STEVE INSKEEP, HOST:
We have some mixed news on affordability. AAA says the average price of gasoline has dropped below $4 a gallon for the first time in three months. But despite that milestone, the overall cost of living remains high. And we have some news on that today. Scott Horsley is here. Hi there, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: OK. What have we got?
HORSLEY: Well, the good news is AAA says the average price of regular gas has dropped to $3.98 a gallon. That's down about 39 cents from a month ago. You know, crude oil prices have been coming down part way from their wartime highs now that more oil is making its way through the Strait of Hormuz. And refineries have switched over to their winter blend of gasoline, which is a little cheaper to produce. And petroleum analyst Patrick De Haan of GasBuddy says U.S. demand for gasoline typically drops off this time of year when the days are getting shorter and people are parking their toys.
PATRICK DE HAAN: Temperatures get colder. People that have boats and RVs are probably done for the year. So I would say, by Thanksgiving, so long as we don't get any wild cards geopolitically, that the national average could be at 3.75 a gallon.
HORSLEY: But keep in mind, gas is still about $1 a gallon higher than it was before the U.S. launched its war with Iran. It's at a record high for this time of year. So even with the recent drop, the drive to grandma's for Thanksgiving this year could be costly.
INSKEEP: OK. So what about diesel?
HORSLEY: Diesel prices have also fallen, but not nearly as much as gas prices. AAA says diesel prices have dropped about 13 cents a gallon over the last month, and they're still averaging well over $6 a gallon. That high cost of diesel fuel is another byproduct of war, not only the U.S. war with Iran, but also Russia's war with Ukraine. Russia is ordinarily a big exporter of diesel fuel. But De Haan says that supply has largely dried up because of wartime damage to Russia's refineries.
DE HAAN: When a country like Russia isn't exporting diesel, that is very impactful to the global market. So diesel prices, they will come down, but they will still remain very elevated.
HORSLEY: And that's also affecting the cost of heating oil in the northeast because heating oil is a close cousin of diesel.
INSKEEP: OK, so our gas prices are going down. The prices of diesel, which bring our products to market, not gone down so much. What's happening with inflation overall?
HORSLEY: Yeah, it's still pretty sticky. This morning, the Labor Department reported that consumer prices in October were up four-tenths of a percent from the previous month. That was a smaller increase than in September but a bigger increase than forecasters had expected. Rising rents and grocery prices drove much of the increase. But as you say, it's also partly about transportation costs. Economist Mike Reid of RBC Capital Markets says we're seeing more of those diesel prices spill over into the cost of everything else.
MIKE REID: We've seen it show up notably in goods that are heavily imported - apparel, recreation goods, IT equipment. To some extent, it's tariffs. But you're starting to see the higher freight costs get passed through.
HORSLEY: Federal Reserve Governor Chris Waller gave a speech early today before the inflation report came out. And he warned that, you know, energy costs may be stickier and have a longer-lasting effect on inflation than we used to think.
INSKEEP: Oh. Well, what does the Fed do with that when they meet next month?
HORSLEY: Well, the Fed was already expected to raise interest rates by a quarter percentage point when they meet in December. But Waller hinted today that it may take a bigger, half-point rate increase to really bring prices under control.
INSKEEP: Another jump in interest costs. NPR's Scott Horsley, thanks so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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