Investors and Consumers: A Conflict of Interests

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By Rob Gelb

Oil prices have increased 5% this month, and whether that is a good sign depends on who you are asking. High prices benefit investors who gain from a positive externality, as prices for other commodities have a positive correlation with oil prices. However, higher oil prices do not bode well for consumers. In a recent Wall Street Journal survey, 69 economic forecasters speculated that there is a net positive outlook for a country as a whole when there is a drop in fuel costs, particularly in gasoline, there is a net positive outlook. “Lower oil prices and income gains could unleash faster consumer spending,” chief economist Lynn Reaser of Point Loma Nazarene University explained.  For now, investors might be the ones who will be enjoying the benefits, as consumers will be forced to accept higher gas prices. Since markets have been reacting poorly to the consistent dip of oil prices though-it fell over 300 points in January-a little less consumption might be a necessary tradeoff if markets, and subsequently the U.S. economy, are going to stabilize.

Sources:

http://on.wsj.com/1E3qsgJ

http://on.wsj.com/1E3qEwC

http://cnnmon.ie/1vDb8k5