patrick.net

But,but but.... the oil people and all the middleman milking the cow, are getting plenty of money. So we probably DESERVE a good recession, in order to properly worship the gods of capitalism. And if we don't worship properly the volcano will explode and kill us all.

Interesting graph.

So another 6-12 months until US Industrial Production plummets off a cliff again?

God Bless Amurrica. The land of automobile dependency.

its different this time

Shouldn't high oil price causes oil stock to go up? DOW 15000 soon?
And creates more oil related jobs?
Causes high inflation and high real estate price?

If you rent, can you afford 10% rent increase every year?

xenogear3 says

Shouldn't high oil price causes oil stock to go up? DOW 15000 soon?
And creates more oil related jobs?

Yes, high oil prices are great for the economy, because they create oil jobs.

Hurricanes are also great for the economy, because they create construction jobs. ;-)

What is so hard to understand about high Oil creates havoc on the US economy?

We're a consumer economy, that depends on energy from soup to nuts.
Higher Oil = Higher Gas
Higher Gas = higher cost for crop production
Higher cost for crop production = higher groceries.
= Higher production costs = higher transportation costs
= fewer employees = fewer consumers = higher prices to off set the lost volume = recession = more unemployed = less consumption = more companies goes under = more Oil speculators(unemployed losers sitting at home playing monkey see monkey do) = higher prices.

There are some anamolies to this correlation analysis, especially when you use terms like ALWAYS. Such as,

1981 recession with falling oil prices
2001-04 Economic recovery with huge run up in oil prices

Though in general, I have little argument with your point.

However, if I want to correlate something to oil prices, I would use US intervention in the Middle East.

1973 - US resupplies Israel in Yom Kippur War, oil price spikes
1977 - Iranian Revolution
1990 - Kuwait War
2002 - Iraq War
2012 - Threat of Iranian War

That said, speculation in prices based on fear, (and not supply disruption) is what has always spiked oil prices. Remove the ability of monied interests to leverage and affect prices in this way, and oil would be cheaper. This can be accomplished by increasing margin requirements or eliminating margin in commodities trade altogether.

Its crazy that a small number of like minded speculators can affect oil prices many times more than supply and demand does...

yep. this is the same philosophy itulip has termed as the "peak cheap oil" economic cycle.

david1 says

Its crazy that a small number of like minded speculators can affect oil prices many times more than supply and demand does...

Nixon blamed the "speculators" when the dollar was going toast towards the end of Bretton Woods I.

http://www.youtube.com/embed/iRzr1QU6K1o

The bears explain the cause behind gas price increases.

http://www.youtube.com/embed/40hNSJEKUgo

david1 says

Remove the ability of monied interests to leverage and affect prices in this way, and oil would be cheaper.

Where do the "monied interests" get their leverage from? Cheap money.. what is the source of this cheap money?

Let's not generally blame the "speculators" and mask the root cause.

uomo_senza_nome says

Where do the "monied interests" get their leverage from? Cheap money.. what is the source of this cheap money?
Let's not generally blame the "speculators" and mask the root cause.

Well put sir.

I'd love to be able to print money and go gambling in the markets with it.

this is going to further hurt home prices with the cost of heating bill. In NY the taxes are already too high... This economy is strange, unemployment is high, you hear about foreclosures and underwater houses, people with no money, high gas but your local TGIF, Applebees and other food restaurants are packed with customers!

joshuatrio says

Interesting graph.

So another 6-12 months until US Industrial Production plummets off a cliff again?

We've known for awhile that another recession is coming. It has to.

It's gonna be 1980 all over again.

Where's my Best of Hall and Oates CD?

rootvg says

It's gonna be 1980 all over again.

LOL, the Bernank sure has plans to raise interest rates just like Volcker did. Except that if he does it, then he'll wreak havoc on the whole economy. And he has already committed to keep interest rates near zero until 2014.

Sure this is exactly like 1980!

/sarc off.

rootvg says

Where's my Best of Hall and Oates CD?

Love their music!