April 25, 2001

Gas Prices Coming Back to Haunt Us

Last year, as OPEC cut production levels and gasoline prices soared, we told you that U.S. refineries would pose more of a problem in the future than OPEC's supply whims. U.S. oil inventories have been near record lows for more than a year. Plus, in the midst of last year's crunch, refineries put off necessary maintenance work in order to keep the profits rolling in.

Now, however, they're suffering from production hangover. The refineries were barreling ahead at full capacity, but all that has caught up. And any slowdown in production is going to mean higher prices at the pump.

Now that we're in the beginning stages of recession, the effects of higher gas prices are going to weigh on our pocketbooks even more. We saw higher gas prices singlehandedly lay the groundwork for the current slowdown, and it will undoubtedly cause the recession to drag on longer. Americans are already facing the fear of layoffs and a volatile stock market. When rising gas prices start to eat into discretionary spending funds, this economy is going to grind to a halt.

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