The week ahead of the oh-so important Labor Day weekend has something that Joe Public as the consumer is not going to like. This is particularly the case for those with families who have no choice but to drive the gas-guzzling SUVs or large trucks. It was just on Monday that we noted how oil was rising back near the $100 mark per barrel, but here is the worst part to look forward to for the family drivers… A $100 fill-up cost.
On Sunday was when it hit yours truly that the rise in gasoline was real. It was real enough to snap a quick photo of it.
WTI Crude traded at above $96 per barrel on Monday, and now today we have a $97.50 per barrel reading. With supplies currently out of balance and with refining issues having been around, there is also the possibility that the corn crop wipe-out from the drought could get the EPA to lift or suspend the ethanol mandate. While that would be good for corn and feedstock prices, it also means that much more crude oil will have to be used for a gallon of gasoline.
This hurts producers of good and consumers as increased oil prices hurt production margins at the same public discretionary spending gets gobbled up by higher prices at the pump. Crude went under $80 back in June and this is almost a 25% gain since then at this point. How long will it be before these higher prices start showing up in economic reports tracking inflation and production costs and in retail spending? We are already seeing a common theme that shorter-term retail readings are warning about gasoline prices being higher.
When the consumer hears about a barrel costing $100 per barrel, it sounds bad. When they go to the gas pump to fill up the tank and see $100.00, they cannot help but say “Darn!” or much worse. As a reminder, the Labor Day weekend is really a “Week Ahead of Labor Day” holiday for many individuals and families.
The cost of $100 to fill up a tank of gas is going to start influencing consumer behavior all over again.
JON C. OGG