Evidence Investing

With oil reaching over $85 a barrel recently and with what is generally considered to be a 'fragile', some people (me) are asking: do what degree will the effect is rising oil prices hamper this burgeoning economy.  So lets turn again to Econobrowser for some enlightenment.

Fact: Ten of the 11 recessions in the United States since World War II have been preceded by a sharp increase in the price of crude petroleum. 

Check out this chart.  {grayed areas are the recessions, the black line is the price of crude}:

Econobroswer goes on to postulate that the truly important aspect of this whole picture is oil shocks.  Shocks have everything to do with perception...supply perception, usually (take the 1970's oil shocks).  Another aspect of this is the relative anchoring of gas prices:   And with retail gasoline prices still a dollar a gallon below what consumers have recently seen, I'm doubtful that gasoline prices have the ability to induce as much consumer anxiety as we observed two years ago. Although recent increases in prices have brought energy expenditures back up as a share of total consumer spending, they're still below the 6% level at which consumers historically have started to make dramatic adjustments. 


Just food for thought...