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The attacks against Saudi Arabia, which caused soaring oil prices, are certainly the subject of the history of the financial markets on Monday. That they are more than an ephemeral title depends on the length of time during which the production is interrupted or the next attack of the facilities.
British investment advisor AJ Bell's analysts have calculated that the last eight times the twelve-month price of oil was above 100%, there had been a global recession or economic downturn six times.
It should be noted that, despite the sharp 10% increase in crude oil prices, the prices of brent
BRN00, + 11.87%
, trading around $ 65 a barrel, are still below levels recorded a year ago. On September 17, 2018, Brent was trading at $ 78.40.
The nadir for oil prices last year was just over $ 50 a barrel, averaging close to $ 70 last year.
So, a deep breath. If the price of oil remains below three digits – $ 100 a barrel translates to about $ 3.57 a gallon at the pump – the economic consequences are unlikely to be heavy.
In 2014, a Federal Reserve document attempted to understand the role of oil shocks in the US recession.
The Fed was unsure of whether oil prices were causing recessions or whether it was simply an approximation of the other determinants of the economic cycle.
For example, increases in oil prices and contractions in credit tend to occur at about the same time, making it difficult to determine their respective contributions to the US business cycle, the Fed paper noted. And while soaring oil prices tend to precede recessions, they do not always keep up with soaring oil prices.
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