Impact of petroleum futures pricing in the general economy tends to reflect within a 9 month cycle. That means that the substantial effect in the general economy of today's prices will be seen 9 months from today.
The general economic effects that you are experiencing now are, at least in some considerable measure, consequences of base commodity prices from 9 months ago.
Petroleum is not at all like most other commodities, in that the price of petroleum has an extremely profound effect on the price of everything else.
For example, central banks - particularly the ECB, extremely worried about inflationary pressure from petroleum prices, did not act quickly enough to reduce interest rates accelerating the domino effect that we are seeing now.
Last thing to say is that Petroleum is valued in U.S. dollars. It has been Bush administration policy to devalue the dollar (a la banana republicans) to achieve four aims.
1.) disguise the true balance of trade deficit.
2.) slow down economic growth in Asia (what I have called Economic Cold War)
3.) disguise the real cost of the Iraq war.
4.) keep holders of American paper (China for example) from liquidating their dollar holdings.
It was clear to me, and I have been saying this to my clients and writing about it since 2003, that this economic policy would not survive the end of the Bush administration. It seemed inevitable to me that it would start to seriously correct immediately before the election with the most severe correction coming in Q1.09
Don't look for gasoline prices at the pump to correct in any meaningful way before Q2.09 - it will take that long for events to make their way through the system.
KissingPro saidWhy is the cost of gasoline still high? Any economists out there?