Uptick in gas prices could threaten consumers’ confidence
Uptick in gas prices could threaten consumers’ confidence
The consumer price index for July, which came out Thursday, seems reasonably benign for both overall inflation and the core rate, which strips out volatile food and energy prices. Thing is, real people can’t simply strip out food and energy — not if they want to eat and fill up the tank to buy groceries, at least.
Now, it’s true that gas prices were pretty muted last month, up just two-tenths of a percentage point. But there may be more gas pump inflation in the pipeline for August. That would likely show up in the next CPI report, which comes right before the Federal Reserve’s next interest-rate-setting meeting in September.
If you drive, you’ve probably noticed: Gas prices have shot up over the past month — an average of around 30 cents a gallon to $3.82 nationwide.
“A lot of the surge was attributed to just the terrible heat we had,” said Andrew Gross, who tracks gas prices at AAA.
Heat waves in major refining regions slowed production this summer, he said. “’Cause they are these giant outdoor tank farms full of volatile chemicals and those things don’t like sitting in the sun baking all day long.”
Plus, the price of crude oil has risen above $80 a barrel. It was trading below $70 back in May, when many economists feared the U.S. and Europe were heading into recession at the same time China was slowing down. All that probably would have caused global energy demand to fall.
Instead, “fears of a global recession have attenuated, and that’s why oil has bounced back,” said Jay Hatfield at Infrastructure Capital Advisors.
Now, over the past few months, U.S. consumers have felt more upbeat as overall inflation eased. Rising gasoline, however, could reverse that, per Chris Jackson at public-opinion firm Ipsos.
“Gas prices are definitely one of those things people are sensitive to,” he said. “So they’re just always getting squeezed somewhere. Like, eggs are cheaper again, but getting to the store to buy them is now more expensive.”
Gas could have more room to rise as higher crude oil feeds through from refineries to wholesalers to what we pay at the pump.
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