Those prices have also fallen: The cost of a gallon of diesel was $3.94 on Thursday, 7 cents cheaper than last month and almost 70 cents cheaper than last year.
Diesel also powers heavy machinery used in agriculture and transportation. The fuel oil index fell 5.5 percent in December, following a 2.7 percent drop in November.
A mild winter in the northern hemisphere has also helped reduce diesel costs. Bad weather tends to increase the demand for diesel. According to IATA data, the price of jet fuel in North America was down 10.4 percent compared to the week ending January 5 last year, but was slightly more expensive compared to last month, 0.7 percent.
