It may not come as a surprise to anybody that the U.S. economy – not to mention the global economy as a whole – currently finds itself in a very delicate position as the world continues to try to rebound from a very difficult two years that were overshadowed by a faceless monster that managed to impact everyone’s lives in one way or another.
… Of course, we’re talking about the recent virus breakout that not only led to the deaths of many but left many more jobless and suffering as the world economy closed its doors, awaiting a cure.
Though that cure now appears to be here, significant mutations of said virus continue to spread, causing more alarm and fear as we make our way into the latter half of the year. As many begin to pull out their long sleeves and pants in preparation for the upcoming colder season, many still are concerned that, it will be during these colder months that these new variants will make themselves better known, throwing all the recent post-virus progress out the window and the world economy along with it.
As such, today we take a look at our current economic standing and see whether or not we may have a cold winter ahead of us…
Do Higher Prices Mean Fewer Sales?
You’ve probably been witness to the post-corona price surge on everything from groceries to gasoline. You may have seen your favorite meals at a local restaurant go up in price… Perhaps not by much, but enough for you to notice. Anyone watching the real-estate markets can attest that buying a house today is going to cost MUCH MORE than it did just a few years ago. This has become the norm in our new world as companies that managed to survive quarantine look to make up for lost wages during the recent economic shutdown.
… But with those higher prices comes a cost and that cost could come in the form of overall sales. How long will today’s customers put up with price gauging until they decide it makes more economic sense not buy that new house and just stay put instead. Or, realize that a nice meal at home, without being subjected to high gasoline costs and inflated menu prices, will cost them MUCH less than a night on the town.
Unfortunately for the global economy, many economic minded individuals are beginning to take this cynical approach to their lifestyles and, as a direct result, economic health could find itself having a hard time returning to pre-pandemic stats.
Granted, this is not everyone’s thought process, and, despite these recent high prices, there are many who will still pay whatever it takes to return to their previous lifestyles. But even a loss of 10% of its consumer base could be detrimental to companies that are barely keeping their doors open in the new reality we find ourselves living in.
The Uncertain Future of Crude
As quarantine mandates began to be lifted in early 2021, many could not wait to shake off that recent bout of cabin fever and head out into the world once again! The struggling airlines found themselves with full passenger lists once again, cruise lines (which had taken a terrible beating during the Covid-19 spread) began arranging sail dates again and, in general, demand for gasoline continued to rise. The weather was warming up, the air was clean and the world was getting back on its feet.
… But with many across the globe now making their way into the winter months, gasoline prices have started to take a tumble as people look to hunker down for what could be another cold winter.
Just this past Monday alone, gasoline demand fell 4.8% when compared to the previous week’s reports. Though, not a surprising turn of events for some as this downturn is common at this time of year, certainly a tough blow for the crude markets as they, along with the rest of the world, work to rebound from a year of restricted travel.
Added to this is the fact that the recent evacuation of Kabul by U.S. troops has left the enemy Taliban in control of the major Afghan city and allowed Chinese and Iranian officials to move in, recognize the newly powerful Taliban as a legitimate leader of Afghanistan and begin making plans to exploit the country’s vast natural resources.
… And with the Keystone Pipeline now shut down once again, U.S. crude consumers are even more dependent on foreign nations for their supply.
Anyone old enough to remember the tragic days following the September 11th attacks in 2001 will also remember the immediate surge in gasoline prices as U.S. consumers began to worry that the inevitable coming middle eastern conflict would soon put the U.S. crude industry into a tailspin, as supply no longer was able to meet overwhelming demand.
With recent events in the middle east unfolding as they have and upwards of 15,000 American citizens currently at risk, stranded behind enemy lines, the opportunities for yet another middle eastern conflict directly following the end of another are currently on the horizon and, among the many tragic outcomes of such an occurrence, it wouldn’t be far-fetched to predict that the crude industry could be impacted in a major way.
LEARN MORE HERE…
As many on Wall Street try to work to predict what could come next in this unpredictable market, DTI founder and 40-year market veteran Tom Busby focuses on the facts of today to help us gauge the pulse of our current markets to be able to prepare for tomorrow.
Join Tom below as he shares his latest insights and helps you manage your investments in this time of uncertainty.
P.S. – Are you interested in learning how you could tackle this market with a simple $5 trade?