Most of the economists interviewed say something along the lines of this observation by Bernard Baumohl, chief global economist for the Economic Outlook Group: "Once we cross the $4 threshold, the pain will become more palpable, and it is going to show up more noticeably in the reduction in future consumer spending." He predicts "spending on discretionary goods will be diminishing as the price of gasoline keeps moving higher."
Others point to the travel industry as being particularly vulnerable. As an AAA spokesman says, "People just don't have the elasticity in their budgets." A sign of how desperate -- or, perhaps, befuddling -- things may be can be gleaned by the subhed on an MSNBC story about drivers cutting back on demand: "A puzzling decline because Americans usually curb driving only as last resort."
In the "Money & Company" blog over at the Los Angeles Times, Ronald D. White gives a bit more space to Tom Kloza, chief oil analyst for the Oil Price Information Service, who was the source of the "tipping point" metaphor in the New York Times story above. He foresees "dire consequences" to the consumer economy if the national average price strays above $4 for very long.
But he also points out that oil prices were falling yesterday even as Moammar Kadafi was said to have accepted a plan by a delegation of African leaders to end the conflict in Libya that was seemingly responsible for the latest price surge.
In fact, "long-term commodity bull Goldman Sachs warned clients on Monday to lock in trading profits before oil and other markets reverse," Reuters' David Sheppard reports. "Not only are there now nascent signs of oil demand destruction in the United States," Goldman's commodity team points out in a note, "but also record speculative length in the oil market, elections in Nigeria and a potential ceasefire in Libya that has begun to offset some of the upside risk‚ owing to contagion." How is it that Wall Street types can make good-news scenarios sound like bad news?
SF Gate, meanwhile, is running an on-the-other-hand piece supplied by Investopedia pointing out that "oil has a bigger impact on our economy than any other commodity" but that rising prices are actually good news for several industries. It cites six that purportedly hope that the needle keeps ticking upwards: 1. Oil Substitutes and Alternative Energy; 2. Insulation Companies; 3. Hybrid Vehicles; 4. Industrial Gas Vendors; 5. Recycling Companies; 6. Waste Management Companies.
While all this is going on, we are on the cusp of the first anniversary of the explosion of the Deepwater Horizon oil-rig and the massive oil spill that resulted -- an event that is not escaping the attention of BP and its advertising agency, Oglivy, Sarah Shearman reports in Marketing.
Body copy in a newspaper ad says: "This was a tragedy that should not have happened. Our responsibility is to learn from it and share with competitors, partners, governments and regulators to help ensure that it never happens again." The tagline: "One year later. Our commitment continues."
I have been watching a BP station in northern Westchester County, N.Y., that sits across from an ExxonMobil station. Both stations seem to have had the same low prices over the last year. The ExxonMobil's 12 pumps always seemed to be busy but when I'd glance across the street, it looked like a ghost town. I couldn't help but wonder if I was witnessing consumers trying to stand up and exert a little bit of influence on the market.
Well, I noticed that the situation had reversed itself a few weeks ago. Does time heal all consumer boycotts? Or did the fact that BP suddenly was selling gas a few pennies a gallon cheaper than ExxonMobil have something to do with it? You think I'd jeopardize my own green credentials for about 70 cents on a fill-up? Let's just say I paid more heed to the well-known fact that avoiding BP stations was hurting independent station owners more than arrogant and insensitive executives.
The New York Times, meanwhile, has a good news/bad news retrospective in its Science section on the environmental impact of the spill that, in essence, concludes that it will be many years before we really know what the repercussions will actually be -- not only to the gulf and its plant and animal life but also to the surrounding marshland that has been blackened by oil.
"Hundreds of scientists are working day and night trying to carve out a piece of that giant puzzle, but it is an entire region and it is complicated," Christopher Reddy, a senior scientist at the Woods Hole Oceanographic Institution who studies long-term consequences of oil spills, tells Leslie Kaufman.
This situation seems murky all around.