Gas prices drop slightly, but could still rise
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Gas prices drop slightly, but could still rise
Jeremy Hobson: The national average for a gallon of gasoline dipped today after about a month of steady increases. We’re down to $3.76 a gallon, which is still obviously very high.
Juli Niemann is an analyst with Smith Moore and Company who focuses on the oil markets, and she’s with us live from St. Louis as she is every Tuesday. Good morning, Juli.
Juli Niemann: Good morning, Jeremy.
Hobson: One of the things that we’ve talked about that’s driven oil prices up — and gas prices up as well — has been concern about tension with Iran. And I want to play you something that Israeli Prime Minister Benjamin Netanyahu said in Washington last night. talking about the steps that have to be taken to deal with Iran’s nuclear program.
Benjamin Netanyahu: We’ve waited for diplomacy to work. We’ve waited for sanctions to work. None of us can afford to wait much longer.
Now Juli, it does sound like tensions are rising even further between Israel and Iran, between the U.S. and Iran — what are the oil markets saying about all this?
Niemann: Well we oil analysts are looking at it rationally. An Iran and Israel explosion would have too much to lose. Iran needs the oil trade money with China and India. They won’t bomb their own Straits of Hormuz just for spite, or to prove a point. And Israel won’t bomb them because the Iranian citizens are already pushing for change, and there are no nuclear warheads imminent. If they were attacked from the outside, this would simply entrench everything further.
But what rational people would say and conclude: it’s too much too lose. But we’ve seen in the past, war is seldom rational. And the markets are bracing for the irrational.
Hobson: The markets are bracing for the irrational — how would that trickle down to our economy? What would that mean for us and for gas prices and the recovery that’s going on here?
Niemann: Oh, no trickle down — it’ll be a tsunami: $150 a barrel overnight. You’re going to see gasoline spike to $5 a gallon. And you’re going to look at growth and recovery in the economy — which is very fragile at the moment — come to a screeching halt. Just when it looks like housing is no longer a real drag on the economy, unemployment is improving; this would bring everything to a temporary halt.
Hobson: Well Juli, let me just get your thoughts on that before we let you go. Employment, you say, is improving. What are you expecting Friday — we’re going to get the big monthly jobs report from the government — what’s the unemployment rate going to do, keep going down?
Niemann: Well you’re looking at employment coming from small and medium businesses, and mostly non-manufacturing. This is a real positive. It should continue to rise at a rate of around 200,000 a month, and I think Friday’s employment report right now is still on track. But like I say, it’s a confidence situation here — that could turn on a dime as well.
Hobson: Juli Niemann, analyst with Smith Moore and Company, thanks as always.
Niemann: You bet.
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