Oil Prices WILL Slow The Economy
Lance Roberts | Mar 01, 2012 12:47AM ET
Over the last few days they have been quite a few articles and comments made about the recent rise in oil and gasoline prices.There is a growing consensus among the mainstream analyst community that "this time is different" because the rise in oil prices, and the subsequent rise in gasoline prices our recent post on this subject . With net reportable contracts on crude oil at the second highest level on record, combined with continued infusions of liquidity into the global markets (as with the second round of LTRO today), it is only a function of time until that liquidity finds its way into the highly liquid and leveraged oil and commodity markets driving prices higher.
This will ultimately show up in headline consumer inflation as well as in the upcoming personal income reports as consumers divert more income into basic necessities of food and energy. This ultimately detracts from their ability to purchase other discretionary items impacting corporate earnings and will continue to pressure on already reduced profit margin expectations.
While rising oil and gasoline prices have not immediately thrown the economy "under the bus" it doesn't mean that it won't happen. With a tremendous amount of artificial intervention into the financial markets and economies on a global scale - things can remain irrational longer than most expect.The trap, however, is being complacent that "this time is different" - it never is.Furhermore, complacency can lead to far greater losses than you can imagine.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.