American households felt inflation where it hurts most in September: at the petrol pump. Consumer prices rose 3.7 per cent over the past year — up from 3.4 per cent in August and above the 3.6 per cent economists had expected — while petrol prices jumped 9.1 per cent in a single month, according to data released on Wednesday. Fuel alone accounted for more than half of the month’s increase, turning every trip to the station into a fresh reminder of the rising cost of living.
Over the past year, petrol is up 34.2 per cent and fuel oil is up 74.2 per cent, while diesel hit a record $6.52 a gallon on September 22 before easing to $6.27 by mid-October — still far above normal. The Federal Reserve’s October Beige Book found oil-price effects in all twelve districts, with businesses passing rising diesel and fuel-surcharge costs through supply chains. Those fuel pressures are piling on top of the grid emergency order tightening electricity reserves for US households, another squeeze on home budgets.
Why the pump is doing the damage
Energy has become the engine of this inflation wave. Crude has climbed past $106 a barrel since August as geopolitical shocks tightened refined-product markets. It is refined fuel, not raw crude, that shows up at the pump, and analysts note that rate hikes cannot manufacture more barrels. Shoppers are taking a double hit elsewhere too: phones are getting pricier as the memory-chip shortage drives the worst quarter for phone shipments in 14 years.
The pain is broadening beyond energy. Core inflation, which strips out food and energy, ticked up to 2.6 per cent from 2.4 per cent — reversing a cooling trend that had run since May — while shelter rose 0.4 per cent and used cars, airline fares and apparel all climbed. Mortgage rates have surged 74 basis points to 7.4 per cent since late August, cutting buyers’ purchasing power by more than 7 per cent, as detailed in analysis of the September CPI print.
Mortgages, wages and what the Fed does next
For workers, the maths is unforgiving: earnings growth of 3.0 per cent trails 3.7 per cent inflation, so paycheques lose ground just as monthly payments climb. The Federal Reserve meets on October 27-28, with traders pricing about a 44 per cent chance of another hike — after the Fed raised its target range in September for the first time in more than three years. With midterms on November 3, rising pump prices are a political problem as well as an economic one. Until fuel costs settle, households will keep paying.
