With the petroleum industry pumping just barely enough fuel to keep the world's economic engine humming, a buying frenzy on oil markets is setting the stage for sharply higher gasoline prices in the US as early as next week.
Crude oil futures traded above US$53 a barrel again on Friday, and analysts said the global supply tightness is likely to persist this year due to an economic expansion that so far appears only moderately slower than the year before. But the cycle of rising incomes and ever higher energy prices won't last forever.
"Those people who think we've entered a new paradigm where high oil prices don't affect economic growth are wrong," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation in New York.
What's happening today, Goldstein said, is that the blistering pace of economic growth in China, and to a lesser degree the US, is overshadowing the financial drag that typically would be more prominent when energy prices soar.
"Right now we're riding a wonderful cycle," he said.
Indeed, reports released this week showed that most of the big retail chains posted strong sales gains last month, workforce productivity is rising, manufacturing is expanding and the US economy added a better-than-expected 262,000 jobs last month.
But for many drivers, it soon will be difficult to find any gas stations across the US selling regular unleaded for less than US$2 a gallon (3.8 liters), analysts said. That's because gasoline prices on futures markets have soared 20 percent in the past week alone. The average retail price of gasoline was US$1.93 per gallon last week, a US$0.21 increase from a year ago, according to the Energy Department.
The greatest financial squeeze will surely be felt by low and fixed-income families, who spend about three times as much of their wealth on energy as do middle-income families. But many economists are quick to point out that the hit to the US economy won't be as bad as history might suggest, since the US is twice as efficient as it was 30 years ago and gasoline prices would have to rise another US$1 per gallon to approach all-time highs on an inflation-adjusted basis.
On Friday, crude futures rose US$0.21 to US$53.78 per barrel on the New York Mercantile Exchange, but briefly surpassed US$55 per barrel the day before.
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