On Wednesday, the chairman of the New York Fed, William C. Dudley said that, if the price of oil continues to decline, or even remains where it is, it will lessen the chance of a recession. Crude oil prices, on Wed. closed at $87.82. It is down 20% from the Feb high of $109.77.
“...This tumble is good for consumers, of course. The national average for gas is $3.62, according to AAA. Given that it takes a few weeks for prices in the crude-oil futures market to filter through to the gas pump, you can expected prices to keep falling…”
(On an aside, I noticed that the great demonic force of all time – if you are a conservative kool-aid drinker – George Soros, began dumping his Euros ages ago. I’ve been watching to see if he was right, and he was.)
All of this is rather fascinating. The Pink Flamingo has been saying, since the summer of 2008, that the root cause of this recession is the high price of gas at the pump. There are some who are forecasting a commodity recession because of the price of oil and the drop in the price of gold.
The Euro is down and the dollar is up. That is one of the reasons the price of oil, for us, is going down – the dollar is gaining strength. One indicator says consumer confidence is down. Another says it is up.
“…Consumer sentiment edged higher in May to the best reading since the recession, as declining gasoline prices appear to have offset slowing job-markets growth.
The preliminary reading of the University of Michigan-Thomson Reuters index rose to 77.8 from 76.4 in April. That’s the best reading since January 2008 — just one month after the recession started.
The current economic conditions index jumped to 87.3, the best reading since January 2008, from 82.9 in April.
The index of consumer expectations actually fell, falling to 71.7 from 72.3 in April.
That picture could be explained by the combination of falling gasoline prices, which impact the current situation, and April’s report of slowing jobs growth, which could be weighing on expectations. Read “We need more than cheap gas.”…”
”...Toews and other analysts said they expect that average price to continue falling into June, possibly by as much as 10 cents per gallon, before rising again later in the summer.
Of course, reality could throw a wrench into such predictions.
“You have a couple of wild cards in the middle of the summer” that could trigger significant price fluctuations, said Tom Kloza, chief oil analyst at the Oil Price Information Service. Among them: economic instability and a looming election in Greece, fears of a recession in Europe, the arrival of hurricane season, and tensions over sanctions against Iran, which has threatened to disrupt Middle East oil supplies.
In addition, while the national average might hold steady or even fall over the next month, gas prices can vary widely from state to state and region to region. Some Western states such as Washington, Oregon and California have experienced sharp increases in gas prices recently, in part because of various supply problems and a fire that temporarily shut down one large refinery. In Tacoma, Wash., for example, the average price is $4.30 per gallon, 69 cents above the national average.
Despite the relief of many drivers as prices have fallen in recent weeks, that feeling is largely a matter of perception. Gas prices continue to put a significant dent in the wallets of many Americans. But many drivers expected the situation to be worse right now, so seeing prices linger below the $4 mark seems like a victory, however small.
“You’re about as miserable as you were last year, but you were prepared to be much more miserable,” Kloza said. “It’s like you’re prepared for a 100-degree day and you got 90 degrees. It’s still uncomfortable; it still crimps consumer spending. But it’s not quite the crisis that some people were calling for.”…”
There are some fools who think that the drop in oil prices is signaling the beginning of a global recession. They haven’t quite figured out that we are paying far too much for gas. They only see doom and gloom out of Europe. What they aren’t factoring into the drop in the Euro is the way the dollar has been trashed for years. What goes up must go down, including the Euro.
“…The euro fell near a two-year low against the dollar, helping to push oil prices even lower. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude barrels more expensive for investors holding foreign money. Brent crude, which is used to price oil varieties that are imported into the U.S., fell by $3.21 to end at $103.47 per barrel in London.
Traders have seen this show before. This is the third consecutive May where oil has plunged, in part because of similar concerns about European debts. Oil fell 9.9 percent in May of last year and 14.1 percent in May 2010. Jim Ritterbusch, an independent oil trader and analyst, said it’s a coincidence that the month has become known for tumbling oil prices.
A number of one-time factors moved oil prices over the past few years, he said, including last year’s Libyan rebellion, the 2011 release of emergency oil supplies by the U.S. and other industrialized countries, fighting in Nigeria and fears over Iran’s nuclear program. In the past two years, oil recovered from its swoon in May and ended the year higher than it started…”
There are “economists” who don’t seem to understand that there is an economic cause and effect of the high cost of oil and oil based products, including gas. Michael Hicks, thinks We the Little People aren’t smart enough to understand that lower oil prices signal a looming recession. Then again, he authored a paper stating that Walmart did not harm local business or effect local wages.
“…“I’m very worried about the recession outlook for the U.S. economy,” Hicks said. “Europe is already in a recession, and there’s evidence that it’s going to deepen beyond the first quarter, maybe half a percentage point through the end of summer.” Hicks, who heads the Center for Business and Economic Research, just issued a revised forecast that negative growth in the U.S. is likely for at least one quarter.
If negative growth continues for two consecutive quarters, economists said a recession is near. “I think we’re going to see job growth stagnate,” said Hicks. “Unemployment rates could slip upwards. The only reason it’s been dropping nationally is because so many people have been leaving the labor force, which is indeed a sign of an impending recession.”
University of Indianapolis business professor Matt Will agreed that dropping gas prices are a sign of weakness, but not a recession…”
This is just amazing.
“..But experts say cheaper gas is the flip side of worse news: The United States and world economies are still struggling. “I think the worst pain at the pump is behind us for the year,” said Hamza Khan, an analyst with energy firm the Schork Group. “Until we see really good news like the way we were back in January, when we had that holiday boom, I don’t think consumer confidence is there to support further (prices increases) in gasoline.”
The average price for regular gas in New Jersey dropped from a peak of around $3.80 a gallon in April to $3.69 yesterday, in sync with the national trend, according to numbers from AAA.
That’s because gas prices are linked to the economy, according to Khan.
“When the recession ended, we saw the economy get better, and we saw the (gas) prices go higher,” Khan said. “The problem is when there’s a difference in the pace — if the cost of gasoline goes up too fast, it can choke the recovery, and I think that’s what we saw last year. It really puts a damper on growth.”..”
At least, at the Politico, there is some comprehension as to what is really going on here. It’s not a recession that is pushing the lower prices, but the strong dollar, and some action with Iran. It is also very political.
“...For Republicans, the problem is that so much of their election year attack was based on rising gasoline prices.
Obama — like any president — has virtually no control over gasoline prices that are tied to global supply and demand, speculative fears tied to tensions in the oil-rich Middle East and other factors. But the GOP messaging strategy suggested prices were rising because of Obama’s inaction on oil drilling and the Keystone XL pipeline.
Falling prices may make it harder to use the issue against Obama, but the GOP isn’t backing off, especially since the traditional start of the summer driving season — Memorial Day — is still a few weeks away…”
There’s a heck of a lot going on here. Speculators have added a good $27 per barrel to the price of oil. Since 2008, Charles and David Koch have made something like $52 billion on speculating the price of oil, up, and impoverishing us all. Just that $27 a barrel more is enough to break entire school systems, simply because of the price of gas. It is enough to break entire transportation systems. It is enough to cause a massive rise in inflation for any product based on petroleum.
In 2008 the price of a large Yankee candle was $19.00. Today, it is $25.00. I quit buying them. It is just an example of the price of everything. Food prices, which are not indexed for inflation, have gone up,wildly. Why oil speculators have gained billions, We the Little People have seen our standard of living plunge.
Where people were dining on steak a year ago, you’re doing lucky to get hamburgers. But, it’s not about the price of oil, really? When the price of oil began skyrocketing, as the speculators drove it skyward in 2008, the recession took hold. Just listening to William Dudley made me realize that I have been right all along. There is a cause and effect of high gas prices.
High gas prices are not an indicator of a strong economy, it is just the opposite. Just like the artificially low dollar, another Greenspan debacle, is not good for the country. If the dollar is low, gas is higher. If the dollar is low, anything imported, such as Louis Vuitton, goes up in price.
What we’re looking at, once again, is the abject failure of Randian economics. It is about keeping oil prices high, so that the billionaire speculators can become even wealthier, while impoverishing We the Little People. They are costing this nation a fortune. THEY are the ones who are pushing us over an economic cliff.
It doesn’t take much logic and reason to comprehend when people were once paying $1.64 for a gallon of gas, and are now paying $2.00 more, that’s a lot. If you have a SUV, like I do, which holds 25 gallons, that’s an additional fifty bucks every time you fill it. I fill mine maybe twice a month, at the most. Years ago it was more like three times a month, but I can’t afford the additional $150 a month.
That’s part of a house payment, a credit card payment, a car payment, or grocery money. But, for the elite, that’s the sign of a healthy economy – for them.
Let’s follow that bouncing ball a little farther. If you must chuck out an additional $100 – $150 a month for gas, you’re not spending it on something else. If you’re not spending it on something else, someone loses a job. That someone goes on unemployment, costing taxpayers a pile of money. That person no longer has money to spend, so someone else loses a job….and it has begun.
It doesn’t take rocket science to see that oil speculation has led to the shape this country is in, now. I don’t know about you, but, I’m feeling like one of those old fashion witch hunts. I would like to see a punitive tax rate of at least 75% put on people who speculate up the price of oil – retroactive to 2008. Let’s see how the Koch brothers would like that.
A billion here, a billion there, and we can either sink or swim. When vile, self-centered Randians, who care for nothing but their own bottom line, are using our former democracy not only to pad their billions, but to purchase enough politicians to see that they never are required to pay for the lives they have destroyed, they should be forced to pay massive taxes on it.
It’s only fair.
And – that’s not socialist.
It’s the only way to protect this nation against Randian perversion.
P. S. There’s one other little thing at play here. If oil prices continue to stay where they are, currently, or drop, just a little, it benefits Barack Obama and hurts Mitt Romney. It will be interesting to see what happens here. If the Fat Cats want Romney in office, they will torpedo the economy and cause gas prices to rise. If they want to keep Obama in office, they will torpedo gas prices, and cause them to fall.
We the Little People are just collateral damage.