When they said they
worked in the oil industry,
I knew I was in trouble
The Cafe
Another view of sectarianism
Transform
every death
into a birth
Rear Window
Jock Gallagher on brollies
Alan Fisher
It’s the topic which dominates most conversations in America. People meet, exchange greetings and then ask how much it cost to fill up. The rise in petrol prices is hitting everyone.
In a country where people love their cars and where public transport is poor, it’s adding a lot of extra cost to already hard-pressed budgets. One woman who was filling up told us that she was now spending at least $20 a week more on fuel – tough when every cent is already committed. Another told us how she and her husband were trying to co-ordinate their working days better so they can share a car.
Compared to many places around the world, petrol in the US remains inexpensive (national average: $3.96 per gallon). But America is not only used to cheap petrol, it expects it. Budgets are set with low prices in mind. When it exceeds even the most pessimistic predictions, the cost of transport increases, impacting on the price of almost everything else. Companies start to struggle and look to the costs they can control, which almost inevitably means staffing. And household budgets become tight as well, with the danger of lost jobs.
There are three big reasons for the spike in prices. First, the trouble in the Middle East makes people worried about supplies. Then there are speculators who buy what oil is on the market and hold it back to drive up prices and increase their profits. And there is growing demand – particularly from China and India.
Barack Obama received a boost in support from the killing of Osama Bin Laden, but when it comes to handling the economy, public confidence in his ability is way down. And the biggest problem is the soaring cost at the pumps.
There are those who still hope the price will drop soon but the trend is up. America doesn’t like it – but it had better get used to paying it.
Alan Fisher is an Al Jazeera correspondent
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Today’s banner
Choppy waters, Oban
by Islay McLeod
The UK ‘recovery’
will take us back
to the 1830s
Alf Young
Two more signals from our troubled economy released yesterday suggest, yet again, that Dr Osborne’s medicine simply isn’t working. The number of new mortgage approvals in April, according to the Bank of England, fell to its lowest level since records began in 1992.
While growth in UK manufacturing slowed to its weakest pace for nearly two years.
If we take the first as a proxy for the health of consumer demand across the UK and the latter as an indication of the strength of the promised export-led recovery, the progressive rebalancing of our malfunctioning economy simply isn’t happening.
Consumer spending has certainly collapsed. Paul Fisher of the Bank of England demonstrated in a recent speech that the slide in the consumption which largely fuelled our pre-crash years of plenty has left demand there way below the recovery patterns experienced after either the 1990s or the 1980s recessions. Indeed the Financial Times suggests this time the recovery in consumer spending is likely to be the slowest in not just two or three decades, but in 180 years.
Yes, we are talking about comparisons with life in the 1830s here. A combination of higher inflation, tax rises, benefit cuts and slow wage growth will leave families feeling no better off, in real terms, until 2015 than they were before the banking crisis hit us all in 2008. However, while making more things we can sell to the rest of the world showed some early resilience in the wake of the crash, it now looks less and less likely that such a savage hit on living standards will be offset by a sufficiently powerful export-led manufacturing renaissance.
Plenty of companies are reporting strong profits. But not enough of these earnings are being ploughed back into fresh investment. The corporate sector is hoarding more and more cash until the wider economic landscape becomes clearer. In what are traditionally our strongest export markets – North America and the eurozone – times remain confused and tough. Hence the caution.
‘The US economy was supposed to be in bloom by late spring,’ wrote Robert Reich, President Clinton’s former labour secretary, in the Financial Times on Tuesday, ‘but it is hardly growing at all’. Reich calls US growth in the first quarter of 1.8% annualised ‘measly’, given America’s sky-high jobless levels and house prices now one third below their pre-crash peak. But if 1.8% is measly, how are we to describe year-on-year growth in the UK last year of 1.4%, or just 0.8% here in Scotland?
Things are no better – arguably much worse – in the eurozone. Yesterday the FT’s main economic commentator Martin Wolf opened his weekly column with this: ‘The eurozone, as designed, has failed’. He concluded that the two options open to eurozone members – default and partial dissolution or open-ended official support – are equally ‘intolerable’ and confessed he has no idea how the politics of making that choice will actually work out.
At what point will policymakers own up and admit their post-crash prescriptions are prolonging the misery, not making the patient better?
