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Economy in Brief

Oil & Gold Prices Down. A Trend Reversal?
by Tom Moeller August 21, 2006

Inflationary concerns were piqued by the up-trend in prices for gold & oil. That trend reversed a bit last week as the price of West Texas Intermediate Crude Oil settled on Friday at $71.15 per barrel, down 7.6% from the near-high of $76.99 reached early the prior week. Gold prices also moved lower to $613.90, off 7.5% from the July high.

Evidence that higher oil prices forced cutbacks in the demand for gasoline as well as some diminution of political tensions could have caused the trend reversal. In fact, the latest monthly figures on real personal consumption expenditures indicate demand for gasoline & oil fell 5.5% from the peak during January of 2005.

These gasoline demand figures through June were roughly consistent with the Department of Energy's estimates of lower demand, but during July & August consumers seem to have grown accustomed to higher prices. Gasoline demand versus last year returned to the plus column.

The four week average of gasoline demand through mid-August rose 1.3% versus last year as a result of firm demand this Summer. Certainly that growth is well off the 4-8% rates of early 2004, but consumers' resilience clearly is in evidence.

The just released figures from the Federal Highway Administration indicated that through 2004, the miles driven in the U.S. by passenger cars grew a steady 2.0% from the year earlier. These figures are available in Haver's USECON database under Highway Statistics.

The latest Short-Term Energy and Summer Fuels Outlook from the U.S. Energy Information Administration can be found here.

US Weekly 08/15/06 12/31/05 Y/Y 2005 2004 2003
Light Sweet Crude Oil, WTI (per BBL.) $73.06 $58.16 10.5% $57.59 $41.78 $32.781
Cash Gold Price, Handy & Harmon $625.50 $507.40 41.2% $447.13 $411.72 $367.78
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