Recession Fears Fading, So Oil Prices Are Rising (Again)
A classic good news, bad news scenario
10/17/2011 | By Mark Huffman
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ConsumerAffairs.com
| Finance
Motorists have probably noticed in the last week or so that the break at the gas pump they were enjoying has begun to disappear.
Gasoline prices, which dipped nationwide to an average price of $3.39 a gallon, are climbing again. The average price is now over $3.45 a gallon, up about six cents in the last week.
What happened? The financial markets have decided in recent days that maybe we aren't headed for another recession after all. As a result, crude oil prices, which dipped below $75 a barrel two weeks ago, are now back up over $87.
Prices fell because, if there was going to be a recession, the future demand for oil would be significantly less. But now with a recession nearly off the table, traders have concluded that energy demand may be greater that what was perceived just a couple of weeks ago.
Changing circumstances
What's happened to change people's minds? It started with the September employment report. It wasn't great, but it showed that the economy added 103,000 jobs during the month. If the economy was heading toward recession, it wouldn't be adding jobs.
The latest piece of clarifying news came late last week in the form of stronger than expected retail sales. Yes, consumers were spending again, and not just on necessities. Car sales were up nicely.
Businesses adding jobs and consumers spending money seems to indicate, in the minds of traders, that the economy may still be week, but it's not headed for recession.
Jobs going begging
While the unemployment rate is too high, a number of business executives have complained they have openings they can't fill because they can't find qualified applicants. Some estimates put the total of unfilled jobs as high as three million.
All of this suggests that recent worries about a double dip recession have more to do with economic problems in Europe and less about what's happening in the U.S. economy.
While a stronger-than-expected economy is good news, for consumers it's likely to mean that gasoline prices have stopped their slid toward the $3 a gallon mark and will probably start heading up again.
Daniel Long (Mon, 17 Oct 2011 15:18:10 +0000): Well this figures...lower the stupid gas prices and maybe...just maybe it will help people be able to afford to go out and find these jobs.
Daniel Gordon (Mon, 17 Oct 2011 16:00:59 +0000): The people with money are screwing us. I still say that if gas prices would get to around 2.60/2.85 p/gal. our economy would do a turn around. I predict that with gas prices going up, consumer spending will go down. (The only reason they may stay up is the holiday season.) Traders stop driving the price up! Get the price per barrel back under $75 p/gal. You are still making money! Let the rest of us earn and spend some!
Jolly Jim (Mon, 17 Oct 2011 17:10:53 +0000): What are those 3 million jobs and where are they? It is time to stop speculation on the markets.
Faye-Linda Quimby McGovern (Mon, 17 Oct 2011 21:14:17 +0000): financil markets, financial market....I am so sick of hearing about it. It's the damn speculators IN the financial market are are playing games with the economy...please make the politicians start making laws about the speculators....leave the poor people alone. Haven't the politicians taken enough away from the poor people? Start attacking the rich!
Frank Cole (Tue, 18 Oct 2011 01:02:23 +0000): Yeah, yeah, yeah. That's why Lowe's is laying-off 2,000 employees, the GAP is closing stores and housing continues to be in the dumps. Have you bothered to look at the plunge in shipping from overseas and the rail and trucking statistics to see what kind of holiday shopping season is expected? This article is pure 'happy talk' drivel.
Bonita Lewis (Mon, 24 Oct 2011 17:02:54 +0000): If something isn't done soon about gas prices, the reccession will be gainning ground again instead of fading, because no one can afford these high prices.