Energy prices, specifically gasoline, were the biggest culprit of August's hotter than expected inflation print.

The Bureau of Labor Statistic's Consumer Price Index (CPI) rose 3.7% on year-over-year basis in August, topping economist expectations of 3.6%.

"The index for gasoline was the largest contributor to the monthly all-items increase, accounting for over half of the increase," read the CPI release.

The energy index rose 5.6% in August from the prior month, a sharp re-acceleration from a 0.1% increase in July, as oil prices rallied and prices at the pump hit 2023 highs.

The gasoline index saw the biggest price increase among the energy components, with a 10.6% rise in August on a monthly basis, following a 0.2% increase in July.

Across the board all the energy components saw a month-over-month increase in prices. Electricity rose 0.2% in August after decreasing 0.7% in July. Natural gas jumped 0.1% over the month, following a 2% increase in July. Fuel oil also rose by 9.1% in the last month.

Despite the month-over-month rise, the energy index is down 3.6% when compared to 12 months ago. All of the components within the sector, except for electricity, are down on a year-over-year basis.

Oil's is on a three-month rally, up around 30% since late June amid a tight supply squeeze following OPEC+ production cuts and unilateral output reductions extended by Saudi Arabia and Russia.

"The math is simple — declining supply and rising demand equal higher prices," Adam Turnquist, chief technical strategist for LPL Financial, recently wrote in a note to investors.

West Texas Intermediate (CL=F) crossed $89 per barrel on Wednesday. Brent crude futures (BZ=F) sat above $92 per barrel. The prices represent oil's loftiest levels since November 2022.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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