Saturday, August 13, 2005

The silver lining in high gas prices

Considering how the price of gas is close to $2.50/gallon here in Michigan, and I have a good commute every day, I feel the 'ouch' from this as much as everyone. I'm almost at the point that I wish this war was about oil, and that the U.S. would just get done with it and invade Iran and Saudi Arabia, hand it over to ExxonMobil, and open the spigots for $1/gallon gas.

But here is the silver lining, albeit long-term, in the short run spike in gasoline prices:
  1. This is dampening consumer spending. Not enough to cause a recession, mind you, but enough to temper inflationary pressures.
  2. The spike in prices, coupled with interest rates, is cooling off the housing market. This lessens the possibility of a major correction in the housing market, and it is slowly forcing all those folks who took second, third, and forth mortgages on the house for consumer spending to start seriously thinking about deleveraging. The deleveraging the reduction of speculation in the housing market will lower consumption, reduce inflationary pressures, and strengthen the U.S. dollar.
Well, at least I deluded myself into that.

3 comments:

Anonymous said...

There is also another silver lining in the rising gasoline prices: perhaps more people will have a second thought, change their habits, and be less participating in this car-dependent drunken party.

Jessica Lovejoy said...

"drunken party"?....where's the drunken party? and why wasn't I invited!?

Anonymous said...

Jessica, it is an open house party, every day on most roads. Carnage, too.