Today the price of crude oil surged above $86 a barrel, easily blowing past its previous all time high. Stocks were finally hurt by the surge in crude oil prices today, as the Dow surrended over 100 points, after fighting the oil headwind recently quite often. In the past it had seemed like the stock market was more concerned with the price of oil than it has been of late. It seems that the market has become a little less concerned with the rise in crude oil prices because it hasn't appeared to hurt the overall U.S. economy that badly as of yet.
I want to make this post an interactive post, and hear the comments of the readers, so I will pose this as a question. At what point do you believe the price of oil will hurt
the economy? Do you think that the current level of $86 will have large implications on our markets if it continues to hold, or do you think that the price of oil must go far higher before it eats significantly into GDP growth, or even causes a recession?
On an inflation adjusted basis, the highest level crude oil has ever reached was $100.28 back in December of 1979. The fact that we still have not hit the highest level on an inflation adjusted basis is the argument from many for why we haven't seen more problems from the higher energy prices.
I tend to think that high oil prices are here to stay, with obvious volatility along the way. There has to be a point at which oil will affect our economy negatively. The question is, what exactly is that point?
I thought it would already be having its affects on the economy. Especially after how things worked out earlier this year there just seems to be missing that same, "oil is up, sell your stocks" mentality.
Posted by: Blain Reinkensmeyer | October 16, 2007 1:05 PM | Permalink to Comment