Watch Out For The Price Of Oil

Posted: May 26, 2009 in Technology and Business
No doubt, there’s a lot wrong with the world economy.
 
But, for the last few months, I’ve been telling folks that I thought the average U.S. consumer — the same consumer that drives 2/3rds of the U.S. economy — the same economy that sparks the rest of the world — was actually better off today than a year ago…
 
… primarily because oil at $30-$60 a barrel — vs. $150 (or, God help us, $200) — affects the U.S. consumer way more dramatically than just about everything else broken out there.
 
Two recent data points support this:  Last week’s Lowes’ results (Lowes is home improvement)… and today’s jump in consumer confidence.  Both wouldn’t have happened if the average U.S. consumer was actually, truly worse off.
 
So here’s the flag:  Watch out for oil prices. 
 
If oil continues to climb — and it’s almost doubled in the last few months — I think that could cause more consumer trouble than all the other bad stuff that may happen.
 
Like last time, I think $100 a barrel is the negative tipping point.
 
Update:  Stephen Schork, editor of The Schork Report, which comments a lot on oil, recently said his tipping point is $75… at that price, gas is $3 a gallon… and at that price, that’s when the Federal Highway Administration says drivers start scaling back, which means at $3 a gallon, the U.S. consumer isn’t feeling so good any more.  Which (with oil at between $75 and $100) makes me not feel so good any more about this market.  Watch out for the price of oil.

Update:  Another noted economist, Nouriel Roubini, weighs in about the dangers of $100 oil.

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