Another
weight around the economy’s neck as we head into the potentially troubled
waters of 2014 is the high price of fuel.
Oil and gasoline costs are unusually high given where we are in the
economic long wave; traditional cycle theory suggest fuel prices should be
considerably lower until the deflationary cycle bottoms out late next year or
early 2015.
The
latest spike in retail gasoline prices could be seasonal since the summer
driving season doesn’t end until next week.
With gasoline prices on the rise again, however, businesses and
consumers will be feeling the pinch if the trend continues beyond Labor Day. The dual factor of rising interest rates and
fuel costs are a potentially devastating one-two punch that has the potential
to torpedo the economic recovery assuming the trend continues.
Keep
in mind that it was the oil and gasoline price spike in the summer of 2008 that
served as the proverbial “straw that broke the camel’s back” during the credit
storm. The economic impact of high fuel
costs can never be underestimated when the economy is already weakened by the
undercurrents of the long-term deflationary cycle.
