|
Carson noted that the Fed's previous rounds of bond-buying pushed up commodity prices and fueled greater inflation. That weakened the ability of U.S. consumers to spend and likely slowed growth, he said. He expects the same thing to happen again. The Fed's moves can push up oil prices in several ways. The Fed creates new money to pay for its mortgage bond purchases. That increases the amount of dollars in circulation and can lower their value. Oil is priced in dollars, so the price tends to rise when the dollar falls. That's because it costs more for overseas investors to purchase dollars to buy oil. Lower interest rates also push investors out of safer assets, such as bonds, and into riskier investments, such as oil, in hopes of a greater return. And if the Fed's moves accelerate growth, that would increase demand for oil and gas and also raise their prices. Higher gas prices are eating up a bigger share of Americans' incomes than in previous years. Spending at the pump accounts for 8.2 percent of the typical family's household income, according to Fred Rozell of the Oil Price Information Service. That's just below last year's 8.3 percent. Those represent the biggest slice of household income spent on gas since 1981. The typical household spends about $342 per month on gasoline. Before gasoline prices began rising in 2004, households spent less than $200 per month, Rozell said, under 5 percent of median income. Average gas prices are higher this year than last year. But Americans are using less by driving more fuel-efficient cars and driving less. Meanwhile, average wages, adjusted for inflation, have been flat for the past year, the Labor Department said Friday. That adds to the squeeze on consumers. One silver lining is that weakness should eventually push prices back down, economists note. That's because people cut back on oil and gas consumption when prices rise. "Unless the economic data rapidly improve, the gains in oil ... prices are unlikely to be sustained," Julian Jessop, an analyst Capital Economics, said.
[Associated
Press;
Copyright 2012 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
News | Sports | Business | Rural Review | Teaching & Learning | Home and Family | Tourism | Obituaries
Community |
Perspectives
|
Law & Courts |
Leisure Time
|
Spiritual Life |
Health & Fitness |
Teen Scene
Calendar
|
Letters to the Editor