Economists Don't Fear $4 Gasoline
Will dizzying gasoline prices slam the brakes on the U.S. economy this summer? Derek Burleton, senior economist at TD Bank Financial Group, and Jan Stuart, UBS oil economist, agree that prices will rise -- but aren't sounding any alarms yet. The two joined "Power Lunch" to talk about the pump's impact on the economy.
On Thursday, the American Automobile Association warned that it foresees record highs for gasoline prices by May's end. And with gasoline already topping $3.50 in certain areas, some analysts have predicted $4-per-gallon gasoline this summer. But Burleton told CNBC's Sue Herera that "you need a sustained increase, not just a pop-up to four on average."
He concedes that if gasoline did plateau at levels near $4, "it would happen at a time when the U.S. economy is more vulnerable than it was during past price spikes." Burleton points to the "housing market correction" as a concern," and says inflation pressures are "more of an issue" than they were in 2005, the last gasoline super-spikes. But he maintains he isn't calling for that scenario to happen.
Stuart agreed with Burleton's optimism. He called for price rises, but said, "Even if you do see $4, we expect a repeat of last year," in which personal savings will decline -- but with no immediate stress on the economy. He pointed to "very strong" rising gasoline demand growth as proof that "there's disposable income out there." And he doubts that gasoline prices will "materially slow anything down" this summer.