The Dow lost 168 points today, as oil prices continue to advance. As I wrote about in Saturday's column in the News Press, gasoline futures trade on Brent, North Sea Crude futures prices, which have been rising dramatically over the past few months. While WTI (West Texas Intermediate) is trading just under $100 per barrel, up $2.66 today, Brent is pushing $114 per barrel. I filled-out yesterday at $3.75 a gallon. I think we could easily see $5 or even $5,50 per gallon this summer.
Although Bernanke spoke today and stated that he feels that gasoline prices could spike and the economy could still continue to grow, and that inflation would not be a serious concern, I don't buy it. If gas prices break through $5 a gallon this summer, the economy is going to suffer. For every penny that gasoline rises, it costs consumers $1 billion. That is $1 billion that comes right out of consumer spending that would occur in other areas of the economy, but is gone forever. Gasoline prices rose 17 cent a gallon last week alone, which means that $17 billion of spending was taken out of the economy. A one-dollar rise would take $100 billion out of the economy, and would continue to take money out of the economy for as long as prices stay elevated.
There is a lot to worry about with all that is happening with oil. Add to this the possibility of deterioration in the Middle East and a possible closure of the Suez Canal, or worse, a revolution or even a war, and we have the makings of a serious threat to our economy.