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Pain at the Pump: Sunday Stew

Pain at the pump was topic du jour on Late Edition with Wolf Blizer this morning.

The $50 fill-up, they call it.

It is what you can expect to pay if you own a pickup or SUV.

Prices average $2.59 a gallon, with prices past $3.00 dollars in California.

The price of oil is up 48% YTD and market pundits are finally realizing the detrimental effect it is having on consumer spending.

Walmart, as a matter of fact, blamed energy costs for dwindling profits when they reported #s earlier this week.

Even the recent strike at Northwest sees oil as the cause-of-anguish: companies just can't afford huge retiree/health care benefits with oil stuck where it is (and travel still in its post 9/11 descent).

We're running in the mid-3% range of GDP and unemployment is at 5%.

If energy wasn't so exhorbitantly expensive, we'd would be spending more money at Target and the GDP would be higher.

Let's put everything on the table.

Catablast! Media Group feels bearish has a bearish outlook on the stock market for the next 2-3 months.

It's a strange prognosis for us, namely because the market has historically gone up during the Fall.

We think climibing rates, stubborn oil prices (Goldman Sachs told us last week to "get used to $60 oil" after they conveniently backed off from their earlier and exagerrated $105 oil forecast), and a speculative fervor driving real estate will hamper the market for the short term as investors continue to invest in property rather than common.

The market always looks forward at least 6 months.

And what exactly do we have to look forward to?

The demand for oil is greater than expected, with continuing growth in the U.S. economy despite the energy price creep and the rapid expansion of China and other nations. The era of higher prices is too new to have stimulated a boost in oil-production capacity, so there's no cushion. Oil producers can no longer bring prices down simply by pumping more. And even a small disruption in the flow of oil -- anything from hurricanes and government unrest to terrorist attacks -- can cause a big spike in prices.

Either demand falls or supplies increase.

Neither is likely.

History is our only consolation. Consider that

The U.S. economy has proved to be remarkably resilient in the face of rising oil costs -- in large part because the oil shocks of the 1970s. Back then, oil reached its all time high of about $90 per barrel, in today's dollars. Those high prices touched off major improvements in energy efficiency, making energy costs a smaller percentage of the cost of doing business today.

Can soaring prices cause a recession?

The monetary stimulus applied by the Fed during the last four years has had a large role in the economic boom abroad.

Economic growth in places like China and the fact that Americans are driving more than ever means that demand will not ebb anytime soon.

Supply and demand.

That's the real driving force behind energy prices.

Get used to it.

As well as a sideways-moving market.

posted by Catablast! Media Group @ 1:59 PM