Rising Gasoline Prices A Harbinger Of Future Economic Problems?

This morning, Joe Petrowski, the CEO of Gulf Oil LP, an oil retail and distribution company with outlets located primarily throughout the Northeast, was on  CNBC discussing gasoline prices.  In response to questions from the talking heads, Joe made several points.  First, as gasoline pump prices rise toward $3 per gallon, drivers are beginning to cut back their purchases.  Mr. Petrowski said that their gallons per purchase statistic was declining suggesting that consumers are becoming stressed financially.  One of the talking heads (a portfolio manager) asked whether this wasn't really consumers just cutting back their purchases because the price to the consumer had risen?  Pure economics - higher prices cause demand to fall.

That question about consumer consumption suggests the questioner doesn't view gasoline as an inelastic consumer good, meaning it is more of a necessitity than a luxury, which for most people is reality.  The second point Mr. Petrowski made was that at their convenience stores, consumers continued to trade down in their purchases - buying more store brands than national brands.  That signals people are more conscious of the price of what they are buying.  With unemployment about three percentage points higher than at this point in 2008, and about eight million additional unemployed workers - many of whom are located in the Gulf Oil market territory, one has to think high gasoline prices are starting to hurt consumers.

On the future direction of gasoline prices, Mr. Petrowski pointed out that on the New York Mercantile Exchange (NYMEX) that trades petroleum products, open interest (buying) for crude oil contracts is nearly as high as in May 2008 before the last push of prices to $147 per barrel.  He also pointed out that open interest for gasoline was higher than spring 2008 suggesting.  His conclusion is that triple-digit oil prices are in our future as well as gasoline prices over $3 per gallon. 

On the other hand, Mr. Petrowski may be pointing out a peak in trading interest, especially if petroleum demand doesn't rise.  Could we be looking at a meaningful market correction for oil and gasoline prices in the next couple of months as stretched consumers retrench their spending in contrast to the Wall Street and Washington views that the rosy retail sales figures recently reported signal the economy is a strong recovery phase?