24/7 Wall St. Insights

• The October consumer price index shows that low oil and gasoline prices have kept inflation in check.
• Geopolitical pressures suggest that will not change soon.
• Also: Dividend legends to hold forever.

In October, the consumer price index rose 2.6% from a year ago. That was low compared to May 2022, when the increase was 8.3%. However, it was a tick higher than expected. It also raised the question of whether the Federal Reserve will cut rates again this year as it tries to drive inflation down to its target of 2.0%.

The price of one major component of CPI helped keep the measure from being higher. Fuel oil prices dropped 20.8%, and gasoline prices fell 12.2%. The decline is part of a pattern. Crude prices hit $115 a barrel in May 2022, but today they are at $69.

Crude and gas prices have fallen for two primary reasons. In February 2022, Russia began a huge invasion of Ukraine, and anxiety about the oil supply caused a massive increase in these prices. The G7 nations capped the price of Russian oil at $60. The BBC reported that it affected the “price (of oil) being shipped using G7 and EU tankers, insurance companies and credit institutions.”

The other reason oil prices have fallen and affected CPI oil and gasoline price components is an abundance of crude worldwide and low demand in China because of its slow economy. China imports more oil than any nation in the world. In December, the United States produced more oil than any nation during any month in history.

Oil and gas prices helped hold the CPI figure low. There is no reason to believe the underlying price of crude will rise soon.

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