Economy Watch: Oil Continues Precipitous Price Drop
The price of crude oil, which is an international commodity, got another downward push when the energy minister of the UAE said that OPEC isn’t going to reverse its recent decision not to cut oil production, even if oil prices go as low as $40 a barrel.
By Dees Stribling, Contributing Editor
The price of crude oil, which is an international commodity, got another downward push over the weekend when the energy minister of the UAE said that OPEC isn’t going to reverse its recent decision not to cut oil production, even if oil prices go as low as $40 a barrel. As of Friday, the international benchmark Brent crude was $61.85 a barrel, down 2.9 percent for the day, and nearly 20 percent since Nov. 26, which OPEC said it would maintain current production. The trade block’s 12 member nations, which produce about 40 percent of the world’s supply, pumped about 30.5 million barrels a day in November.
The side effect for U.S. consumers during the holiday season is even lower prices for gasoline. AAA reports that the average price of a gallon of gas is still sliding. On Sunday, the average price for a gallon of regular gas was $2.559, down from $2.679 only a week earlier, and $2.914 a month ago. This time last year, the average was $3.239 per gallon.
Wall Street dropped sharply on Friday, with investors apparently concerned not only about energy stocks, but the sluggishness of economic growth outside the United States (reportedly, for instance, GDP growth will be as low as 7.1 percent in China next year, which is low for that country, and down from a probable 7.4 percent this year). In any case, the Dow Jones Industrial Average off 315.51 points, or 1.79 percent, for the day. The S&P 500 declined 1.62 percent and the Nasdaq was down 1.16 percent.
Consumer sentiment sees mid-month uptick
The dropping price of gas, besides putting a little more money in U.S. consumers’ wallets, might also be adding to their increasingly optimistic frame of mind. The University of Michigan and Reuters reported on Friday that consumer sentiment came in at 93.8 for mid-month December. That’s up from 88.8 at the end of November and 89.4 in mid-month November (both of which are also fairly strong readings).
In fact, consumer sentiment is now as high as it’s been since January 2007, well before the panic and recession that followed. The current conditions component of the index is up three points from the end of November to 105.7, and the expectations component, though not as high at 86.1, is still up 6.2 points since the end of November, and points to rising confidence about income and jobs.
Michigan bases its numbers on querying 500 U.S. households each month on their own financial conditions, as well as their attitudes about the broader economy. Consumer sentiment is an indirect measure of economic strength, since consumers with better feelings about the direction of the economy are likely to spend more, an especially important consideration during the holiday season.
