Yesterday, the major stock market indexes rallied sharply higher in a very broad based advance. Just about every sector in the stock market surged sharply higher including energy. Today spot crude for March delivery is trading above $91.00 a barrel. Gasoline is also holding steady and remains near it’s 52 week high.
This has been a very cold winter across the United States. The east coast of the U.S. has experienced an unusually high amount of snow fall and this certainly will keep demand strong for heating oil. High energy prices have always been considered a direct tax on the U.S. consumer. High energy prices can also cut into corporate profits. Airline stocks are particularly sensitive to high oil prices. Airline stocks such as AMR Corp. (NYSE:AMR), Delta Air Lines Inc. (NYSE:DAL), and Jet Blue Corp. (NYSE:JBLU) are trading at multi-month lows despite heavy passenger loads. This decline for these airline stocks is a direct effect of high energy prices.
In 2008, many economists, investors and traders, can point to the July surge in energy prices as the straw that broke the camels back in the stock market. The U.S. consumer simply could not afford $147.00 oil. This time around the economy is still on fragile footing despite the current inflation rally that is being spun as a positive by the government and the Federal Reserve Bank. Can the U.S. consumer handle $100.00 oil this time around? We shall see.