Auto Prices & Gasoline Prices: An Economic Outlook
David Hope
Mar 22, 2011, 11:01
Auto prices are already feeling the pinch of the Japanese natural disasters. Now, economists, retail experts, manufacturers and consumers are debating whether or not the United States is ready for spiking gasoline prices.
That's because the future is now when it comes to gasoline prices, which topped $3.50 per gallon as the national average this week. Airlines, tourism, car manufacturing, food prices and much more are all affected. Everything between fundamentals and frills rests on crude oil, which rose to $105 a barrel in New York this week, the highest price since September 2008, despite reassurances from Kuwait and Saudi Arabia that what is lost in supply from chaos in Libya can be produced elsewhere.
Call it the Toyota Syndrome: unintended acceleration of gas prices.
Oil is our Achilles heel and a nascent economic recovery the perfect time to say, "I told you so." Now, everybody can chant it together, since virtually everybody knew so in advance.
Auto companies are declaring they are ready for rising gas prices, pointing to an improved, but still paltry line up of "green" vehicles coming off the assembly line.
Saudi Arabia has frequently declared it would be happy with oil between $70 and $90 per barrel. But how unhappy could it be that the price has topped their target? Seems unlikely oil producers will rush to correct the "problem."
"High oil prices always hurt our economy. Sometimes they get masked from consumers, but you cannot hide their impact on the economy," Lawrence Goldstein, an economist at the Energy Policy Research Foundation, told The New York Times.
Arguably, the word "high" could be eliminated from Goldstein's sentiment. Oil prices, high or low, always hurt, because we are net importers of oil. In effect, there is no such thing as a low oil price.
In the retail sector, spending is "surprisingly strong," the chief economist for the trade group the International Council of Shopping Centers told the Times. But the pressure is on, he said, if oil prices "stay above $100."
In stock markets, chaos in the Middle East has turned a dull year into a wild ride. Steady clips of two steps forward, one step back, all in margins of tolerable constraint -- on a good day, a rise of 0.25 percent -- have turned into a bipolar episode that requires seat belts.
From September to February, the Dow Jones Industrial average tacked on 2,000 points, enough to give billionaire hedge fund manager Carl Icahn both the willies and enough personal gain to decide to return outside investor funds and go it alone for awhile. The Dow is now bouncing around routinely. Since Presidents' Day, Feb. 21, the Dow has added or lost more than 150 points on three occasions, swinging more than 100 points on two more occasions and come close to that a few times more. At the end of the roller coaster: The Dow closed Tuesday just above 12,214 points. In the last session before Presidents' Day, the Dow closed at 12,391.25.
In international markets Wednesday, the Nikkei 225 index in Japan added 0.61 percent while the Shanghai composite index in China was flat, up 0.07 percent. The Hang Seng index in Hong Kong rose 0.42 percent while the Sensex in India rose 0.16 percent.
In Australia, the S&P;/ASX 200 index lost 0.84 percent.
In midday trading in Europe, the FTSE 100 index in Britain fell 0.23 percent while the DAX 30 in Germany rose 0.31 percent. The CAC 40 index in France rose 0.24 percent while the Stoxx Europe 600 index added 0.3 percent.
Source: UPI
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