Are Gasoline Prices Slowing the Progress of Our Economic Recovery?

Yesterday, when I filled up my, Lincoln MKZ Hybrid, gasoline tank I hit my all time record for the cost of a tank of gas, $64. So I started asking everyone I talked to, “How are the current gasoline prices affecting your activities?” They have all said gasoline prices are having an effect on how often they drive and the plans they are making for the summer.

Since crude oil is one of my three main indicators for stock market problems I decided to go back and see how crude and gasoline prices today relate to those in the past.

First, when crude oil prices go up near 80% on the first day of the month over the same price 12 months before, it signals a stock market problem coming. It has correctly signaled this January 1, 1974, September 1, 1979, July 1, 1987, September 1, 1990, November 1, 1999, July 1, 2000, October 1, 2004, November 1, 2007 and January 1, 2010. This was the only signal that called the October 1987 crash. So let’s take a look at what it is telling us today:

  • Crude oil prices were up 54.02% over the same price 12 months ago on May 1, 2011, current Midwest regular gasoline price were $4.19 per gallon.
  • The last time crude oil was this high was April 1, 2008, crude oil prices were $100.98 per barrel and gasoline prices were $3.71 per gallon.
  • By July 1, 2008 crude oil prices were $140.97 per barrel and Midwest regular gasoline prices were $4.21 per gallon.
  • Crude oil prices at or near $130.64 per barrel on June 1, 2011 would be a very red flag.

Interestingly enough, all reports show that we have a surplus of gasoline today. This is being explained because of all of the hybrid and high mileage cars that have been bought in the past few years.

If this is the case then why are prices so high? Well part of the reason is the political problems around the world in oil producing countries. The other part might be because of speculators within the investment markets. Our current gasoline prices are as high as when crude oil was at $140 per barrel not $111 per barrel. Why might that be?

Finally, why is this important to you: Crude oil has to do with everything you do and have; it does not just affect your gasoline prices? Crude oil is used for:

  • Farmer’s fertilizer when they are planting your food.
  • Medical chemicals.
  • Clothing chemicals.
  • Furniture finishing products.
  • Cleaning chemicals.
  • Transportation of products to factories and then to retailers and much more.

Only time will tell how big of a problem this is

About the author

Ted Feight, CFP®
Ted Feight, CFP®

I have been an asset, financial, life and wealth manager for 36 years. During that time the profession has been in a state of rapid evolution. What my core clients expect of me today is very different from what they expected 36 years ago When I started, clients were just beginning to invest and had little. Now many are near and or are retired, and have accumulated a great deal.
I believe I have given my clients peace of mind and comfort that occurs when they have had a trusted relationship with someone for many years. What keeps my clients coming back to us is not product, but the confidence that someone is looking out for their best interest, listening to what they are saying and serving as a partner in helping them get where they want to be. Who else has asked the questions about who they are, where do they want to go, and what drives them? I have been my clients' sounding board, confidant, coach, guru and in the end the stronger the relationship we have had, the greater were their successes. We do not always have the "Be your client's best friend" type of relationship but, in the end, I want to be their "go to" guy when they need questions answered or need help.

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