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gasoline

Arizona gas prices fall for 8th straight week

Arizona motorists are paying less at the pump for the eighth consecutive week.

Officials with Triple-A Arizona said Thursday that the average statewide price for unleaded regular gasoline is $3.11 a gallon. That’s down by nearly 11 cents from last week and represents the lowest pump prices this year.

This week’s national average is $3.21 per gallon, a decrease of more than 8 cents from last week.

Tucson has the lowest average gasoline price in Arizona at $2.90 a gallon while Flagstaff has the highest at $3.46.

Missouri has the lowest average gas prices in the continental U.S. at $2.96 a gallon with New York having the highest at $3.73 a gallon.

Barack Obama

Obama faces tough road with improving economy

Here’s the assignment President Barack Obama has won with his re-election: Improve an economy burdened by high unemployment, stagnant pay, a European financial crisis, slowing global growth and U.S. companies still too anxious to expand much.

And, oh yes, an economy that risks sinking into another recession if Congress can’t reach a budget deal to avert tax increases and deep spending cuts starting in January.

Yet the outlook isn’t all grim. Signs suggest that the next four years will coincide with a vastly healthier economy than the previous four, which overlapped the Great Recession.

Obama has said he would help create jobs by preserving low income tax rates for all except high-income Americans, spending more on public works and giving targeted tax breaks to businesses.

He used his victory speech in Chicago to stress that the economy is recovering and promised action in the coming months to reduce the government’s budget deficit, overhaul the tax system and reform immigration laws.

“We can build on the progress we’ve made and continue to fight for new jobs and new opportunity and new security for the middle class,” Obama said.

The jobs picture has already been improving gradually. Employers added a solid 171,000 jobs in October. Hiring was also stronger in August and September than first thought.

Cheaper gas and rising home prices have given Americans the confidence to spend slightly more. Retailers, auto dealers and manufacturers have been benefiting.

That said, most economists predict the improvement will remain steady but slow. The unemployment rate is 7.9 percent. Obama was re-elected Tuesday night with the highest unemployment rate for any incumbent president since Franklin Roosevelt.

Few think the rate will return to a normal level of 6 percent within the next two years. The Federal Reserve expects unemployment to be 7.6 percent or higher throughout 2013.

Economists surveyed last month by The Associated Press said they expected the economy to grow a lackluster 2.3 percent next year, too slight to generate strong job growth. From July through September, the economy grew at a meager 2 percent annual rate.

Part of the reason is that much of Europe has sunk into recession. Leaders there are struggling to defuse a debt crisis and save the euro currency. Europe buys 22 percent of America’s exports, and U.S. companies have invested heavily there. Any slowdown in Europe dents U.S. exports and corporate profits.

And China’s powerhouse economy is decelerating, slowing growth across Asia and beyond.

Most urgently, the U.S. economy will fall over a “fiscal cliff” without a budget deal by year’s end. Spending cuts and tax increases of about $1.2 trillion will start to kick in. The combination of those measures would likely trigger a recession and drive unemployment up to 9 percent next year, according to estimates by the Congressional Budget Office.

Many U.S. employers are wary of expanding or hiring until that potential crisis is averted. That’s why analysts have said resolving, or at least delaying, the fiscal cliff should be the most urgent economic priority for the White House.

In the longer run, analysts are more optimistic. Americans are feeling generally better about the economy. Measures of consumer confidence are at or near five-year highs.

And the main reason unemployment rose from 7.8 percent in September to 7.9 percent in October was that more people felt it was a good time to look for work. Most found jobs. Those who didn’t were counted as unemployed. (The government counts people without jobs as unemployed only if they’re looking for one.)

A brighter outlook among consumers is due, in part, to a steady increase in home prices after a painful six-year slump. Higher home prices can help create a “wealth effect,” making homeowners feel richer and spurring more spending.

Banks are also more likely to lend freely when home prices rise because homes are more likely to hold their value.

Americans have also been shrinking debts and saving slightly more. Household debt as a percentage of after-tax income dropped from about 125 percent before the recession to 103 percent in the April-June quarter, according to the Federal Reserve’s latest data. That ratio was roughly 90 percent in the 1990s.

But thanks to record-low interest rates, the cost of repaying those debts has dropped sharply. That, in turn, will free up more money for consumers to spend on cars, appliances and other goods.

Americans paid 10.7 percent of their after-tax income in interest on mortgages, credit cards and other consumer debt in this year’s April-June quarter, according to the Fed. That was down from 14 percent at the end of 2007. And it’s the lowest proportion since 1993.

“That’s 3 percentage points of disposable income that I am no longer using to pay for stuff that I bought earlier but I can instead use to buy stuff now,” noted Alan Levenson, chief economist at T. Rowe Price.

Economists note that economic recoveries after financial crises tend to be painfully slow. In part, that’s because time is needed for consumers to reduce debts and for banks to recover and lend again.

Paul Ashworth, an economist at Capital Economics, noted that banks have boosted lending for the past 18 months — another sign that the passage of time is helping the economy rebound.

Obama “is going to have an easier time of it … because we’re further along the road to recovery after the financial crisis,” Ashworth said.

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Rising gas prices could curtail consumer spending

Higher gas prices are crimping consumer spending and slowing the already-weak U.S. economy. And they could get worse in the coming months.

The Federal Reserve this week took steps to boost economic growth. But those stimulus measures are also pushing oil prices up. If gas prices follow, consumers will have less money to spend elsewhere.

The impact of the Fed’s actions “is likely to weigh on the value of the U.S. dollar and lift commodity prices,” said Joseph Carson, U.S. economist at AllianceBernstein. “We would not be surprised if (it) fueled more inflation in coming months, squeezing the real income of U.S. workers.”

Americans are already feeling pinched by high unemployment, slow wage growth and higher gas prices.

Consumers increased their spending at retail businesses by 0.9 percent in August, the Commerce Department reported Friday. But that was largely because they paid more for gas. Excluding the impact of gas prices and a sizeable increase in auto sales, retail sales rose just 0.1 percent.

Perhaps more telling is where Americans spent less. Consumers cut back on clothing, electronics and at general merchandise outlets — discretionary purchases that typically signal confidence in the economy.

Gas prices have risen more than 50 cents per gallon in the past two months. The national average was $3.87 a gallon on Friday. Most of the increase took place in August, which drove the biggest one-month increase in overall consumer prices in three years, the Labor Department said Friday in a separate report.

“Consumers were not willing to spend much at the mall since they are feeling the pump price pinch,” said Chris Christopher, an economist at IHS Global Insight.

Weaker retail sales will likely weigh on growth in the July-September quarter. Economists at Bank of America Merrill Lynch slashed their third-quarter growth forecast to an annual rate of only 1.1 percent, down from 1.5 percent. That’s not nearly fast enough to spur more hiring, which has languished since February.

The Fed is hoping to kick-start growth with a series of bold steps announced Thursday that could make borrowing cheaper for years.

It plans to spend $40 billion a month to buy mortgage bonds to make home buying more affordable. It also pledged to keep short-term interest rates near zero through at least mid-2015.

And Fed Chairman Ben Bernanke said the Fed will continue its efforts — and intensify them if necessary — until the job market improves “substantially.”

The announcement ignited a two-day stock market rally that sent the Dow Jones industrial average to its highest level since December 2007, the first month of the Great Recession.

But the Fed’s actions also helped move oil prices briefly above $100 a barrel Friday for the first time since May. They fell back slightly, but were still up 74 cents to $99.04 a barrel in mid-afternoon trading.

Carson noted that the Fed’s previous rounds of bond-buying pushed up commodity prices and fueled greater inflation. That weakened the ability of U.S. consumers to spend and likely slowed growth, he said.

He expects the same thing to happen again.

The Fed’s moves can push up oil prices in several ways. The Fed creates new money to pay for its mortgage bond purchases. That increases the amount of dollars in circulation and can lower their value. Oil is priced in dollars, so the price tends to rise when the dollar falls. That’s because it costs more for overseas investors to purchase dollars to buy oil.

Lower interest rates also push investors out of safer assets, such as bonds, and into riskier investments, such as oil, in hopes of a greater return. And if the Fed’s moves accelerate growth, that would increase demand for oil and gas and also raise their prices.

Higher gas prices are eating up a bigger share of Americans’ incomes than in previous years. Spending at the pump accounts for 8.2 percent of the typical family’s household income, according to Fred Rozell of the Oil Price Information Service. That’s just below last year’s 8.3 percent.

Those represent the biggest slice of household income spent on gas since 1981. The typical household spends about $342 per month on gasoline. Before gasoline prices began rising in 2004, households spent less than $200 per month, Rozell said, under 5 percent of median income.

Average gas prices are higher this year than last year. But Americans are using less by driving more fuel-efficient cars and driving less.

Meanwhile, average wages, adjusted for inflation, have been flat for the past year, the Labor Department said Friday. That adds to the squeeze on consumers.

One silver lining is that weakness should eventually push prices back down, economists note. That’s because people cut back on oil and gas consumption when prices rise.

“Unless the economic data rapidly improve, the gains in oil … prices are unlikely to be sustained,” Julian Jessop, an analyst Capital Economics, said.

Global Economy

With The Global Economy, Far-Off Natural Disasters And Wars Affect Us All

Today, the United States, China, Japan, Germany, France, and the United Kingdom are among the largest economies in the world. Each of them has grown significantly in past decades and provides our global world with needed goods and services. This was not always the case; politics, religion and cultural differences kept us from working together. Throughout time, many of our leaders have put their best foot forward to improve our government relationships. As improvements in technology, communication and transportation evolve it has allowed us to grow globally.

On one hand, global economic growth is great. But on the other hand, being a global economy also has its drawbacks. As our economies work together and we rely more and more on each other, we have become more vulnerable. For example, war, government policies, political leaders and natural catastrophic situations can affect all of us. There are certainly pros and cons to having a global economy, but given recent events many of us may question this direction.

The recent situation in the Middle East and the tragic earthquake and tsunami in Japan show us how our markets and social humanity can affect not only that country, but also the rest of the world. Since the rebellious strikes in Libya, we have seen a spike in gas prices, commodities and will incur a great financial obligation for the military efforts to help the civilians of Libya. Also, the rebuilding of Japan will be very costly and cause slower production of their goods and services for quite some time. Not only is it a devastating situation for the people of Japan, but it also will hurt them economically for years to come.

Analysts have spent countless hours struggling to quantify the effects and make projections about how these situations will affect our global economy. Until it’s behind us and we look back on history we will not know the full impact

Without a doubt, economically we are more dependent today on other countries to provide importing and exporting of goods and services for growth. We will continue to experience this progression in our future, so we must adapt and learn to change as our environment changes.