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KAI RYSSDAL: It’s entirely possible that when we all look back to figure out when the wheels truly came off the economy, the 7th of November’s going to be circled in red ink.
The dollar took a beating today, thanks to some comments overnight from a Chinese official. He hinted it might be time for Beijing to put more of its $1.4 trillion worth of foreign reserves into something other than the greenback.
And speaking of that, there’s oil — the connection is that oil’s a dollar-denominated commodity. And so with the dollar dropping to record lows against almost every other currency out there, people who sell oil want more dollars for it.
Anyway, it was close… Another record high today, but not quite triple digits. Crude hit $98.62 a barrel at one point this morning. It tumbled pretty quickly after that on some better-than-expected inventory reports. But it’s generally accepted than $100 a barrel isn’t a question of if, but rather when.
Marketplace’s Jeff Tyler looked into just how painful that might be, both here and abroad.
Jeff Tyler: Expensive crude oil isn’t likely to sink the U.S. economy, but higher fuel prices could hurt our trading partners.
Severin Borenstein: That’s what should raise more concerns.
That’s Severin Borenstein with the University of California Energy Institute. With other countries required to pay more for energy, he says they’ll have less money to spend on American imports.
Borenstein: That’s more likely to lead to a dampening in worldwide demand — that could cause a worldwide economic downturn.
On the domestic front, gas prices are up 85 cents a gallon compared to last year, and heating oil is near a record high. Stephen Brown with the Federal Reserve Bank in Dallas estimates that for homeowners to fill an average 250-gallon tank it will cost…
Stephen Brown: Let me get my calculator out here… 250… That’s going to be $135 more each time they fill the heating-oil tank.
Higher crude prices creep into the economy in other ways. Airfares are up. Both truckers and FedEx are raising rates. But U.C. Berkeley’s Severin Borenstein says many increases will be less obvious.
Borenstein: Once we get to the supermarket and the drug store and the other places we buy things retail, we probably won’t really notice it on any one good. But overall, we’ll see a gradual increase in prices.
It may be gradual, but it adds up. Borenstein calculates that with oil prices up 30 bucks over the past couple months, the country is spending an extra $200 billion a year on oil — some of it eventually coming out of your pocket.
I’m Jeff Tyler for Marketplace.
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