Essential Diesel Prices Hit Record Richmond Highs

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RICHMOND – Diesel prices topped $6 a gallon in Richmond and other parts of Virginia on Friday, while inflation ticked up because of rising costs for energy and housing, setting the stage for a likely increase in interest rates by the Federal Reserve Board.

The average price of regular unleaded gasoline exceeded $4.12 a gallon in Richmond and statewide because of higher crude oil prices amid the escalating conflict between the United States and Iran over shipping through the Strait of Hormuz in the Persian Gulf.

But the pressure of the six-month-old war showed most in the price of diesel fuel, which is essential for trucking and other means of transporting goods, including groceries. The average price of diesel hit another record high at just under $6 a barrel on Friday, but exceeded that mark at $6.01 a gallon in the Richmond and Petersburg area. The average price of diesel hit $6.06 a gallon in the Fredericksburg area and about $6.03 a gallon in Charlottesville.

Those increases are likely to raise the cost of goods, whether transported by ship, rail or truck.

“Diesel is trucking, food prices,” said Kent Engelke, chief economic strategist and managing director at Capitol Securities Management, Inc. in Richmond.

Higher energy prices were apparent in the Consumer Price Index, which edged up by 0.1% in August and 3.4% over 12 months, as inflation stays consistently above the Federal Reserve’s target of 2% before it will reduce interest rates to stimulate the economy and hiring.

The increase was modest, Engelke said, “but we were looking for something a little bit better.”

Gasoline prices rose 3.9% in August, after dropping by 2.9% in July, in hopes that the standoff over shipping in the Strait of Hormuz had been resolved. Food prices increased by 01.% for the month, primarily due to higher prices for eating out.

Engelke said he’s confident that energy prices will come down if tensions ease in the Middle East, but core inflation, after excluding fuel and food, increased by 0.3%, driven by rising rents and other lodging costs.

He said the market expects the Federal Reserve to increase the overnight lending rate by a quarter-percentage point after its Tuesday and Wednesday meeting, despite President Donald Trump’s demand that the board cut rates to stimulate the economy with midterm congressional elections looming in November.

Despite the pressure on prices, Virginians continue to spend, based on the latest report on collection of sales taxes and other revenue to pay for public services in the state general fund budget.

A recent Roanoke College survey showed consumer sentiment plummeting, but Virginia sales and use tax collections grew by 4% in August and $77.3 million in the first two months of the fiscal year that began on July 1, or about $49 million ahead of projections in the new two-year budget.

Overall, state revenues grew by 2.8% in August and 5.4% in the first two months of the fiscal year – $81.5 million ahead of budget projections, or 1.8%.

“Revenue remains generally in line with our forecast through the first two months of the fiscal year, though continued national economic uncertainty means we must stay vigilant,” Gov. Abigail Spanberger said on Friday. “With high costs driven by the president’s reckless war and an uncertain labor market remaining areas of concern nationwide, particularly given persistently high inflation, we will continue to responsibly manage the Commonwealth’s finances.”

Secretary of Finance Mark Sickles noted that sales and use tax collections continued to outperform state expectations, but he said, “We are concerned by persistently high core inflation and the resulting increased likelihood of a Federal Reserve rate hike.”

Engelke said his biggest concern remains the federal debt, now at almost $41 trillion, which he said is upsetting the bond market, sending yields up and prices down.

Trump’s political pitch this week of a $5,000 “dividend” for Americans if Republicans win the midterm elections didn’t help, he said. The cost of the president’s proposal would be about $1.2 trillion, which he said demonstrates “the propensity of Washington to spend.”

Engelke said the bond market’s reaction says “we are spending too much money.”

“It’s not a question of ‘if’ we’re going to have a crisis, it’s ‘when’,” he said.

Distributed by Newsbank, inc.

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Diesel tops $6 a gallon in Richmond, as inflation ticks up appeared first on Insurance News | InsuranceNewsNet.

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