Oil futures surge again
Oct 16th 2009 9:20AM
Updated Dec 4th 2009 4:53PM
There appears to be no stopping the advance in crude oil prices. Fueled by expectations that an economic recovery will be more rapid than anticipated and that demand in developing nations like China will spike up sharply, the cost of crude has more than doubled this year.
Prices for oil futures rose above $78 in Globex trading Friday morning. Contracts hit $78.17, a 2009 record.
Concerns are emerging, however, that oil price increases could actually derail an expansion of GDP in nations like the U.S., where the recovery is still tentative. Oil prices affect a broad range of products from petrochemicals to heating oil to gasoline. If crude continues to trade higher, both businesses and consumers in America will start to feel the pinch as the holiday season approaches. That could impact corporate profits in the fourth quarter and retail sales. Many retailers make 40 percent of their total annual sales in the fourth quarter.
Oil prices have probably crossed the tipping point -- from being a benefit to the economy to being a drag on GDP expansion. When crude was below $40 early in the year, it helped contain the recession. But if oil prices continue to push up, the chances of a double-dip recession become a concern once again.
Douglas A. McIntyre is an editor at 24/7 Wall St.