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    Lenzner, The Price of Oil Is The New Economic Spoiler

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    This document discusses how rising oil prices negatively impact consumer spending and the overall economy. It contains the following key points: 1) As energy expenditures rise above 6% of consumer spending, it has severely hit consumer spending in the past. Currently, energy expenditures make up around 6% of consumer spending in the US. 2) When oil rises to 6% of global GDP, demand is reduced, and at 8% the demand shock is severe. 3) Rising commodity prices like oil are hurting low-income households, who spend a larger portion of their income on gasoline and food. 4) High oil prices can stall economic growth as they act like higher interest rates by reducing demand. When central banks

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    Lenzner, The Price of Oil Is The New Economic Spoiler

    Uploaded by

    forbesadmin
    17K views5 pages
    This document discusses how rising oil prices negatively impact consumer spending and the overall economy. It contains the following key points: 1) As energy expenditures rise above 6% of consumer spending, it has severely hit consumer spending in the past. Currently, energy expenditures make up around 6% of consumer spending in the US. 2) When oil rises to 6% of global GDP, demand is reduced, and at 8% the demand shock is severe. 3) Rising commodity prices like oil are hurting low-income households, who spend a larger portion of their income on gasoline and food. 4) High oil prices can stall economic growth as they act like higher interest rates by reducing demand. When central banks

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    Lenzner,The Price of Oil is the New Economic Spoiler

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    This document discusses how rising oil prices negatively impact consumer spending and the overall economy. It contains the following key points: 1) As energy expenditures rise above 6% of consumer spending, it has severely hit consumer spending in the past. Currently, energy expenditures make up around 6% of consumer spending in the US. 2) When oil rises to 6% of global GDP, demand is reduced, and at 8% the demand shock is severe. 3) Rising commodity prices like oil are hurting low-income households, who spend a larger portion of their income on gasoline and food. 4) High oil prices can stall economic growth as they act like higher interest rates by reducing demand. When central banks

    Copyright:

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    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    17K views5 pages

    Lenzner, The Price of Oil Is The New Economic Spoiler

    Uploaded by

    forbesadmin
    This document discusses how rising oil prices negatively impact consumer spending and the overall economy. It contains the following key points: 1) As energy expenditures rise above 6% of consumer spending, it has severely hit consumer spending in the past. Currently, energy expenditures make up around 6% of consumer spending in the US. 2) When oil rises to 6% of global GDP, demand is reduced, and at 8% the demand shock is severe. 3) Rising commodity prices like oil are hurting low-income households, who spend a larger portion of their income on gasoline and food. 4) High oil prices can stall economic growth as they act like higher interest rates by reducing demand. When central banks

    Copyright:

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    of 5

    Demand Destruction For The US Consumer

    Oil as a share of Personal Consumption Expenditures


    0.1 Personal Consumption Expenditures, Energy Goods & Services, Bil. $, SAAR, SA - United States / Personal Consumption Expenditures, Bil. $, SAAR - United States [Last: 0.06 (Mar-12)] Recession Periods - United States

    Energy expenditures as a share of consumer spending at 6 per cent are at levels that have badly hit consumer spending in the past -study by Hamilton

    0.09

    0.08

    0.07

    0.06

    0.05

    0.04

    0.03 '59 '61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11

    Source:MSIM, Factset

    Demand Destruction For The Global Consumer


    Oil as a Share World GDP
    Consumers demand less oil near 6% of GDP and at 8% the demand shock is severe

    Source:ISI

    Average Consumer Doesnt Eat IPads

    QE boosts stock prices and commodities Rising equity prices are supporting the spending of upper income groups Three-quarters of equities by households are held by the top 10% of the income distribution Rising commodity prices are hurting low income households

    Percent of After-Tax Income Spent on Gasoline in 2009


    10 8 6 4 2 0 Lowest Quintile 2 nd 3 rd 4 th Top Quintile 5.3 4.2 3.4 2.0 9.0

    Percent of After-Tax Income Spent on Food in 2009


    40 30 20 10 0 Lowest Quintile 2
    nd

    32.0

    15.7 11.0 9.6 7.0

    rd

    th

    Top Quintile

    #sam.asset.id#

    Oil Is The New Interest Rate


    Inflated prices for commodities like oil carry the seeds of their own destruction, because the higher they rise, the more likely they are to stall the entire economy Oil has become the new interest rate, capping growth when central banks insist on flooding the system with liquidity
    1,600 S&P 500 - Price Index (Left) Crude Oil, Brent ($/bbl) - Close (Right) 160

    1,500

    140

    1,400 120 1,300 100

    1,200

    1,100

    80

    1,000

    60

    900 40 800 20

    700

    600

    '99

    '00

    '01

    '02

    '03

    '04

    '05

    '06

    '07

    '08

    '09

    '10

    '11

    Source: BCA, Data as on Feb 25, 2011

    Financialisation Of Oil

    Source: Cornerstone Analytics

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