Oil is up almost $30 a barrel in just four months, trading Friday as high as $119.50 a barrel. Demand in China continues to fuel demand Domestic oil demand has dropped 1.6% over the last year as the economy weakens “an exogenous shock, similar to to the supply shortages of the mid-1970s, early 1980s and briefly in the early 1990s.” spending on energy as a share of wage income has shot up above 6% topping the 1974-75 and 1990-91 shocks to be the worst since the 1980-81 runup the current shock is far worse than any of the three prior ones, The figures “suggest that energy costs will crowd out other spending components because income growth is being stifled by weakness in payroll employment,” “Moreover, relatively thin saving flows offer consumers little cushion against the rising oil prices.” Weak retail sales — from cars to appliances to clothing — are clear signs of the effect |
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