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10 of 11 Recessions Preceded by Oil Shock to Markets

February 23, 2011

I just finished listening to the Economics Editor for Bloomberg, Michael McKee, on whether the Libyan situation which is spiking oil prices will “shock” the markets and lead to a double-dip recession. McKee stated that 10 of the previous last 11 recessions were preceded by oil shock to the markets. The big question is, is this an oil shock to the markets?

Here is a brief summary of his report:

– Oil prices are highest in three years
– Gas nationwide average of $3.19 (closer to $3.79 here in SoCal)
– The U.S. uses 400 million gallons per day

Stephen Schork of the Schork report stated we will liekly see gas at $4.00 a gallon in the summer of 2011;

If we get to $4.00 a gallon, the increase = $2.6 billion per week that people will pay and that will not be spent in the overall economy for other goods & services and thus may lead to a double-dip in the economy;

OPEC has stated it will replace any shortfall of Libyan oil through increased production.

As we can see, it is time to invest in alternative energy as we are at the mercy of middle east politics and related oil production models.

Just a note: The bill that passed the House last week to continue funding the federal government would rescind all “unobligated” funds from the Department of Energy’s clean energy loan guarantee program, with the exception of funds for nuclear energy projects.

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