Oil below $60, gasoline follows suit
Economic data continues to get worse in the US. Consumer spending continues to slow according to surveys and retail sales data. The Federal government is currently working on details of a major new bailout plan designed to help lenders work with struggling homeowners to avoid foreclosures.
As the data continues to paint a negative picture for the economy, oil and gasoline prices remain on their downward price trend. For many consumers, prices at the pump have been the silver lining in the daily cloud of uncertainty and fear about the bigger picture economy. Many consumers are spending half of what they were on gas in the late summer. Lower natural gas prices could be a benefit through the cold winter months many face in the near future as well.
Light sweet crude oil closed the New York trading day Tuesday (November 11) at $59.33 per barrel. This marks the low 20 month low point for the commodity. It is hard to believe forecasters were discussing how long the super spike would continue in mid-July when oil reached its all-time peak over $147.
Gasoline fell to a national average of $2.22 per gallon. This is down a remarkable 32 per cent just in the last month and down from the $4.11 national average in mid-July. The news is even better in many states where gas is well below $2.00 per gallon. Some parts of the country are approaching $1.50 quickly. Several stations in Des Moines, Iowa were at $1.77 per gallon Monday and Tuesday.
The less expensive travel costs are definitely helpful to Americans burdened with historically high unemployment and unstable economic conditions. Many retailers are hurting as the always important holiday shopping season approaches. Strapped middle-class consumers simply cannot afford much of the discretionary items on store shelves at the present time. Black Friday, the affectionate name given to the busiest shopping day of the year (Friday after Thanksgiving), may be known as a “dark day†for different reasons in 2008.
Many transportation and travel-dependent business operator are also very thankful for cheaper fuel costs. The lower cost of operation has helped some companies counter drops in sales and business. The International Energy Agency is widely expected to cut its forecast for 2009 global oil demand for the third consecutive month. This is a sign that gasoline prices should continue to remain low, and perhaps fall even farther if the trend continues.
In the summer months, high gasoline prices were a hot button issue on many political fronts. Oil and gas prices dominated many of the headlines in business and news media. Although Americans appreciate the lower prices at the pump, one could speculate that some might be willing to trade a little bit higher fuel cost for positive signs of a stable economy, reduced risk of foreclosure, and better job opportunities.
This may, in fact, be the trade-off is the economy does stabilize. Much of the drop in oil and gasoline has been credited to slowing global demand as consumers cut expenses. When the economy shows signs of stability, some consumers and businesses may go back to business, and driving, as usual.
Market Recap
Stocks have started off another trading week on a sour note. After a modest 76 point Dow drop Monday, the blue chip index gave up 176 points Tuesday. The NASDAQ and S&P were down 35 and 20 on Tuesday as well. The big news is a new federal assistance program in the works to aid struggling homeowners faced with foreclosure. There are already outcries about alleged abuse of funds and lack of transparency with the $700 billion bailout package. Consumer spending data showed a continued slump. Oil and gas are still down.
Neil Kokemuller
Tuesday, November 11, 2008
9:49 PM EST
Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.
Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.
About Pete Southern
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.
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