Follow America’s petrol prices over the next couple of months as the summer driving season hits full speed.
They are creeping towards $US3 a gallon and consumers and economists in the US and elsewhere are starting to be worried.
It could derail not only America’s summer holidays for a second year in a row, but whither the green shoots and send the economy back to flat-lining.
Rising oil prices are the driver, helped by a weakening US dollar as market fret about huge debts and inflation.
Rising oil prices boosted US petrol prices past the $US4 a gallon (and prices were forced higher the world over) in 2008.
That sucked out hundreds of billions of dollars in consumer spending on everything and eventually crippled spending around the world, leaving economic demand vulnerable to the impact of the Lehman Brothers failure.
US petrol prices have risen every day since April 29, and are nearly $US1, or 60% higher, since the beginning of this year.
According to US motorist group AAA, the national average now stands at $US2.632 a gallon.
As gas prices rise, analysts warn that consumers will be forced to cut back on spending in other areas.
That could make it harder for the economy to recover because consumer spending makes up around 70% of US economic activity each year.
While petrol prices are still well below the highs of last summer, the US economy is much weaker, have been mortally wounded by the impact of the Lehman Brothers collapse on demand in America and around the world.
Unemployment is still rising through 26 year highs and housing market is deeply depressed, no matter what some analysts say about a steadying now said to be happening.
That is not recovery and activity in housing remains in deep sedation, with prices still falling.
Oil prices peaked above $US73 a barrel in New York last week and closed at $US72.04 a barrel, on Friday, down a drop of 64 cents from Thursday’s close.
The New York contract price jumped about $US5 over three days last week to Thursday, peaking at $US73.23 in intraday trade on Thursday, its highest level since October last year.
On May 1, the price was around $US50 a barrel.
Government figures showed Wednesday that demand for gas was up year-over-year for the first time in 2009, while retail sales figures for May showed a rise (the first in two months), due in large part to higher petrol prices and a rise in car sales as General Motors and Chrysler led attempts by car makers to quit unsold stocks by big price cuts.
The impact of rising petrol prices was seen in May’s import prices which jumped a sharp 1.3% in the month, (up 1.1% in April).
It was the largest monthly rise since last July, when the oil price surge peaked and started easing as the us dollar started to rise.
This year its once again the falling dollar helping drive oil prices (and other commodity prices) higher.
But all things remain relative, thanks to the price difference between now and last May (and the recession), import prices in may were 17.6% lower than in May 2008.
Imported petroleum prices were up 8.3% in May, the fourth consecutive gain after bottoming in January, but were 51.4% lower over the year.
So there’s a long way to go, but the gap is narrowing and the US and other major economies are not equipped to withstand the pain, as they were last year.
The brutal fall in US car sales started around the time a year ago. That brought Chrysler and GM undone.
So watch those monthly car sales figures for the next few months.
They will be an early indicator of any damage to US economic activity.
A lurch downwards in the level of sales will tell us the American consumer has given up the ghost and the economy has lost a vital underpinning for the second year in a row.
