Why it's going to take some time for spending to come back.

Investors in the stock market may be prematurely counting on people spending more with rumors of interest rates decreasing. They are especially premature in thinking this will cause an immediate or near term increase in petroleum usage. The two areas of the economy that will see a short term increase in activity is home sales and loan refinancing.

Lowering interest rates by itself will not have an immediate effect on driving mostly because most American consumers are still suffering shell-shock from the devastatingly high fuel prices we've been subjected to for the past year. Instead of charging more on their credit cards, smart consumers will now use what would otherwise be discretionary income to pay down what credit they already have instead of taking on new credit. While stock market analysts look at this decrease in spending as a bad thing, most financial advisers look at this as in a different light. What consumers are paying in interest is money they do not have for spending, whether for essentials or luxuries.

Another factor that will keep oil usage down for at least a few more months is the increased number of people who are currently unemployed. Many industries have had to lay off employees over the past few months because of decreased sales. Two that are often overlooked are RV and boat manufacturing. With gasoline selling for over $4.00 a gallon and diesel fuel for nearly $5 in most of the country, people have not been using their RVs or boats near as much as in previous years. Most people who had been considering the purchase of an RV or boat have postponed those purchases. This has also affected areas that depend on tourism for much of their economy. Those who have been able to take vacations have for the most part been staying closer to home and spending less on those vacations.

We have seen run ups in oil prices approximately every 5 years since 1973. Other times the run up has lasted half as long as this time. Because this time did last so long, it's going to take longer for consumers to recover to where they feel comfortable driving far from home again. It may be that the speculators in oil commodities and the oil producers went too far this time in driving prices higher. It may be that we actually remember the lessons this was supposed to teach us and continue full force in developing alternatives to petroleum for energy to power our lives.

Hopefully this time our government and industries will stay on the path towards energy independence and not relying so much on fossil fuels. If they do, we may be able to prevent our economy being decimated by oil producers profiteering off our reliance on oil.