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By New_Deal_democrat October 10, 2013 7:25 am
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Is The Oil Choke Collar Beginning To Give Way

- by New Deal democrat

One of my running themes for the last several years is that we had an Oil shock from 1999 to 2008 that was fully equal to the Oil shock from 1973 to 1980. Except for 2008, the move was gradual enough that it did not actually put us into recesseion, unlike the two sudden disruptions of 1973 and 1979.

A couple of years ago, having examined the issue at length, I targeted this year, 2013, as the year that the Oil choke collar might finally begin to give way, due to new oilfields and technologies coming online, use of alternative fuels, improved gas efficiency in vehicles, and conservation. Needless to say, the jury is still out, but there is some evidence that the Oil choke collar is indeed finally giving way.

First of all, here's a graph showing gasoline prices for the last three years:

Photobucket Pictures, Images and Photos

Notably, gas prices this year never made it to their 2011 and 2012 peaks. Note also that gas prices are already near their winter 2011 and 2012 lows. We are lower than we were a year ago, and equal in price to where we were two years ago.

This next graph looks at the trend over the same period of time as a YoY percentage change. Here the trend of deceleerating price increases rolling over into accelerating price decreases is apparent:

Photobucket Pictures, Images and Photos

While I claim no special knowledge, *IF* gas prices continue to decline as they normally do at this time of year, we could establish a new 3 year low in the price of gas by New Year's Eve. Not only might inflation be somnolent, running at 1%, we could actually tip over into "good" deflation, where prices are actually slightly negative YoY, while average wage increases, lately running at about 2% YoY, put actual real increases in purchasing power in American consumers' pockets.

If Washington doesn't cause a recession of course.

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