Can U.S. economy withstand gasoline price curse? - News and Current Events | futures trading

Go Back

> Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events

Can U.S. economy withstand gasoline price curse?
Started:February 24th, 2012 (12:52 PM) by kbit Views / Replies:250 / 0
Last Reply:February 24th, 2012 (12:52 PM) Attachments:0

Welcome to

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike

Thread Tools Search this Thread

Can U.S. economy withstand gasoline price curse?

Old February 24th, 2012, 12:52 PM   #1 (permalink)
Elite Member
Aurora, Il USA
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
kbit's Avatar
Posts: 5,839 since Nov 2010
Thanks: 3,275 given, 3,321 received

Can U.S. economy withstand gasoline price curse?

(Reuters) - Could history repeat itself? That is a question uppermost in the minds of many Americans as they warily watch gasoline prices at the pump rise week after week.

After all, a spike in gasoline prices early last year helped nearly knock the economy back into recession.

The answer, economists say, is that this time is different: the recovery is in far better shape to absorb the blow.
"This is the dark cloud in an otherwise brightening domestic economic picture. It's something we need to watch right now, but not panic about yet," said Jerry Webman, chief economist at OppenheimerFunds in New York.

U.S. gas prices have jumped 8.8 percent since the start of this year, according to the Energy Information Agency, topping an average of $3.65 a gallon in the week through Monday. This is a record for this time of the year when prices are usually on the low side because of slow seasonal demand.

Early last year, a combination of strong gasoline prices in the wake of the so-called Arab spring uprisings and disruptions to motor vehicle production after a devastating earthquake in Japan put the brakes on U.S. growth.

Although gasoline prices are 41 cents higher than they were at this time last year, there are no supply-chain problems disrupting factory production and winter this year has been unseasonably warm, giving the economy a mild stimulus.

"Fortunately the U.S. economy is on an upswing, not strong but on the way up. It's in a better shape to deal with the oil prices," said Sung Won Sohn, an economics professor at California State University Channel Island. "We don't have the Japanese tsunami to worry about, business and consumer confidence have improved, and the job market is growing nicely."

Recent data ranging from employment to manufacturing have been solid, leading economists to temper their expectations of a sharp slowdown in U.S. economic growth in the current quarter.

The brightening outlook has helped support oil prices, although the main driver appears to be fear that a confrontation between Western nations and Iran could end up disrupting oil supplies. U.S. crude prices hit a more than nine-month high at $106.72 a barrel during trading on Wednesday.

Iran, the world's fifth-largest oil exporter, has threatened to close the Strait of Hormuz, the main Gulf oil shipping lane, in response to sanctions aimed at getting Tehran to abandon its nuclear program. Western nations say the program is aimed at developing weapons; Tehran says it's peaceful.

Although U.S. gasoline prices have jumped, economists take comfort in the fact that the pace of the increase has not been as rapid as it was in 2011. Gasoline prices peaked at about $4.02 a gallon in May last year, not far from the all-time high of $4.16 a gallon reached in July 2008.

The rise in gasoline prices poses a threat to both inflation and growth. It acts as a tax on households, which are already strained by weak income growth, and will likely pull spending away from non-energy goods and services.
So far, the pinch has been tempered by falling prices for natural gas. Natural gas prices dropped 2.9 percent in January, their fourth straight monthly decline.

"Roughly one-third of the gasoline spike has been offset by lower natural gas prices," said Joseph LaVorgna, chief economist at Deutsche Bank in New York. Other economists say the impact could be even greater.

Still, a sustained increase could complicate the task of the Federal Reserve. Officials who may want to come to the economy's aid with more stimulus could think twice if there is upward inflation pressure.

"If we get caught in an environment of steadily rising gasoline prices, that will put them in a bind," said Anthony Karydakis, chief economist at Commerzbank in New York.
"On the one hand they will be looking at the risk of a cool down in the economy again and on the other they will be looking at the risk of rising prices."

Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina, said even at $4 a gallon, gasoline would not push the economy into recession on its own, although it would eat up the benefit of the recent extension of the payroll tax cut, which is expected to provide $1,000 in relief to the average family this year.
"If that is the only thing to happen I don't think that will turn us back into recession," he said.

Last year when prices breached the $4 a gallon mark, they stayed there for only three weeks. Economists argue that if they were to rise that high this year, households would likely view the increase as temporary and dip into savings to fund purchases.

A strengthening in the labor market, which has enjoyed two straight months of solid job gains, is also seen helping to support spending.

But higher gas prices do present a fresh headwind that increases the economy's vulnerability to other shocks.
"Remember a car that's going at 20 miles a hour is easier to stop than a car that is going 60 miles an hour, and the U.S. economy is going at 20 miles. That makes us a bit vulnerable to a pause," said OppenheimerFunds' Webman.

Analysis: Can U.S. economy withstand gasoline price curse? | Reuters

Reply With Quote

Reply > Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events > Can U.S. economy withstand gasoline price curse?

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

NinjaTrader 8: Programming Profitable Trading Edges w/Scott Hodson

Elite only

Anthony Drager: Executing on Intermarket Correlations & Order Flow, Part 2

Elite only

Adam Grimes: Five critically important keys to professional trading

Elite only

Machine Learning Concepts w/FIO member NJAMC

Elite only

MarketDelta Cloud Platform: Announcing new mobile features

Dec 1

NinjaTrader 8: Features and Enhancements

Dec 6

Similar Threads
Thread Thread Starter Forum Replies Last Post
Peak Oil's Affect on Gasoline Prices in 2012 kbit News and Current Events 0 January 12th, 2012 08:38 PM
FTC opens probe into oil, gasoline markets kbit News and Current Events 2 June 20th, 2011 08:56 PM
Don't Expect to See Gasoline Below $3 Any Time Soon Quick Summary News and Current Events 0 June 20th, 2011 05:00 PM
Why Oil Prices Bounced Back While Gasoline Skidded Further Quick Summary News and Current Events 0 May 12th, 2011 05:10 PM
Drivers Starting to Cut Back as Gasoline Prices Keep Rising Quick Summary News and Current Events 0 April 11th, 2011 09:50 AM

All times are GMT -4. The time now is 12:20 PM.

Copyright © 2016 by All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts

Page generated 2016-10-28 in 0.09 seconds with 19 queries on phoenix via your IP