The crude oil price has been scaling new recovery highs over the past few days and indications are that the trend is solidly up. Although oil is marching higher as a result of increased demand, an increasing price also represents a head wind for the economy – almost like an additional tax. Here is why:
“Every $1 per barrel rise in oil decreases U.S. GDP by about $100 billion per year, and every one cent increase in the gasoline price decreases U.S. consumer disposable income by about $600 million per year,” said Joseph Lazzaro of Daily Finance.
The price chart of gasoline is below and the oil chart is here.
Source: Business Insider – Clusterstock, December 23, 2010.
Source: Bob Englehart, Comics.com, December 22, 2010.
