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Gas prices keep falling, but Americans still feel inflation’s bite

Lily Jamali Aug 10, 2022
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Because gas prices are so volatile, they can be misleading when you’re tracking inflation, says Severin Borenstein of UC Berkeley’s Haas School of Business. Brandon Bell/Getty Images

Gas prices keep falling, but Americans still feel inflation’s bite

Lily Jamali Aug 10, 2022
Heard on:
Because gas prices are so volatile, they can be misleading when you’re tracking inflation, says Severin Borenstein of UC Berkeley’s Haas School of Business. Brandon Bell/Getty Images
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The pace of price growth is cooling, with data released by the Labor Department on Wednesday showing that U.S. consumer prices were unchanged in July.

Gas prices are a big part of the reason why, as they’ve dropped roughly 20% from a peak reached following Russia’s invasion of Ukraine.

The national average for a gallon of unleaded is $4. And drivers in California — like those across the country — are paying less than they did two months ago.

Crystal Lino has noticed. “I wish they would have fallen a lot earlier because I don’t live very close to work.”

Lino is a single mom, and the commute to her job at a grocery store in South Pasadena is about 15 miles each way.

“When you work five days a week, it can add up very quickly,” she said. “It’s very hard to try and put aside gas money, as well as like food and rent and stuff.”

Food and rent keep getting more expensive, even as prices at the pump fall. Because they’re so volatile, gas prices can mislead when you’re tracking inflation, said Severin Borenstein of University of California, Berkeley’s Haas School of Business.

“It’s always one of the least reliable parts of the consumer price index.”

Gasoline has an oversized impact on the headline CPI number, which showed inflation staying steady in July, he said. Core CPI, which strips out gas and food, showed inflation rising, albeit at a slower pace.

Gas could get cheaper in the coming weeks as it adjusts to lower oil prices, but “in a month or two, oil and gasoline could be headed back up again,” Borenstein said.

That could lead more Americans to drive less, a trend that’s already underway, according to Kelly Sanders at the University of Southern California.

“Demand compared to last summer is down this summer about 10%, which is pretty significant,” she said.

But on a recent cross-country road trip in her hybrid, Sanders was surprised to see how little she paid for gas: just $678 for almost 5,000 miles.

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