From “Dr. Joe’s Market Diagnosis”, by Dr. Joe Duarte
The U.S. Heating Oil Fund (NYSE: UHN) and the U.S. Gasoline Fund (NYSE: UGA) both fell hard on June 22, an event that suggests we may be at that inflection point in the economy where a fledgling recovery is derailed by rising fuel costs, especially diesel fuel, the lifeline of the U.S. trucking industry. And this relationship may be forecasting a second down leg in the U.S. economy, better known to economists as a double dip.
Recently, after traveling in Texas, heading toward Houston from Dallas, we noted how traffic along I-45 was more active than we saw along the same corridor in April. To us, it seemed as if that might be yet another sign of a U.S. economy on the mend. Yet, despite that very anecdotal data, there is some evidence that things are starting to get a bit rough around the edges. According to The Wall Street Journal, rising diesel prices are taking their toll on manufacturers and truckers.
For example, low fuel prices a few weeks ago have climbed significantly and rapidly over the last two to three weeks as refineries cut production in response to low demand that manifested itself earlier in the year. [entire post]