Oil prices may jump to record highs in the next couple of months, all because of President Barack Obama’s policies, and that could send the U.S. economy back into the dark ages, says billionaire real-estate mogul and reality-TV star Donald Trump.
“Oil is going to a level that may be unprecedented. Gasoline is going to be $6 to $8 a gallon,” he told CNBC. “If oil continues to go up, it’s going to be very rough. This country can never recover, because oil is our lifeblood.”
Oil hit a 2½-year high above $112 a barrel Friday.
|Barack Obama (Getty photo)
Trump, who’s considering a bid for the presidency next year, places the blame for higher oil prices on Obama. “He’s in bed with these people (OPEC),” Trump says. “He doesn’t speak the way you have to speak to them.”
The Organization of the Petroleum Exporting Countries, or OPEC, sets the price of oil, Trump says. “They’re having a field day. They don’t respect Obama, our leadership and our country. It’s going to be a very sad day for the U.S. if oil goes up any further. … This country can never be great again.”
Others are concerned about the surge in oil prices too. Soaring oil prices probably cut global economic growth by 0.5 to 1 percentage point in the first quarter, JPMorgan Chase economists wrote in a note to clients. And the continued increase is “on course” to have a similar impact this quarter, they say.
Monday, the International Monetary Fund lowered its forecast for U.S. growth this year, predicting higher oil prices and the pace of job gains will restrain the recovery.
The world’s largest economy will expand 2.8 percent this year, down from the 3 percent projected in January, the IMF said. Global gross domestic product will grow 4.4 percent in 2011, matching the previous estimate, according to the Washington-based lender’s World Economic Outlook report.
Consumer spending, the biggest part of the U.S. economy, faces headwinds from the rising cost of food and gasoline. Federal Reserve officials last month said the expansion is on “firmer footing,” lessening the need to extend a bond purchase program beyond June.
“Recovery in the labor market remains lackluster,” the IMF said in the report. “The drag on 2011 growth from oil price increases largely offsets the boost from the Federal Reserve’s unconventional policies and from stronger net exports.”
The economy grew 2.9 percent last year, the most since 2005, according to figures from the Commerce Department. U.S. GDP will expand 2.9 percent this year and 3.1 percent in 2012, according to the median estimate of about 70 economists surveyed by Bloomberg News from April 1 to April 7.
U.S. crude oil for May delivery rose $2.49 to $112.79 a barrel on the New York Mercantile Exchange on Friday, the highest settlement since Sept. 22, 2008.
Meanwhile, with the price of gas above $3.50 a gallon in all but one state, there are signs that Americans are cutting back on driving, reversing a steady increase in demand for fuel as the economy improves, the Associated Press reported.
Gas sales have fallen for five straight weeks, the first time that has happened since November, according to MasterCard SpendingPulse, which tracks spending at 140,000 service stations nationwide.
Before the decline, demand was increasing for two months. Some analysts had expected the trend to continue because the economic recovery is picking up, adding 216,000 jobs in March.
"More people are going to work," said John Gamel, director of gasoline research for MasterCard. "That means more people are driving and they should be buying more gas," he told the AP.
Instead, about 70 percent of the nation's major gas-station chains say sales have fallen, according to a March survey by the Oil Price Information Service. More than half reported a drop of 3 percent or more — the sharpest since the summer of 2008, when gas soared past $4 a gallon.
This year, gas prices have shot up as unrest in North Africa and the Middle East rattled energy markets and increased global demand for crude oil squeezed supplies. A gallon of unleaded regular costs $3.77 on average, and only Wyoming has an average lower than $3.50. Gas is already 41 cents more expensive then at this point in 2008, when it peaked at $4.11 in July.
But a top Federal Reserve official said he expected commodity prices to stabilize and have a minimal effect on underlying U.S. inflation trends, even if costly fuel did put a dent on household budgets, Reuters reported.
Dennis Lockhart, president of the Atlanta Federal Reserve Bank, said historically, prices for industrial commodities "have tended to exert a relatively small effect on most consumer prices."
"This is not to say there will be no pass-through effect on inflation. The point is the effect is likely to be muted."
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