As the weekly Lundberg survey shows, in the week ended February 10, gas rose by 11.57 cents to $3.5101, the highest since September. The latest price is also 12% higher compared to a year earlier. What is troubling is that as the attached chart shows, the trend of gradual gas price declines has now firmly ended, having touched a low of $3.20, and has been replaced by a steady climb over the past 2 months. In other words, the US consumer's retail spending has been far weaker than expected in November and December, and soon to be discovered in January, primarily due to gas purchases, which have already plunged as discussed recently, once again taking up a substantial portion of the discretionary spending basket (on credit at that). And what is worse, is that as the LTRO #2 is about to add another several hundred billion to the ECB's balance sheet, which will ineivtably be followed by more Fed printing, the Gasoline trendline has only one way to go. Expect the recent highs of $4.00/gallon to be taken out shortly, and to lead to yet another GDP roll over once again. Alas, none of this will be a consolation to European readers, who a few days ago just saw gas hit all time highs.Of the face of it, this seems to violate the law of supply and demand - when demand falls, so must price. We're seeing prices go up even when demand is down. Why?
The Fed printed a ton of money with their Quantitative Easing #2, and the folks who sell us oil aren't idiots. Since there are more dollars for the same US GDP, each dollar is worth less. And so the (nominal) price of oil goes up. The real (inflation-adjusted) price is likely flat, or a little down.
So what is the real price of oil? We don't know, because the price of energy is helpfully excluded from the CPI. Don't look to your government to tell you any data here. The fact that they won't tell you is all you need to know.