Economy Watch: Governments Out to Pop Oil Bubble
Citing British and American sources, as well as France's Energy Minister Eric Besson, media reports said on Wednesday that the three nations seemed poised to deal with fuel prices in the coming weeks by releasing strategic oil stocks.
By Dees Stribling, Contributing Editor
Citing British and American sources, as well as France’s Energy Minister Eric Besson, media reports said on Wednesday that the three nations seemed poised to deal with fuel prices in the coming weeks by releasing strategic oil stocks. The price of oil has advanced by about 16 percent since the beginning of 2012 alone, and that price is represented in painful gasoline prices worldwide—but they are of special concern to governments in France and the United States, which have elections this year (France’s presidential election is about four weeks away now).
Any release would be more psychological than substantive, since the national reserves in question represent only a few percent of the world oil market on any given day. Still, when dealing with an asset bubble (if indeed oil is bubbling up as it did in pre-panic 2008), sometimes all it takes is a little psychology to turn the herd around. On the other hand, oil investors and speculators might see the move as a political gesture, which it is, and pay it no mind.
The price of oil did drop about $1 a barrel on Wednesday, however, on mere word that the three countries were poised to release some reserves. Still, prices at the pump remain painful. According to AAA, the national average for a gallon of gas is now $3.91, compared to around $3.70 last month and $3.59 at this time last year.
More trucking in February
Despite the advancing price of fuel, the American Trucking Association said on Wednesday that its For-Hire Truck Tonnage Index, a measure of the U.S. economy that describes how much was hauled by all modes of domestic freight transportation, rose by 0.5 percent in February after dropping 4.6 percent in January. The latest gain put the index at 119.3 (2000 = 100), up from January’s level of 118.7.
Also, compared with February 2011, the ATA index was up 5.5 percent, which bested the January 2012 year-over-year increase of 3.1 percent. “Fleets told us that February was decent and that played out in the numbers,” ATA chief economist Bob Costello noted in a press statement. “I’m still expecting continued truck tonnage growth going forward. Rising manufacturing activity and temperate consumer spending should be helped a little from an improving housing market.”
All together, according to the ATA, trucking represented 67.2 percent of tonnage carried by domestic freight transportation, including manufactured and retail goods. Trucks hauled 9 billion tons of freight in 2010; a total for last year has yet to be compiled, but it probably represented an increase from the recession plagued ’10.
Durable goods orders up
The U.S. Department of Commerce said on Wednesday that orders for durable goods increased 2.2 percent in February, with businesses more interested in buying the likes of autos, aircraft, computers and other machinery. But it’s a volatile measurement of U.S. economic activity on a month-to-month basis. Just last month, orders dropped considerably because January represented the first month after the reduction by half of a investment tax credit on the purchase of certain durable goods.
A durable good, at least by official definition, lasts three years or longer. In February, businesses orders about $211.8 billion worth of such goods, which is 42 percent above the 2009 trough in durable goods spending, but still below its most recent peak in 2007.
Seemingly still in a funk about consumer confidence and Case-Shiller’s downbeat report, Wall Street had a down day on Wednesday, with the Dow Jones Industrial Average losing 71.52 points, or 0.54 percent. The S&P 500 and the Nasdaq were both off 0.49 percent.