Just as the economy was getting up a nice little head of steam, fighting in North Africa and rising tension in the Middle East threaten to slow the forward motion. At the very least, the turmoil and resulting concern over the impact on oil production could create headwinds to recovery, a drag on growth, not unlike those that surfaced last year around the sovereign debt crisis.
Instead of European debt, the worry this time is rising fuel costs. The question of the hour: Will the current political fighting in Libya spill over into the kind of region-wide crisis that could upend the nascent global recovery?
Oil crossed the $100-a-barrel threshold in late February, and yesterday it closed at $105 a barrel, a new post-recession high. The national average for gasoline, meanwhile, hit $3.509 a gallon Monday, according to AAA and other sources.
Rising energy costs were cited as the single biggest impediment to growth in our industry by several participants at a roundtable last month with Soundings Trade Only just before the start of the Miami International Boat Show.
“Fuel prices are a big issue,” said Mark Mansfield, national sales manager of the new Cutwater Boats. “We see it in every single sale.”
No one wants a repeat of 2008, when gasoline averaged $4.89 a gallon at the fuel dock and diesel went for about $5.25. We interviewed a lot of boaters that summer. I remember well one man’s response to higher fuel costs: “They suck,” he said.
That pretty much said it all.
The unrest in Libya and spiking oil prices also tossed a wet blanket onto otherwise positive news last Friday that unemployment had fallen to its lowest level in nearly two years. The jobless rate dropped to 8.9 percent in February from 9 percent in January, marking the third consecutive month the rate has dropped. That’s the lowest it’s been since April 2009, and the three-month drop is the sharpest since 1983, according to reports.
There’s been other good news, as well. Consumer confidence hit a three-year high in February. And there has been a significant increase in auto lending, which points to increased confidence among buyers.
And the reports we’ve gotten from dealers and builders at Miami and the nine-day New England Boat Show, which closed Sunday, have been upbeat.
Although he acknowledged the harm that a prolonged spike in oil prices could create, Federal Reserve Chairman Ben Bernanke told Congress earlier this month that he didn’t believe the increases in energy prices to date posed a “significant risk to the recovery or to overall inflation.”
A prolonged rise, however, would be another matter.