The Effects of Energy Commodities on CPI
An Analysis of Energy Commodities as a Factor of US Inflation
DOI:
https://doi.org/10.47611/jsrhs.v13i2.6753Keywords:
energy, energy commodities, inflation, interest rateAbstract
From 2021-2023, the US saw a period of unparalleled inflation. Prompted by the debate on the role of energy prices, this paper investigates the role of rising energy commodities in this inflationary trend. Focusing on the Consumer Price Index (CPI-U), we explore the direct and indirect effects of energy commodity price changes. Despite the sector's 3-5% CPI weight, energy commodities exhibit significant volatility, contributing to 30% of monthly inflation fluctuations on average. The study identifies Gasoline and Fuel oil, both crude oil derivatives, as key components. Additionally, we assess the secondary pass-through effects, mainly through the transportation and industrial sectors. This research provides insights into the substantial impact of energy commodities on inflation and encourages further exploration on this topic, which can enhance economic forecasts and possibly monetary policy forecasts.
Downloads
References or Bibliography
Baba, C., & Lee, J. (2022). Second-round effects of oil price shocks -- implications for Europe’s inflation outlook. IMF Working Papers, 2022(173), 1. https://doi.org/10.5089/9798400219351.001
Gómez-Loscos, A., Gadea, M. D., & Montañés, A. (2012). Economic growth, inflation and oil shocks: Are the 1970s coming back? Applied Economics, 44(35), 4575–4589. https://doi.org/10.1080/00036846.2011.591741
Igan, D., Kohlscheen, E., Nodari, G., & Rees, D. (2022, May 18). Commodity market disruptions, growth and inflation. The Bank for International Settlements. https://www.bis.org/publ/bisbull54.htm
The Investopedia Team. (n.d.). What causes inflation?. Investopedia. https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp#:~:text=Cost%2DPush%20Inflation&text=As%20a%20result%2C%20the%20added,they’re%20major%20production%20inputs
Neely, C. J. (n.d.). How much do oil prices affect inflation?. Economic Research - Federal Reserve Bank of St. Louis. https://research.stlouisfed.org/publications/economic-synopses/2015/05/11/how-much-do-oil-prices-affect-inflation/
Prices & inflation. Prices & Inflation | U.S. Bureau of Economic Analysis (BEA). (n.d.). https://www.bea.gov/resources/learning-center/what-to-know-prices-inflation
U.S. Bureau of Labor Statistics. (2024, February 13). Consumer price index for all urban consumers: All items in U.S. city average. FRED. https://fred.stlouisfed.org/series/CPIAUCSL
U.S. Bureau of Labor Statistics. (n.d.). CPI Handbook of Methods Appendix 2: Content of CPI entry level items. U.S. Bureau of Labor Statistics. https://www.bls.gov/cpi/additional-resources/entry-level-item-descriptions.htm
U.S. Department of Labor. Frequently Asked Questions - United States Department of Labor. (n.d.). https://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=98&theagencyid=BLS&faqtop=Agencies%2B%26%2BOffices#:~:text=Answer%3A%20The%20CPI%20measures%20the,%2C%20(CPI%2DW
U.S. Energy Information Administration - EIA - independent statistics and analysis. Use of oil - U.S. Energy Information Administration (EIA). (n.d.). https://www.eia.gov/energyexplained/oil-and-petroleum-products/use-of-oil.php
Published
How to Cite
Issue
Section
Copyright (c) 2024 Daniel Chen; Richard Yang
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Copyright holder(s) granted JSR a perpetual, non-exclusive license to distriute & display this article.
