Quote du Jour: Rising oil = head wind

By Prieur du Plessis, on December 24th, 2010 posted in: Economy, Oil

The crude oil price has been scaling new recovery highs over the past few days and indications are that the trend is solidly up. Although oil is marching higher as a result of increased demand, an increasing price also represents a head wind for the economy – almost like an additional tax. Here is why:

“Every $1 per barrel rise in oil decreases U.S. GDP by about $100 billion per year, and every one cent increase in the gasoline price decreases U.S. consumer disposable income by about $600 million per year,” said Joseph Lazzaro of Daily Finance.

The price chart of gasoline is below and the oil chart is here.

Source: Business Insider – Clusterstock, December 23, 2010.

Source: Bob Englehart, Comics.com, December 22, 2010.

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nandarani

December 24, 2010 at 11:53 pm

I do not understand how anyone would not find what you say here obvious – how there could be any question about it. Shipping costs will go up, air travel will become more expensive. Fuel is the life blood of the economy. Those who are in charge of the price making would like it to be at $200 a barrel and are moving it in that direction as rapidly as the American public will tolerate. See Lindsey Williams reports from CEO’s of top oil companies, in videos on youtube. If the price is raised too rapidly, the frogs will jump out of the boiling water; if the heat is turned up more slowly, horrendous things can be implemented. In fact, inflation means that the oil producing nations really ARE getting less bang for the bucks they are receiving for their oil.

Oil is such a big deal that, if you look beneathe the surface and do the research you will find that rebuilding in the Gulf area is being prevented because the end game is to have no people there, and an area devoted to oil production. This is a fact; the information is available online. IN addition, the BP disaster is not as it appears on the surface, an accident. Information about that, too, is available online.