Gas Prices are going down
Gasoline prices have been falling like crazy in June. Gas is already down $.14 in June. You can see the remarkably straight line decline – it’s about 2 cents every 3 days.
Here at Crucible headquarters, we can do simple math. I assumed 10 more days of price declines at the same rate, which would shave another 6 cents off the price of gasoline, for a total of $.20 of declines. That’s 5.2% decrease in the price of gasoline.
Then I went over to the macroblog at the fed, and used their handy guide to how to calculate CPI given a few prices. I then pushed this into a spreadsheet, using the same assumptions as David Altig did at his Atlanta Fed blog.
It turns out that if gas declines another 6 cents, headline CPI will be 2.3%. Thats down 1.3% from May! Then if we see a bit of spillover from lower energy prices into lower food costs – say for example if corn loses ethanol subsidies and drops 20% or something like that – we could see an extended period of lower CPI.
