Rising Oil Prices Not Hurting Economic Recovery…Yet
According to a Wall Street Journal article published on Wednesday, the jump in oil prices to one-year highs this month has yet to stunt economic recovery.
Oil prices have risen nearly 13% in October and have recently been hovering around $80 a barrel. Meanwhile, the US dollar continues to weaken. As we previously reported, this price spike (combined with other factors) has made analysts nervous. Last week, US Energy Secretary Steven Chu told Reuters that he fears another price spike and would prefer stable prices for the sake of the economy. “Even $80 is making me nervous,” he said.
Nobuo Tanaka, the International Energy Agency’s executive director, has also expressed that “the rapid hike of the price is certainly a concern.” Too much, too soon could make raw materials prohibitively expensive and hinder manufacturing activity.
Though the strength of the economy remains fragile heading into the holiday spending season, many economists agree that threats to the recovering economy won’t become dangerous until gasoline climbs above $3 a gallon.
“Eighty dollars a barrel is not a showstopper,” U.S. economist Brian Bethune told the WSJ. “We need to be at $90 to $100 a barrel before things get more serious. The problem is underlying consumption spending is not strong.”