How Low Oil Prices Saved America From Inflation

By Douglas A. McIntyre Published Nov 15, 6:45AM EST

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How Low Oil Prices Saved America From Inflation — © WendellandCarolyn / iStock via Getty Images

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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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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.