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It's been a trying summer for many Americans, with a job market that's underperforming, and a listless Dow that's exhibited sideways action for three months, but there has been one encouraging trend of late: gasoline prices.
Although at an average U.S. price of $2.70 per gallon for regular unleaded and about 4% higher than last Labor Day, 'the trend has been the motorist's friend,' as they say on Wall Street, with prices moving lower, with a few hiccups, essentially since spring. In early May, the average price for unleaded regular hit $2.78 per gallon.
What's behind the decline? Two factors: The price of oil has declined from highs near $86 per barrel to about $75, and the summer driving season did not see a huge increase in gasoline demand, in part due to the lower-than-expected U.S. monthly job growth.
Lower gasoline prices also boost U.S. economic growth: each 1 cent drop in gasoline's price increases U.S. GDP by about $1 billion per year (falling gas prices also act like a mini tax cut).
Energy Analysis: Gas prices could dip even more in the fall: If the price of oil does not shoot higher, its would not be a stretch to see gasoline prices dip another 10-15 cents per gallon, as the summer travel ends. The aforementioned assumes, of course, no major refinery outages due to weather-related events or fires, etc.
Longer term, oil will dictate gasoline's price: rising U.S. GDP growth would likely push crude higher; modest GDP growth would place less upward pressure on crude's price.
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Reader Comments (Page 1 of 1)
9-03-2010 @ 6:14PM
william lindblad said...
I agree. Let us see how long the modest job growth that propelled today's market lasts. Even if one considers that 50K were lost, 60K were gained and that remains positive. The only problem with this equation is the compensation range and the labor dept. does not report on that.
9-06-2010 @ 9:02PM
Iridium said...
Exactly, millions of people have exhausted their unemployment and have to get a job. You can find $8 an hour jobs all day long and those count as a job created. Problem is that job doesn't mean anything when the person used to make $50k a year.
By 2020 the average American will be making less than $25k a year while the ruling class will control 99% of the wealth. That is a given unless the attitude in this country shifts heavily against Wall Street.
Gasoline needs to fall below $1.75 a gallon to have any effect in stimulating the economy. The problem is that any stimulation of the economy causes speculators to drive the price of oil ever higher.
These economic analysts are the greatest breed of stupid in the history of humanity. I read an article where the author said there was no chance of a double dip because the equity market is beginning a new bull run because earnings are higher than any time in the past 30 years. He then went and listed 10 stocks to invest in and 8 of them were corporations based outside the USA. how is that good for the US economy???