At my homepage www.rolf-martens.com I've added today, under "News with
brief
comments":
Monday, 10 March 2008 (NWBC 354) J. B. Bruno, AP: "Oil Rally May Be
Economy's
Undoing"
2008-03-10, 10:35 GMT:
Below I'm reproducing an AP article headlined as above, of 08.03. See also
my
"UNITE! Infos":
#241en: "Why is the oil price so high? (1)" (11.08.2005),
#242en: "Why is the oil price so high? (2)" (13.08.2005),
#243en: "Why is the oil price so high? (3)" (26.08.2005),
#262en: "Why is the oil price so high? (4)" (26.08.2006),
#275en: "Will the world economy crash? (1)" (15.03.2007) and
#305en: "Will the world economy crash? (2) - An article in the Boston
Globe"
(28.01.2008)
- and of course Karl Marx: "Capital", at the Marxists Internet Archive.
[http://www.marxists.org/archive/marx/works/1867-c1/
http://www.marxists.org/]
[QUOTE:]
Oil Rally May Be Economy's Undoing
By JOE BEL BRUNO 2 days ago
NEW YORK (AP) Preoccupied the last few months with shrinking credit and
a
slumping economy, Wall Street has all but ignored the relentless rise in
oil
prices that has taken a barrel of crude to a once-unthinkable $106.
But the market may not be able to look the other way much longer
especially
when consumers, already hurting from the soaring cost of gasoline, find
themselves paying even more to fill their tanks come spring.
"Investors are just getting used to higher oil prices in what has really
been a
stealth rally," said Peter Dunay, chief investment strategist with
Meridian
Equity Partners.
He said lofty oil prices "should be getting lots of attention" by Wall
Street.
But, investors have instead been distracted by a nearly endless stream of
bad
news about the economy from banks taking steep write-downs for soured
mortgages to the loss of tens of thousands of jobs.
To be sure, there is a lot for Wall Street to worry about these days.
Major
stock indexes have slid by double digits since the start of the year as
economists fear the economy might already be in a recession. And, the
summer's
subprime mortgage collapse continues to threaten financial institutions
around
the world.
Although there certainly were many days last year that Wall Street tumbled
in
response to the puni****ng march in oil prices, the advance toward $100 a
barrel
at 2007's end and the surpassing of that milestone this year might
actually
have been welcomed by some investors. Institutions have been piling into
crude
along with other commodities to flee not just sagging stocks but also
the
flailing U.S. dollar.
The greenback's fall against other major currencies has helped drive
buying
across commodities as investors overseas view dollar-denominated assets as
relatively cheap. Meanwhile, big institutional investors have used hard
assets
like oil as a hedge against inflation.
On Friday, oil prices jumped to a new record above $106 on the New York
Mercantile Exchange. At the pump, gas prices are 68 cents higher than a
year
ago, and within a nickel of last May's record price of $3.227 a gallon.
And
they can only go higher as the summer driving season, which always sends
gas
climbing, arrives.
Those prices, which have sent the cost of almost everything in the economy
higher, are expected to translate into a further increase in inflation. A
growing number of economists are becoming concerned that the Federal
Reserve,
which has been cutting rates in hopes of reinvigorating the economy, will
be
forced to stop because of the overall effect of more expensive energy.
Should the central bank cut rates at its March 18 meeting, which is widely
expected, that move could also further weaken the dollar and possibly
keep
the cycle of rising oil prices going.
Then there is the problem of an even greater impact on the consumer
whose
growing hesitation about spending has been reflected in weak retail sales,
even
during the holiday season. What happens as gasoline prices in particular
increase? The fear is that Americans, forced to pay more money for
gasoline and
overwhelmed by other economic issues, will continue to hunker down.
"The U.S. consumer, who has carried the economy for the past half-dozen
years,
is in full defensive mode, battered by falling housing values, spiking
food and
energy prices, tightening lending standards, the teetering stock market
and
hints of weakening in the labor market," said T.J. Marta, economic and
fixed
income strategist for RBC Capital Markets.
He said the consumer is clearly pulling back, and the retrenchment could
dramatically pick up speed as energy prices rise. Losing the consumer
whose
spending accounts for more than two-thirds of the U.S. economy would
have
disastrous effects, analysts said.
Wal-Mart Stores Inc. re****ted better-than-expected same-store sales for
February this past week. However, investors' cheer was short-lived as the
gains
appeared to come from bargain-seeking consumers who appeared to pare their
purchases elsewhere.
Dunay said monitoring earnings and sales re****ts at the world's largest
retailer is a good way to gauge the mood of consumers. And it's not just
big-ticket purchases like televisions and computers used to determine if
consumers are nervous.
"Many Wal-Marts have started to stock more food on their shelves," he
said.
"And, that's a really telling sign."
AP Business Writer John Wilen contributed to this re****t.
[END OF QUOTE]
_____________________
Message posted by:
Rolf Martens
Malmφ, Sweden
Phone and fax:
+46 - 40 - 124832;
rolf.martens@[EMAIL PROTECTED]
|
