DISCUSSION

Will Rising Gas Prices Derail Retail Recovery?

January 3, 2011Written by RetailWire Staff

With retail sales for the just concluding holiday season expected to be well above those of last year, it would be nice for retailers to be able to take a breather and enjoy the feeling of a job well done.

But, unemployment remains high, the housing crisis has not abated and the average price of a gallon of regular, unleaded gasoline has now topped $3 per gallon for the first time in two years. Gas prices, according to a McClatchy Newspapers article published on The Seattle Times website, have risen 42 cents over the past year.

At least one expert, former Shell Oil president John Hofmeister, is predicting $5 gas within two years, which would drive up the cost of many goods. Services could rise as well.

Others, such as James Williams, an analyst at WTRG Economics, do not expect to see prices go too much higher in the next year. Mr. Williams said the Saudis have a vested interest in not derailing the recovery.

Meanwhile, the University of Michigan's Consumer Sentiment Index for December reached its highest level in six months and U.S. consumer spending has increased for five straight months, according to a Reuters article appearing on ABC News/Money. The Reuters analysis notes that with unemployment still high, consumers are focused on paying down debt, at least between shopping seasons, and that successful retailers are engaging shoppers with frequent promotions and mobile apps.

Discussion Questions: Is the economic recovery strong enough to handle further rises in the price of gasoline and oil? What strategies/tactics should retailers employ to keep shoppers spending as gas prices rise?

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