Monday, March 14, 2011

Oil Shock: $150-200 a barrel?

“Oil price shocks have led to US recessions in 1974-75, 1980, 1990, 2001 and 2008-2009. 3 of these were caused by Mid East political shocks,” notoriously bearish economist Nouriel Roubini wrote on his Twitter account at the end of February.

Last Wednesday, he made another bold prediction: “If troubles spread to other countries such as Bahrain and Saudi Arabia, this could push oil prices up to $140 to $150 per barrel, which could trigger a double-dip recession in the periphery of Europe and the U.K.”

While the predicted oil price may seem shock-worthy, the correlation of oil prices and recession should not. As James Hamilton, an Economics Professor at the University of California, San Diego, wrote last year, rising oil prices are a potential retardant to economic recovery, both in the automotive sector as well as across consumer spending in general...

It seems that plenty of traders agree with Roubini’s bearish outlook. A chart published today by Bloomberg shows a sharp increase in traders buying call options on $200/barrel oil futures, which expire on May 17th...

Roubini Predicts Oil Will Hit $150 Per Barrel, Traders Betting On $200
Mar. 7 2011

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