By MERRILL GOOZNER, The Fiscal Times
The latest spike in gas prices due to heightening tensions in the Middle East is having the expected effect: Consumption is falling. Consumers are taking fewer trips, substituting other ways of getting from here to there, and switching to more fuel efficient vehicles. Gasoline consumption fell 7 percent in the first six weeks of the year compared to the comparable period a year ago.
So far, though, the impact of rising oil and gas prices is the equivalent of the dog that didn’t bark. Economic growth appears to be accelerating despite rising prices. The benchmark price of Brent crude oil soared over $120 per barrel Tuesday, largely in response to fears that the confrontation with Iran will escalate in the weeks ahead.
Oil prices are now at the highest level they’ve been in nine months. Analysts expect the latest run-up, which over the last four weeks has translated into 20-cents-a-gallon hike in the price of gasoline to an average of about $3.58 per gallon nationwide, will continue right through the summer driving season.
Historically, falling demand in response to higher oil prices has signaled the onset of an economic slowdown, or even a recession. But exactly the opposite is happening now. “It’s surprising to see a recovery in the U.S. with demand for gas as low as it is,” said Avery Ash, manager of regulatory affairs for the American Automobile Association. “People are finding ways to save money by making a protracted effort to save on gasoline.”
Keep reading here: Gas Price Spike Creates Unexpected Winners.
