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Tuesday, September 11, 2007

Gas And Oil

The bright spot has been the decline in gas prices this summer. In some areas, the regular price has dropped from neutral into the stimulative range.

Today OPEC agreed to expand output by 500,000 barrels a day, over, of course, opposition by countries such as Iran and Venezuela. Algeria also opposed the measure.

Gas and fuel pricing has huge implications for inflation. Gas prices also affect consumer confidence and directly change the amount of discretionary income consumers have. Diesel prices function as a type of VAT tax on the economy which gets slapped onto just about every product consumers buy, including, of course, gas itself. Diesel prices have risen over the year, and are offsetting some of the stimulus from gas prices:

Here's another glimpse at how gasoline prices might affect the consumer. It is especially interesting (at least to me) to see how gasoline prices behaved during our last consumer recession (early 1990s).

Gasoline Prices and the Business Cycle
Gas prices have been up in Detroit this summer. Way up compared to the winter. They've actually been on a roller coaster this summer, with the peak being back in May. Still seem very high at the moment...
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