IndustryWeek : U.S. GDP Growth Below Expectations — This can’t be good.

“The Fed can either rein-in inflation by continuing to push up interest rates or accommodate the impact of high gas prices on consumers by backing off interest rate increases,” says Peter Morici, a professor the University of Maryland’s Smith School of Business in College Park. “If, as expected, the Fed pushes interest rates higher, the impact on inflation will be limited,” Morici predicts. “Inflation is largely caused by higher oil prices, as other commodity markets are loosening. Oil prices are determined in global markets, and Fed policy has only a limited impact on demand,” he explains. “Higher interest rates will do more to push up [U.S.] unemployment than contain inflation.”

  1. Jim Dermitt says:

    US Airways lost $191 million in the first quarter, more than the same period a year ago, when it lost $177 million.

    The oil companies are doing just great. Jet fuel prices have soared. Ground all the jets and go for a power walk or go golfing. Welcome to the Bush Better Deal. He is going to save the world, starting with Iraq. That is getting better too. That’s the theme. It’s getting better. You lost your job, but hey somebody just got a job, because it’s the Better Deal. I just screwed out of money, but it could of been worse so I guess I am lucky they have the Better Deal looking out for me. I feel like Jesus hanging on the cross and it’s getting better. If it gets any better, maybe I’ll get injured in a bad car accident and get a big fat jury award out of it and not have to drive. I’ll get a new wheelchair from the Better Deal folks in DC.

  2. Ed Campell says:

    And everyone talks about fuel prices without realizing how this affects EVERYTHING. I work for a contractor. Our wood prices have gone up 35%. Everything we get that is made of steel has a price increase + a fuel surcharge to deliver it.

    Since we don’t live on an Interstate mainline, fuel surcharges have boosted some food items 20% and more.

    And no one in Congress or the White House lets out a peep. The talking heads of network TV do their requisite spot from a California gas station, every week, and that’s the extent of popular “journalism”.

    Oh, they do plan to cut Medicaid benefits. That helps who? Or let me ask it, this way: — do the folks who think they benefit from cuts in social services ever give a shit about the folks who need the social services?

  3. jojo says:

    Ha! We could live in Norway where gas is $6.66/gal:

    If business is so good, why does nearly every apartment building in my area of a small town in San Mateo County, CA have a for rent sign outside?

    It’s all smoke and mirrors folks. The only real question is when the stock market will recognize the truth and head deep south.

  4. Jim Dermitt says:

    The Better Deal!
    Everything is changing. People are taking the comedians seriously and the politicians as a joke.– Will Rogers

  5. Sound the alarm says:

    I like that – maybe history will call Bush’s massive give away to the rich the “better deal”.

    BTW – we have to cut medicare/ssn because the rich need another 108 billion bucks in tax breaks. I keep expecting Bush to bring back slavery, but declare it a “better deal”.

  6. Pat says:

    The price of gasoline would drop by $1.00 / gallon tomorrow IF everyone would drive at the speed limit. The difference in fuel used between doing 55 and 75 is 20%. If the amount of oil used dropped by even 5%, the price would fall.

    Currently oil usage is running even with oil production. By creating less demand then production will drop the price as producers fight over market share.

    Could this happen? Nope. Because Americans have become so used to driving bigger, CAFE exempt pick-ups at the speed they feel good at. Doing 80 in a 70 is the norm. No one will be able to tell these good ole boys the harm they do to the economy as they have every right to own and drive these monstrosities. But it is also everyone else that drives at high speeds that contribute to the demand for oil.

    I am not pushing that everyone run out and get a hybrid or high efficiency car. Far from it. All we really need to do is each do a little bit. Slow down 5 or 10 mph. That in itself will drop the price of oil.

    Politicians will not push the issue because voters are the same ones driving these speeds. Consumers want larger SUVs and pick-ups. They also want the economy saved some way where it doesn’t hurt them.

    Just my two cents.

  7. Milo says:

    It’s getting so bad that Bush actually held a highly scripted press conference! However GWB makes a lot more money from the Saudi government than the American one! I think it’s worth pointing out that we are still at the time of year when oil demand is low! There’s some persistent rumours that Osama Bin Laden has directed his associates to prepare attacks on Arabian Gulf oil production targets. Six large and well placed bombs could take a lot of oil off the market for quite some time. In other words we aint seen nothin yet!

  8. AB CD says:

    Last quarter the media was saying the same thing, because the economy grew 3.1% instead of expected 3.5%. Now that number has been revised upward and in fact the economy grew at 3.8%. No corrections issued. Now the media is talking about a sagging economy because the economy grew in this quarter at 3.1% instead of an expected 3.5%….

  9. Jojo says:

    Hey Pat – If I understand what you are saying, you’re asking everyone to drive slower to save gas. You’re ASSUMING, erroneously I might add, that if less gas is used, then gas prices will come down.

    Unfortunately, in our capitalist society, one doesn’t follow the other. The oil companies don’t HAVE to lower gas prices if less gas is being used. They could also just stockpile more in reserve to counterbalance any net savings. China might just use more. Or the Bush admin might continue with their stupid policy of filling the “Strategic” oil reserve at the highest real prices the USA has ever seen for some future rainy day.

    Furthermore, why should I drive slower and help gas prices come down so that the idiots who CHOSE to buy Hummers, large trucks and SUV’s can pay less for their choice of excess in cars? Let them eat cake (as we guillotine their pocketbooks), I say!

    And speaking of harebrained ideas, the higher gas prices are again raising the spectre of imposing a 55 MPH speed limit again. Sheese. I bet radar detector manufactures and local/county/state governments will be supporting this though as both will make more money.

    Unmentioned Energy Fix: A 55 M.P.H. Speed Limit

  10. Pat says:

    Jojo, I agree in my heart with your response. My head makes me respond though.

    The U.S. currently uses over 40% of the world’s oil. Every oil company in the U.S. wants to keep its market share. They would reduce their prices to retain their market share. Example, back in 1998 there was a glut of oil as several countries were dumping it on the world market. The standard price was less then $1.00 per gallon here in the Mid-West. Today there is a shortage of oil on the world market so the price has skyrocketed.

    The standard economic theory is that when supply falls in relation to demand, then prices fall too. When demand increases in relation to supply, the price increases. American usage has increased during that time. But more importantly are the emerging markets in the Far East, especially China and India, but also Indonesia and Thailand. Simply put, it is supply and demand.

    While cars are regulated for fuel efficiency, trucks and SUVs are not. I even know someone who registered their mini-van as a truck (so they would not need to wear a seat belt). Trucks, SUVs, and even mini-vans all get poorer fuel mileage then cars. They also account for about half of the market.

    In several subjects on John’s Blog, it has been repeatedly pointed out that allowing increased illegal immigration into this country is driving down the wages of Americans. Supply and demand!

    Want a few more examples?

    Wood products are heavily taxed from Canada, hence the supply falls and the price goes up to meet the booming housing market.

    In the late 1990s, there is a glut of steel on the world market. Because the price falls so drastically, many Steel Makers in the U.S. go under. It is only with heavy duties (protection) and reorganization (buying bankrupt companies) that the industry revives.

    Computer hardware technology is largely American led. As the technological process becomes standardized, it becomes farmed out to cheaper labor areas of the world. The lower wages and manufacturing costs cause the prices to fall. Many American chip and IC board makers drop from the scene.

    These examples have all happened recently and in the U.S. They all happened in a Capitalist Society. Gee, they also happened under the Republican reign.

    Jojo, I agree with your points and you will prove right in the end. But that is because of the greed of the individual consumer. For far too long, Americans have insisted on getting their way without regard to the consequences. Higher gas prices are the price we pay for that greed.

  11. Jojo says:

    Exactly Pat. While supply and demand do not always work in the real world like they do in textbooks (due to things like tax laws, tariffs , inefficiencies in transport or access, etc., one thing is for sure from the consumer perspective. If gas prices stay high, then fewer people will buy big cars/SUV’s/Trucks that eat a lot of gas. This is happening now, forcing Detroit to offer even more incentives to entice people to buy their inefficient products. Both GM & Ford are both in serious trouble now (not just due to high gas prices though).

    One thing I find interesting over the last few years is the huge increase in horsepower for many cars. Even the lowly Honda Accord now has 240HP in the 6 cylinder model. Many other cars are in the 250-300HP range. Vroom, vroom! Of course, more horsepower eats more gas, especially when all those horses are tied down in stop and go traffic on 101 here in CA [lol]. So now, car companies are starting to bring out hybrid gas/electric cars so that they can get a few miles per gallon while still maintaining high HP numbers. Another stop gap measure as far as I’m concerned.


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