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 last year, reflecting gas prices that for a time soared above $3 a gallon and crude oil 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.
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 related to violence in Nigeria. Prices retreated slightly Wednesday, falling below $66 per barrel.
Overall inflation declined by 0.1 percent in December, an unexpectedly good performance, following November’s even bigger 0.6 percent drop.
Those figures represented the first consecutive declines in two years, but both months were heavily influenced by price declines in gasoline and other fuels 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 3.4 percent rise in 2000.
