Wednesday, February 18, 2009
Gas prices are on the rise again; and with the unemployment rate accelerating, already-strapped consumers will pull back even more. Not good. Eventually, though, the rising unemployment rate and slackening demand for gasoline will pass through to lower gas prices.
The chart illustrates monthly gasoline prices through the February 2009. National gas prices have declined precipitously since July 2008 amid the global recession. However, gas prices have been creeping upward since early January. According to Aysegul Sahin (hat tip, Mark Thoma), this recession is shaping up to be worse than the 1980's. Therefore, renewed pressure on gasoline prices will squeeze consumers and firms further, worsening an already-beaten economy.
The recent bump in gasoline prices seems counter-intuitive amid building crude inventories and falling crude prices, but it is simply a lagged supply effect. According to the Wall Street Journal: