It has been an exceptionally cold winter so far. That is not a regional trend. There are reports of extreme cold from all over the world. Drudge is reporting that the UK is running out of natural gas.
The price of crude oil has been on the rise. There is usually a 3 week lag between the increase in crude oil and the increase in gasoline prices. The last time crude oil was at the current level, gasoline was going for about $3.00 per gallon.
All the signs say that the price of gasoline and oil will continue to rise. Add to that the huge national deficit, low interest rates, the government “stimulus” and the economy showing signs of rebounding (due to lower inventories) and I think we are in for another spike in energy prices and an energy spike will surely dampen any economic recovery.
It has been my theory that the price of energy started the housing collapse. People who were over leveraged on real estate investments couldn’t keep up when gasoline hit $4 per gallon. High energy prices started the flood of foreclosures. The energy price spike didn’t cause the housing market to collapse, but I think it was a catalyst.
Keep an eye on the price of gas. This go round, an energy price spike could set of the inflation that most assume is coming. Inflation will be followed by high interest rates which makes it harder for businesses to grow.
The stock market continues to show good signs…I can’t figure out why. I assume, part of the growth this year is a result of stocks being undervalued during the great panic of 2008-2009. Part of the growth can also be attributed to low interest rates. People have to put their money somewhere. What’s going to happen when the interest rates start to rise again?
Crazy Prediction: Gasoline will be $3.50 per gallon by the end of February. 2010 will have slow growth (under 2%) and unemployment will remain above 8% all year.
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