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Economy in Brief

$73.83: Oil & Water
by Tom Moeller April 24, 2006

The domestic spot price for a barrel of West Texas Intermediate crude oil settled at $73.83 on Friday, driven by Mid East supply concerns and strong demand. That easily surpassed last August's high of $70 reached in the wake of Hurricane Katrina.

Just ahead of the peak summer driving season, retail gasoline prices at $2.78 per gallon additionally have been boosted by supply shortages (especially for high test) by the phase-out of MTBE for ethanol.

Adjusted for the inflation in "core" consumer prices, gasoline prices are at the all time high reached in 1981, although prices remain low compared to other liquids such as Evian water ($21.19/gallon) and Gatorade ($10.17/gallon).

Growth in demand for gasoline recently wobbled, but the y/y rise of 0.2% in the four week average added to gains which ranged between 1.0% and 2.6% during the prior five years. Growth in the number of miles driven by U.S. motor cars has ranged near 2% this decade, down somewhat from 2.6% during the 1990s and the average fuel consumed per car rose last year to 557 gallons, up 14% from a low during 1991. The figure is, however, down by one quarter since the early 1970s. This data is available in Haver's USECON database.

Inflationary concerns fueled Friday's gold price to $623.50 per ounce, up 20.8% since the end of last year. Since 1980 there has been a 56% correlation between the level of gold prices and the y/y change in consumer prices.

Industrial metal prices also have been strong with the JoC-ECRI Industrial Metals Prices Index up 18.9% this year driven by strength in aluminum prices (up 16.5%), copper scrap (up 16.5%) and zinc (up 65.1%). Additionally, high grade copper prices have risen 34.4% since year end '05. Growth in industrial production is behind the rise and during the last ten years there has been a 49% correlation between the level of industrial metals' prices and the y/y change in OECD Big Seven industrial production.

Gasoline Affordability from the Federal Reserve Bank of St. Louis is available here.

Weekly Prices 04/18/06 12/27/05 Y/Y 2005 2004 2003
Light Sweet Crude Oil, WTI  (per bbl.) $71.36 $58.16 36.4% $58.16 $41.78 $32.78
U.S. Retail Gasoline (per gallon) $2.78 $2.20 24.4% $2.27 $1.85 $1.56
Gold: Handy & Harmon (per Troy Oz., EOP) $614.75 $507.40 28.3% $507.40 $443.40 $416.25
High Grade Copper (Comex, /Lb., EOP) $3.06 $2.28 105.5% $2.28 $1.54 $1.04
Stainless Steel Scrap (/ton, EOP) $1,574 $1,268 -8.0% $1,268 $1,558 $1,265
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