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High Gasoline Prices Will Come Back To Haunt Us



February 14, 2012 – Comments (0) | RELATED TICKERS: UHN , USO , OIL

While many people are rejoicing over the recent inflation rally they may want to look at the price of gasoline. The United States Gasoline Fund (NYSEARCA:UGA) has surged higher with the stock market since December 19, 2011. At that time, the UGA was trading as low as $45.17 a share. This morning, the UGA is trading at $54.53 a share. That is a gain of $9.36 a share in just eight weeks. The average price for regular unleaded gasoline at the pump is now $3.51 a gallon in the United States. Prices in California and other parts of the country are around the $4.00 a gallon level.

High gasoline prices are a direct tax on the U.S. consumer. U.S. consumer spending accounts for roughly 70.0 percent of the gross domestic product (GDP) in the United States. If this inflation rally is going to last a while it will require the U.S. consumer to continue to spend more money. Unfortunately, high gasoline prices will usually put a crimp in personal spending. High gasoline prices have usually led to important stock market pullbacks and corrections. Just look at what high gasoline prices did to the economy in 2008.

The United States heating Oil Fund (NYSEARCA:UHN) has also been on the rise as of late. The UNH has surged higher since December 19, 2011 as well. Once again, these high energy prices are the product of a weak U.S. Dollar policy. Unfortunately, this policy will come back to haunt us in one form or another.

Nicholas Santiago

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