Drop In Gasoline Prices Is Not Good News
Posted by Sonja Ebron
Gasoline prices have dropped more than 50 cents over the last two weeks. With prices over $4 this summer, many are sighing with relief, but this is good news only for those with secure sources of income. For prices to drop, there must be either an increase in supply or a decrease in demand. Oil production has been flat for much of the year, and OPEC just announced a cut of over a million barrels a day. What has happened, instead, is a dramatic destruction of demand for gasoline, like something you’d find in an economic crash.
Indeed, the stock market is trending way down and the pain is spreading. Unemployment and food prices are up, and retirees and others on fixed incomes are in bad shape. Small business is terrified. This means people are using a lot less energy — driving less, buying less stuff — and the fall in consumption is outpacing the fall in supply. We should all be worried, because the recession is just beginning.
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