Energy prices jumped in December, helping send up overall inflation for the month amid colder-than-expected temperatures, supply concerns driven by Ukraine’s targeting of Russian oil facilities, and optimism over Chinese stimulus spurring demand.
According to Consumer Price Index (CPI) data released by the Bureau of Labor Statistics, seasonally adjusted energy prices rose 2.6% from the previous month, higher than November’s 0.2% increase. December’s rise in prices accounted for more than 40% of the monthly increase in headline inflation.
A big reason for energy’s increase was gasoline prices, which popped more than 4% for the month as oil prices rallied in December. As of Wednesday, West Texas Intermediate (CL=F) was up about 12% in the past month while Brent (BZ=F), the international benchmark price, spiked roughly 10%.
As of 11:27:12 AM EST. Market Open.
BZ=F CL=F
The rise in crude prices came as Ukraine continued to target Russian energy facilities, and traders speculated whether the incoming Trump administration will reimplement sanctions against oil producer Iran, according to Dennis Kissler, senior vice president at BOK Financial.
“A lot of it was geopolitically motivated,” Kissler told Yahoo Finance on Wednesday. “We had decreasing Russian supplies, geopolitical tensions were very much elevated, and demand from China was starting to pick back up.”
Last month China stepped stimulus initiatives in an effort to revive its sluggish economy. Chinese officials vowed to increase fiscal spending in 2025 in order to boost consumption.
Futures recently touched five-month highs after the US announced widened sanctions against Russia in an effort to cut of Moscow’s revenue amid the ongoing war in Ukraine.
However, oil analysts have projected that prices will move lower this year due to an increase in supply, particularly if the Organization of Petroleum Exporting Countries (OPEC) decides to bring barrels back onto the market
In other parts of the energy index, fuel oil used for home heating also rose more than 4% in December as colder than expected temperatures set in across the northern hemisphere.
On an annualized basis however, the energy index still declined 0.5%, with fuel oil dropping 13.1% and gasoline prices falling 3.9%.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance