Every 1 cent increase in gasoline decreases U.S. consumer disposable income by about $600 million per year. The move in oil in the past week alone has almost entirely wiped out the most recent stimulus.
Investors — certainly U.S. stock investors — would be wise to keep one eye on the price of oil, currently pushing $90 per barrel. Oil traded up 10 cents to $89.29 on Monday at mid-day.
And the reason is obvious enough: once again, oil is approaching the danger zone, from a U.S. GDP growth standpoint.
No one knows precisely at what point oil begins to substantially hinder consumer spending and slow commercial activity — but this much is known: every $1 per barrel rise in oil decreases U.S. GDP by $100 billion per year and every 1 cent increase in gasoline decreases U.S. consumer disposable income by about $600 million per year.