|Users Online Now: 2,861 (Who's On?)||Visitors Today: 1,306,540|
|Pageviews Today: 1,919,559||Threads Today: 472||Posts Today: 9,868|
Oil price spike has wide economic impact
User ID: 328162
05/23/2008 12:58 AM
Report Abusive Post
Report Copyright Violation
As dire forecasts about runaway oil prices become reality, it’s impossible to know how much higher they’ll go. But the impact of the price surge already is being widely felt. And if prices go much higher, the damage to the U.S. economy will be deeper and wider than the fallout from the run-up so far.
Oil prices have doubled in the past year and have shot up nearly 50 percent since January to a record $135 a barrel. Much of the rise appears to be driven by speculators betting that tight supplies — or outright shortages — will push prices even higher.
Consumers — already hit with rising prices and flat wages — are being stretched further. As the Memorial Day weekend kicks off the summer driving season, gasoline prices are at record levels, reaching a national average above $3.83 a gallon. Some analysts predict the average will break past $4 as early as next week. In some parts of the country, prices are already closing in on $5.
“We're already in a mild recession,” said Lakshman Achuthan, an economist at the Economic Cycle Research Institute. “I think if we go towards $150 (a barrel), we start talking about something worse than a mild recession.”
The surge in oil prices is hitting some parts of the economy harder than others. Companies that use lots of oil have already been hurt; the recent surge will only make matters worse.
Airlines have been struggling to make a profit, even as they cut jobs and flights. American Airlines became the latest to announce it was tightening its belt another notch, saying Thursday that it plans to shrink capacity by as much as 12 percent and cut thousands of jobs.
To offset the rapid rise in jet fuel prices, the airline also said it plans to start charging passengers $15 to check the first bag of luggage for each passenger. United Airlines said it’s considering a similar move. The carriers already charge $25 for a second bag.
“(Higher oil prices are) going to send some smaller airlines into bankruptcy," said Nick van den Brul, an airline analyst at the French investment bank, Exane BNP.
Surging gasoline prices are further dampening sales at U.S. carmakers, whose product lines are more heavily oriented toward higher-profit, lower-mileage trucks and SUVs than their foreign competitors.
Ford Motor Co. said Thursday it’s cutting production by 15 percent in the second quarter of this year and another 15 to 20 percent in the third quarter. Ford now says it won’t hit its target of getting back in the black by next year and may have to lay off more workers and close more plants.
Some parts of the economy will hold up relatively well; companies and regions that produce oil will do better. Oil companies are enjoying a spike in profits because production costs have not risen nearly as rapidly as market prices. Those higher profits could help boost local economies in regions where oil and natural gas are produced.
But those benefits will be more than offset by the negative effects of the surge in energy costs. Higher oil prices have already begun to spill over into higher costs for a variety of products and services, including food prices.
The threat of higher inflation makes life even more complicated for policymakers at the Federal Reserve, who have been slashing rates for nearly a year to try to offset the fallout from the housing slump and turmoil in the credit markets.
[link to www.msnbc.msn.com]
Who so boasteth himself of a false gift is like clouds and wind without rain.
|1||FEMA Contractor Predicts 'Social Unrest' Caused by 395% Food Price Spikes ..planning for impact of global food crisis lasting a decade||06/28/16|
|2||Soaring Prices Spike Canada's Inflation Rate||03/21/07|
|3||Gasoline price spike has only just begun||03/19/08|
|4||Gasoline price spike has only just begun shit!! i knew it!!||03/19/08|
|5||And once Again - Gas prices spike; refinery repairs blamed again||10/08/15|
|6||Hidden In The PPI Data Was The Largest Food Price Spike In 26 Years||04/22/10|
|7||California Gas Prices To Spike on Jan 1 because of 'Cap and Trade'||12/22/14|
|8||Spike in Gas Prices - us Stockpiling For War||10/31/09|
|9||Spike Lee: Hand of God Caused Economic Crisis to Get Obama Elected||01/20/09|
|10||Oil Price Spike Could Be Coming Soon As Companies Make ‘Historic’ Spending Cuts To Weather Market Downturn: IEA||03/23/16|