US Economy Tested by High Oil Prices

                                       
                                            Mr. Taylor Smith, Proffesor of economics

US Economy Tested by High Oil Prices
By: Chris Wiese
February 23, 2012

The United States economy is once again being tested. A spike in gasoline prices is threatening to put out the flickering flame of the US economic recovery. Just as the US has weathered the storm from disasters such as Japans earthquake and tsunami, the Arab Spring, and Europe’s debt crisis, this is another potential hit to economy.

Taylor Smith, an Ole Miss graduate and current economics professor at his alma mater, thinks the US economy is in far better shape to absorb the blow of rising gas prices.

“This is the dark cloud in an otherwise brightening domestic economic picture. It's something we need to watch right now, but not panic about yet.”

He is not saying that the Economy has fully recovered, there are areas of concern. “The Arab Spring scared a lot of people because oil supply could be cut off and drive up the gas prices higher than ever,” Smith said. “European Debt is another area of concern, that is flat out scary.”

There are reasons to be concerned, but Smith sees the Economy currently in an upswing. “GDP is increasing, unemployment has finally started to ease and growth is picking up.” The economy is in good shape as of now, but Smith cautions not to get too excited.

“We are one misstep away from another recession,” he said. Smith describes the economy as “very fragile.” The constant fluctuations are starting to wear on US consumers. 

“Consumer confidence is high, and then a little scare such as an increase in prices at the pump has them thinking another crash is coming,” Smith said. “Everyone is just waiting for something to go wrong.”

Smith sees the fluctuations as a normal thing. He thinks people are just paying more attention to the market and are more sensitive since the recession.

“Look, the market is never going to be constant,” he said. “It has and always will fluctuate.”
The increase in gas prices isn’t necessarily an indication of another recession coming, but that the demand for gasoline is rising. We just notice the price increase more on a product that we rely on. If a pack of gum doubled in price, we wouldn’t even bat an eyelash.

“Americans rely on gas so much that any increase in the price will cause a stir,” said Smith. He thinks that the strengthened economy is ironically the cause of higher gas prices. This is just a little bump in the long road to recovery.

Smith concluded, "If this is biggest concern right now then I don't think were headed back into recession."