The long shadow of oil’s rise

Now that crude prices have plunged from their record highs, dragging gasoline prices down with them, will the economy get the much-needed boost it craves?

“In many ways we’re just too fixated on the near-term gyrations, which are impossible to explain,” said Peter Tertzakian, chief energy economist at ARC Financial in Calgary.
“There’s no question there’s been a price response – it’s just, what is the permanence of that price response?”

So far, even with the significant price reductions, wary consumers don’t appear ready to rush back to the gas pumps en masse, much less to renew their love affair with trucks and SUVs.

According to a report yesterday by the U.S. Commerce Department, inflation-adjusted consumer spending dropped in June.

David Hobbs, director of global research with Cambridge Energy Research Associates in Massachusetts, said there is a lag effect, and that it will take some time – and likely further erosion of prices – before people forget the recent pain of $150 oil.

Globe and Mail