Oil is a hard asset which is priced in U.S dollars around the world, and when the value of the dollar falls, global investors tend to shoot up the oil prices. One of the reasons for the weakening of the dollar has been the recent Fed’s Quantitative Easing, which led to the decrease in value of the dollar, and ultimately increase in oil price.
The Gasoline prices reached a two-year high last week with $2.98 per gallon; 35 cents more compared to last year, which could be traced to the weakening dollar and increase in imports by China. The Oil Price Information Service estimates that consumers will be spending $6.4 billion more in oil prices compared to last year, amount which could have been spend on holiday shopping.
Interestingly, the chief economist for the International Council of Shopping Centers, Michael P. Niemira, said that, “it doesn’t seem to matter much because we are getting accelerating economic activity, which is an offset”. But, he also predicts that the increase in oil prices will have a negative impact on the next year’s GDP as “when the bills come in after the Christmas shopping, there will be less disposable income in people’s pockets because of the increase in expenditures for oil, which they can’t avoid”.
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