Record prices for gasoline and other fuels sent U.S. 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 per cent in 2005, with 40 per cent of the increase blamed on the biggest jump in energy costs since 1990. Energy was up 17.1 per cent this past year, reflecting gasoline prices that for a time soared above $3 (U.S.) a gallon and crude oil prices that topped $70 per barrel.
There has been hope that overall inflation will slow to around 2.5 per cent 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.
Earlier this week, crude oil prices surged to 3½-month highs, reflecting worries about a standoff with Iran over its nuclear program and supply disruptions owing to violence in Nigeria.
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