Inflation roared during 2005
WASHINGTON — Record prices for gasoline and other fuels sent inflation rising in 2005 at the fastest pace in five years, and hopes for a slower increase this year could be dashed if energy costs keep surging.
Consumer prices rose by 3.4 percent in 2005 with 40 percent of the increase blamed on the biggest jump in energy costs since 1990. Energy was up 17.1 percent this past year, reflecting gasoline prices that for a time soared above $3 a gallon and crude oil prices that topped $70 per barrel.
There has been hope that overall inflation will slow to around 2.5 percent in 2006. But that is based on a belief that after two years of big increases, energy prices will calm down, something that has not yet occurred.
Earlier this week, crude oil prices surged to 3 1/2 -month highs, reflecting worries about a standoff with Iran over its nuclear program and supply disruptions due to violence in Nigeria. Prices did retreat slightly Wednesday, falling below $66 per barrel.
Overall inflation actually declined by 0.1 percent in December, an unexpectedly good performance, following an even bigger 0.6 percent drop in November.
That represented the first consecutive monthly declines in two years, but both months were heavily influenced by declines in gasoline and other fuels that are expected to be reversed in January.
The 3.4 percent rise in overall inflation for the 12 months ending in December was slightly higher than a 3.3 percent increase in 2004 and was the biggest advance since a similar 3.4 percent rise in 2000.
The 17.1 percent jump in energy costs represented the biggest rise in this category since an 18.1 percent surge in 1990 when global oil markets were roiled by Iraq’s invasion of Kuwait.
For 2005, gasoline prices were up 16.1 percent. Natural gas prices jumped by 30.2 percent and home heating oil was up 27.2 percent, huge increases that are being felt in higher heating bills this winter.
Outside of the volatile food and energy categories, core consumer inflation rose by just 2.2 percent last year, matching the performance in 2004.