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1.19.2011

As oil nears $100 mark, threat to nascent recovery grows

Source: Globe & Mail, January 18, 2011
Authors: Shawn McCarthy and Nathan Vanderklippe

Rising oil costs are putting the squeeze on transportation companies and consumers, raising concerns that the fragile global recovery is in danger as prices veer toward $100 (U.S.) a barrel.

Airlines and trucking companies say they are absorbing higher costs that are difficult to pass on to consumers, even as households have to spend more of their disposable income on gasoline and home-heating fuel.

In the United States, consumers are only beginning to shake off the effects of the deep recession, and the rising pump prices will hurt their confidence and their wallets, said Chris Lafakis, an economist at Moody’s Analytics in New York.

For every one-dollar increase in crude (CL-FT91.710.330.36%), American consumers face an added $1-billion in higher energy costs, Mr. Lafakis said. “That’s money that could be spent elsewhere – it could be used to pay down debt or it could be saved.”

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