We know you are watching gas prices with an eagle eye, especially as prices at the pump approach $4/gallon.
We are now just 18 cents away from the record high gas price of $4.11 during the summer of 2008. Consumers generally start to adjust spending at $4/gallon, according to Gallup, said the Christian Science Monitor.
Gas is already above $4 in six states including Hawaii and California.
For the car electronics market, which is just now seeing a small rebound from an ugly slowdown over the past two years, a steeper rise in gas could spell trouble. So here’s what some analysts say.
First, it’s helpful to understand that gas prices typically peak just prior to Memorial Day. They rise in the spring as refiners shift over to their summer blends, which are more expensive to produce. This spring, the market is also roiled by turmoil in Libya.
Analyst Sandar Cohan of Energy Security Analysis says gas prices could drop dramatically “if summer demand doesn’t materialize,” reported the Christian Science Monitor.
Goldman Sachs says gas prices are slowing economic growth but not stopping it and it’s betting on relief at the pump later this year. The Wall Street firm lowered its prediction for GDP growth last week because the price of gas is sucking $110 billion of disposable income out of the economy this year. But, Goldman still expects the economy to grow 1.75 percent for the quarter (down from 2.5 percent). And it sees growth later this year for a few reasons, one being that it expects gas prices will fall back again (another is a moderate increase in jobs), reports Fortune magazine.
MarketWatch says that gas prices could hit a national average of $4 in a month from now. The average price right now is $3.83/gallon, said AAA on Monday.
A Gallup poll of consumers found they expect gas to peak at an average of $4.36/gallon this summer.
As for car electronics retailers, it’s the uncertainty–more than the actual price of gas– that really hurts the market, said ICE executive director Rob Elliott. Customers start wondering if they will turn in their car for a smaller fuel efficient model. “What happens is customers say, ‘Yea, I was going to put the video headrests in my Tahoe, but I may wait because I may get an Accord.’”
But once prices stabilize, even if they settle a bit higher, then car electronics retailers see a bounce. “We see sales, because then someone, instead of getting the new Lexus, takes his old Camry and upgrades the sound system.”
Elliott says, “Evidently gas prices haven’t crawled up quickly enough and high enough, but I do believe it’s coming.”
For a breakdown of gas prices in relation to average income and the economy in 10 states, see the story here.
Source: Fortune, Christian Science Monitor, CBS, MarketWatch
The various prognostications are all well and good, but if one uses the stock market as a gauge, the world economy is in a VERY fragile state. Between the plethora of natural disasters, the 2 wars plus Libya, the overall instability in the middle east, our weak economy and a largely jobless recovery…. Any prediction is an educated guess at best. The economy is so fragile at this point that almost any negative factors could spell a wrong turn for business.
I suggest plan for very modest growth, watch overhead like a hawk, and keep inventories lean (no matter what the scare tactics). Grab market share whenever and wherever you can.