Let’s dive into the two key components of the consumer price index (CPI) that have experienced the strongest inflationary pressures year-to-date, and even more so on an unadjusted 12-month basis: gasoline, +44%; Oil, +75.6%.
What happened: Fundstrat Executive Partner tom lee sees a light at the end of the tunnel.
“If you look at the 1970s through the 1980s, gasoline never had a downturn. With CPI down more than 2% year-on-year through 1982, we’re already seeing gasoline drop like a stone,” Lee said.
Lee’s throwback to the ’70s and ’80s was meant to point to a time known as “The Great Inflation.” It lasted from 1965 to 1982 and was fueled by the Federal Reserve’s easy money policy. The Fed later changed policy and increased interest rates to around 20%.
“.. look at the period from 1970 to 1990. ..Gasoline rose for a decade before it even started falling..it hasn’t recorded a single peak-to-trough drop of more than 2% in those 10 years..” @fundstrat pic.twitter.com/aCO0waDhvJ
— Carl Quintanilla (@carlquintanilla) September 7, 2022
Gasoline prices rose steadily from 1972 to 1981, the year when gas prices stagnated and eventually heralded a massive fall in overall CPI.
Also read: Oil remains weak on China’s fresh COVID-19 curbs: supply news trickles ahead of OPEC+ meeting
Not too far ahead of August 2022 CPI, Looking at the latest data, gasoline prices fell 7.7% over the past month, the most since April 2020, after rising 11.2% a month earlier.
By national aggregate GasBuddy data, the average gas price in the US had fallen for the 12th straight week, or about 85 days. That’s down 7.7 cents from a week ago to $3.75 a gallon on Thursday, or about 25% since the start of the decline.
What’s next: Although prices are gradually leveling off, several factors increase the likelihood of persistently high inflation. A significant factor is the cost of housing, along with…
