– Oil Crisis...is the world about to be shocked

Katrina batters US, and world oil prices
The Age

Hurricane Katrina is battering Australian motorists and retailers, as well as the United States south, with oil prices cracking the $US70 a barrel mark.

One of the most powerful Atlantic storms on record, Katrina is bearing down on New Orleans and other Louisiana ports that handle more than 10 per cent of America's oil imports.

New York's main contract, light sweet crude for delivery in October, touched a high of $US70.80 dollars before retreating to just under the $US70 mark.

CommSec chief equities economist Craig James said for every $1 increase in the price of crude oil, prices at the bowser rise about one cent a litre.

In the past three months, the price of petrol has climbed 15 cents a litre, or an extra $20 a month.

The average family is now spending about $169 a month just to fuel their car.

Mr James said the high prices for petrol were eating into the money families had to spend on everything else.

It was now getting to the stage of being a threat to the total economy.

"The soaring price of oil has become public enemy number one - posing the biggest threat to the health of the Australian economy," he said.

"While competitive pressures have prevented many businesses from passing through higher transport costs into higher prices for their goods and services, the combination of higher wage and fuel costs represents a major double whammy to bottom-line profits.

"Over the past 30 years, every major slowdown or recession in Australia has been preceded by sharp run-up in oil prices."

Retail trade figures due out Tuesday should provide a clear picture of how damaging high petrol prices have been to the wider retail market.

The NAB said the retail figures are likely to be down 0.5 per cent in July. The consensus among most economists is for growth of just 0.3 per cent.

Also out Tuesday is the monthly goods and services international trade figures.

Although the trade deficit is likely to stay around the $1.4 billion mark, there will be a lot of interest in the cost of imported and exported petroleum.

The NAB said with the value of Australian homes stable, and falling in some markets, and higher oil prices, the outlook for increased consumption in the retail sector was negative.
 

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