Gasoline averages close to $ 5 a gallon in the United States, but at a time when consumers are feeling the pinch, prices are still not at the level that would push the economy into recession, economists say.
It is unknown at this time what he will do after leaving the post. Some suggest that this could possibly lead the economy, not just petrol, to a tailspin. That said, economists say a recession is really possible if fuel prices rise to higher levels and stay there longer.
According to the AAA, the national average of a gallon of unleaded gasoline was बिहीबार 4.97 on Thursday, rising about 65 cents in just one month.
Compounding the pinch at the pump means that other costs are also rising, with inflation running at 8.3% this spring compared to last year. Rising natural gas prices are creating higher overall energy prices, while food and fares are also rising.
“I think we’re in a particularly extreme situation right now,” said Harrison Fell, a senior research scholar at Columbia University’s Center on Global Energy Policy. “I don’t think many economists would argue that मूल्य 5 would minimize the price of gas. I think most of us would agree on stable prices that would drag the economy down without high policy intervention. Whether or not this is enough to push us into recession is an unknown factor.”
Economists are keeping a close eye on gas prices as growth accelerates. Drivers have seen rising fuel prices, and higher gas prices could affect consumer sentiment and inflation expectations.
Economists note, however, that rising wages and a strong job market are acting as insulation against higher prices. Unlike in 2008, when gasoline rose and the economy slumped, consumers were in much better shape.
“While there is clearly a shock, and there is a tension in the consumer budget, the good news is that there is support for a healthy labor market and there is still a surplus of that surplus. In 2008, there was zero savings,” said Michelle Meyer. , Said MasterCard’s chief economist, United States.
Domestic balance sheets were weak in 2008, and consumers were heavily in debt. “It simply came to our notice then. … It was very difficult to absorb the price shock, ”Meyer said.
According to Mastercard SpendingPulse, which measures overall retail sales across all payment types, nominal spending at petrol stations in recent months has grown at a trend pace of nearly 30% compared to the same time in 2019.
The mayor says that despite the rise in gas prices over the past two months, nominal spending growth has remained stable. She said consumers have cut back on how much petrol they buy after spending the same amount.
“There has been some pullback in actual consumption or use. This means consumers are trying to figure out how to balance their spending preferences,” she said.
Another big difference between now and 2008 is that vehicles are more fuel efficient and there are more hybrid and electric vehicles on the road. Many people who work remotely or in the office on a part-time basis also have more flexibility in transportation.
“For the average person out there, it feels very different, depending on how much they are exposed to gas prices,” Meyer said.
Mark Jandy, chief economist at Moody’s Analytics, said the economy is stable, but there are some signs that petrol prices could create a drag. For example, some automakers reported a sharp drop in sales in May, a month where gasoline prices rose sharply. The decline was particularly noticeable in large sports utility vehicle sales.
“It suggests that gas is playing a role. It has realized the demand side, not the supply side. Of all the economic indicators out there, that is the one that worries me the most about what’s happening,” he said.
Economists are closely monitoring consumer trends for behavioral changes. Lately, the use of credit cards has been increasing and consumers are taking more and more loans. “It looks like low- and middle-income families are starting to borrow,” he said.
So far, Jandy has not seen petrol at a point where it is undermining the economy’s growth potential, and he does not expect a recession this year.
“I don’t think we’re there yet. If we get to $ 5.50 or $ 6, that would be equivalent to $ 150 for a barrel of oil. I think we’re done. We’re in a recession,” he said. Will be I think we can digest $ 120 if we don’t stay there long. “
He said that by reducing the pressure on petrol prices, he expects oil prices to rise closer to current levels and reach below १०० 100 a barrel by next year.
“The economy is definitely in thin ice here. We need a little bit of luck in the price of oil,” he said. Jandy said he sees a three-fold possibility of a recession in the next 12 months, and a near-term possibility for a recession in the next 24 months.
Gasoline prices have risen as more Americans choose to spend on things like travel and recreation. The determination to return to normal activities may keep the demand for petrol high or else the price may go up.
“It simply came to our notice then. I think people were in a better position to weather those high gas prices now. With this paint-up demand for travel, it is saving us from this $ 5 gas price, ”Fell said.
Also, petrol prices, while on record, are not at the levels reached in 2008, when measured in salary adjustment terms.
Wells Fargo senior economist Sarah House estimates that petrol will average $ 4.84 per gallon for the month. To make it equal to the 2008 level, based on the wage adjustment basis, prices should reach 4 6.41 per gallon, the House said.
“It will take more than the high price of petrol to push the economy into recession,” the House said. “We’re sluggish, but it’s still a significant number of things we’ve done.”
In a warning, he noted that consumers are struggling with the fastest rising inflation in decades, and that petrol adds to that burden.
“It’s just another straw in the camel’s back,” she said. Unlike some economists, the House does not believe inflation has reached a peak due to uncertainty over how high energy prices could go.
How much can the price of gas increase?
Oil prices hit a record high of डलर 130 a barrel in March after Russia invaded Ukraine, but fell again. Crude oil has risen again and could be higher in the wake of further European sanctions on Russian oil and the reopening of the Chinese economy following the recent cowardly shutdown. West Texas Intermediate crude futures were down less than $ 122 a barrel on Thursday.
Petrol prices rise with oil, but there is also a lower-than-normal supply due to a reduction in global refining. In the US alone, processing capacity is below the pre-pandemic level of 1 million barrels per day due to outages and shutdowns.
JPMorgan analysts expect gasoline prices to rise to $ 6.20 per gallon by August, but other analysts expect the maximum price to be close to $ 5.25 per gallon as drivers are likely to cut back.
Patrick Dehan, head of Petroleum Analysis at Gas Buddy, said the demand for driving at Memorial Day weekend, the start of the summer driving season, was lower than last year.
The Energy Information Administration reports that drivers used 8.98 million barrels of gasoline during the weekend. Last year, that level was 9.2 million barrels per day. In 2019 drivers used 9.4 million barrels a day over a comparable period.
Dehan said he expects the run-up in petrol prices to be almost at an all-time high, but all conditions are off if there is a supply disruption.
“If we get a storm, if there is a refinery kink, we’re going to go up to 50 5.50 or $ 6. Generally the peak is much more predictable than this year,” he said.