Gas Prices Have Outsized Impact on Inflation

Off the Charts: The Visual Says It All

Adult man pumps gas wearing protective face mask during COVID-19 pandemic
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Grace Cary / Getty Images

If you’re looking for a scapegoat for inflation, blame gasoline. A chart of gas prices shows how sharply the price of this commodity has increased compared to other goods, according to data from the Bureau of Labor Statistics (BLS). 

Gas prices in March rose 9.1%, dwarfing the overall 0.6% increase in consumer prices as measured in the inflation-tracking Consumer Price Index (CPI), the BLS said in a report this week. The gap has been almost as stark for four months as rising demand for gas and higher crude oil prices pull pump prices further away from their pandemic hole. 

Nationwide, gas averaged $2.89 a gallon (for regular) on Friday, over $1 more than at its lowest point since the pandemic began, according to AAA. 

Increasing consumer optimism about the economic recovery, fueled by increasing vaccination rates, partly explains the rise. Other factors include agreement among members of the Organization of Oil Producing and Exporting Countries (the cartel that exerts a big influence on oil prices) to limit crude oil production, as well as supply disruptions stemming from February’s severe weather in the U.S., the BLS said, citing analysis from the Energy Information Administration.

The price of gas has swung so wildly that it’s been an important driver of changes in the overall CPI, despite making up just 3% of its “basket” of goods that government statisticians use to calculate inflation. In fact, the increase in gas prices accounts for at least half of the monthly increases in the CPI’s all-items index of goods and services over the last four months, the BLS said.