I note that the US economy continues to show modest signs of recovery, with rumors of a very good Xmas in stores, and acceleration in consumer spending in the last few months' data. That must mean it's time to start thinking about the next oil price shock, right? We know that it's become hard to raise supply easily, so any substantial surge in demand will tend to cause an imbalance, and since oil demand is very inelastic, that can easily lead to big price surges.
The graph above shows US retail gas prices (blue, left scale) and WTI spot oil prices (red, right scale). I note two things:
- In the boom price years of 2004-2008, gas prices developed a pattern of spiking up in the summer, and falling back around year's end. Oil prices too, but slightly less so.
- Current gas prices (level of blue dotted line) are higher than at any year's end except for the beginning of 2008, which we have now pretty much equalled. We know what happened to prices that summer.