Energy prices continued to fall in December on an annual 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 with December 2022, the Labor Department reported on Thursday.
But the energy index rose 0.4 percent on a monthly basis in December, following a 2.3 percent drop in November and a 2.5 percent drop in October, driven by electricity costs, which climbed 1.3 percent from November, and an increase in the gas index because of seasonal adjustments. The increase in the energy index helped drive a slight uptick in headline inflation, which was 0.3 percent on a monthly basis.
Transportation costs, which had been a prime example of stubborn inflation that prompted 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 ticked 1 percent higher 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 track rising costs, particularly oil.”
The easing of energy inflation has been driven by a weak domestic and global oil market, rather than Fed policy moves. Brent crude oil, the international benchmark, was around $79 a barrel on Thursday morning, after approaching $100 last summer amid high demand and extended cuts in production by the world’s biggest oil producers.
Though the gas price index rose 0.2 percent in December, a soft oil market and seasonal effects have depressed gasoline prices since last fall: On Thursday morning, the average price of a gallon of unleaded gasoline was $3.08, 74 cents cheaper than on Oct. 1 and nearly 20 cents cheaper than a year ago, according to AAA.
Michael Pugliese, a senior economist at Wells Fargo, cautioned against reading too far into a single report, particularly with energy prices, which are often volatile. He noted that the easing in energy price increases has been across a range of energy types, not just gas.
“Those prices, on trend, are clearly not rising as much as they were,” he said.
High gas prices can draw headlines and vex elected officials, but diesel costs tend to matter more for overall inflation. Those, too, have abated: The cost of a gallon of diesel was $3.94 on Thursday, 7 cents cheaper than it was last month and nearly 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 decline in November.
A mild winter in the Northern Hemisphere has also contributed to lower diesel costs. Harsh weather tends to drive up demand for diesel. According to data from the IATA, the price of jet fuel in North America was down 10.4 percent compared with the week ending Jan. 5 last year, but it was slightly more expensive compared with last month, at 0.7 percent.
