Posted in: Opinion,
by Patrick DeHaan on Mar 12, 2010 12:14 PM
As much as it stinks to hear, sometimes rising gasoline prices are partially our own fault. The fact that Americans are beginning to spend more shows that the economy is on the mend, and while Americans may be buying more food or clothes, they're also making more trips to the store, the mall, etc. The one product letting them get there is gasoline. We can directly tie increased shopping purchases and retail sales increases to gasoline demand. The more people are purchasing, the more gasoline they're undoubtedly using to get to stores or to the mall.
February's retail sales report showed definite signs of people beginning to open their wallets more for items they want, but that also means they should prepare to pay more at the pump as well. While I have recently been a fan of calling into question why gasoline prices are rising, these kinds of reports show a big reason why. American's pocketbooks are fueling speculators to think that the economy is heading higher, and speculators in turn bet on higher prices in the future.
I realize that not everyone is shopping more- I for one am not (or am I? I guess I don't really know, but I have a feeling). It doesn't matter what a few Americans do, but it does matter what Americans (and Canadians for that matter) spend their money on. The more they shell out for new vehicles, clothing, food, electronics, the more the economy improves. The recovery means that some are more willing (even though they complain in the background) to pay more for gasoline.
Gone are the days when we can enjoy a solid economy and cheap gasoline- even five years ago we saw some stability, but today, oil is almost directly tied to how well the economy is doing. Back in late 2008 as the economy crashed, so did oil. We all loved gasoline prices under $2, but there was fear and concern accompanied with that for some. Now it seems many are feeling better about things- the stock market is improving, people are spending more, thus oil prices rise.
Demand is much more likely to increase on the heels of recovery, not fall, so oil prices are supported. I just want to say this- we- Americans and Canadians- have a choice to make. If we want cheaper gasoline, we have to spend less on other things, which would indicate a slower recovery. If people start opening their wallets for clothes, trips out to eat, and other entertainment, demand for gasoline (and other oil products) will rise. It's our choice whether we believe it or not... if you're one that is increasing your discretionary spending, be ready to pay more at the pump. For the rest of us who are frustrated and aren't spending more, we can do little more but hang on for the ride.