Energy |

Last week, retail gasoline prices were higher than a year ago for the first time since February and, with another penny increase to $3.66 per gallon as reported by the Energy Department the other day, they are now up 8 cents (or over 2 percent) on a year over year basis.

Given that prices continued to decline at this time last year as shown below, there will be some positive inputs to the inflation calculation in the months ahead.

How big an impact this will have remains to be seen since, like most of the natural resource sector, the energy market hasn’t been particularly strong this year.

Just maintaining current pump prices over the summer will result in a year-over-year increase of almost 10 percent come July, but this will quickly vanish in the months that follow as gasoline prices recovered quickly from their summer swoon last year.

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If You Dig It, They Will Pay

A long-term look at commodity prices from this item at The Economist shows big price gains are more often found for goods that must be dug out of the ground rather than grown.

Global population growth has slowed in recent years and technological advances have boosted crop production, mitigating many of the fears from decades ago that the world wouldn’t be able to feed itself. For more on population growth, see this item at Wikipedia:

The world population has experienced continuous growth since the end of the Great Famine and the Black Death in 1350, when it stood at around 370 million.[6] The highest rates of growth – global population increases above 1.8% per year – were seen briefly during the 1950s, and for a longer period during the 1960s and 1970s. The growth rate peaked at 2.2% in 1963, and had declined to 1.1% by 2011.

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The GasBuddy Heat Map (a tool that I relied on frequently in our recent trip south) is showing some very unusual colors these days with gas prices in North Dakota – one of the epicenters of the U.S. shale oil boom – now generally higher than in places like California.

According to the Energy Department’s This Week in Petroleum, it’s all about refinery troubles, a situation that Californians are all too familiar with after last year. This serves as a timely reminder that the price of crude oil is only part of the retail gas price equation.

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Rising Prices, Weather Drive Retail Sales

The Commerce Department reported(.pdf) that big increases in gasoline station sales and automobile sales drove overall retail sales in the U.S. higher by 1.1 percent in February following an upwardly revised gain of 0.6 percent in January.

Excluding motor vehicles, retail sales rose 0.9 percent last month and, excluding both autos and gasoline, sales rose just 0.6 percent.

Surging pump prices more than offset falling demand as gasoline station sales jumped 3.3 percent in February after an increase of 1.9 percent the month prior. Motor vehicle sales rose 1.6 percent last month following a decline of 1.6 percent in January.

February Retail Sales

Clothing sales rose 1.8 percent, however, here too, rising prices played a significant role in the sales gains as the Labor Department recently reported that, over the last three months, the cost of apparel has been rising at an annual rate of more than 5 percent.

An unusually warm and dry winter has also spurred many purchases at home improvement stores, as sale there rose 1.4 percent for the second month in a row. Recall that the retail sales figures are adjusted for seasonal variations and holidays, but not rising prices, all of which makes the February surge less than what it appears.

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