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Page added on June 1, 2018
This Is What an Oil Shock Looks Like
If it looks like a duck, swims like a duck, and quacks like a duck, it’s probably a duck. And right now, this duck is looking a lot like an oil shock:
- In Brazil, a strike by truckers protesting the price of fuel brought the economy to a halt over the past week, interrupting exports of soybeans, coffee and chicken and prompting some to call for a return to military dictatorship;
- In India, prices for diesel and gasoline have hit multi-year records, leading to demands for the government to cut taxes and for a price cap to be imposed on state-controlled Oil & Natural Gas Corp. – a self-defeating expedient, as my colleague Andy Mukherjee explained this week;
- Governments in Thailand, Vietnam and Indonesia and implementing or planning increases in retail fuel subsidies to protect consumers from the effects of rising oil prices and weakening national currencies;
- Airline profits have probably peaked because of headwinds from fuel costs, according to Alexandre de Juniac, chief executive officer of the International Air Transport Association. Philippine budget carrier Cebu Air Inc. this week promised to impose fresh fuel surcharges;
- Moody’s Investors Service just blamed high oil prices in part for a 0.2 percentage-point cut in its outlook for India’s 2018 GDP growth, and warned of the potential of falling consumption spending and rising inflation across the globe if current high prices are sustained.
No Worries
Internet searches for oil shock-related terms show the world isn’t concerned about prices
Source: Google Trends
Judging by internet searches for the term, an oil shock is the last thing anyone should be worried about. It seems insane to be stressing over oil when Brent is struggling to break through $80 a barrel and West Texas Intermediate is bobbing around $70, about one-third lower than their levels four years ago. But crude has a short memory.
Over a Barrel
Crude oil prices during the 1990-1991 Gulf War price spike were merely a return to the pre-1986 average. They still helped spark a global recession
Source: Bloomberg
Take the first Gulf War. In the five months between Saddam Hussein’s 1990 invasion of Kuwait and the start of Operation Desert Storm, a spike drove West Texas Intermediate to an average $30.84 a barrel. Despite representing little more than a return to the status quo before Saudi Arabia flooded the market late in 1985, those prices were high enough to help spark the early 1990s recession.
A 2011 analysis of previous oil shocks by James Hamilton of the University of California, San Diego, suggests they’re a strong predictor of downturns. Rapid oil price increases have preceded 10 of the 11 U.S. business cycle peaks since World War II; only in 1970, 1973 and 2003 – during or in the immediate aftermath of recessions 1 – did a run-up in prices fail to herald the peak.
Future Shock
Rapid oil price increases have an uncanny knack for predicting peaks in the U.S. business cycle
Source: Hamilton, D. (2011) “Historical Oil Shocks”, Bloomberg data
Note: There was also a business cycle peak in April 1960, which we’ve not shown for design reasons since there was no nearby run-up in oil prices. “Invalid date” indicates there’s yet to be a peak.
Over the past 11 months, Brent crude is up 62 percent and West Texas Intermediate has risen 46 percent – but does that constitute an oil shock? By one measure, it could. One way of analyzing such events, pioneered by Hamilton, is to compare current oil prices to their highest level over the previous three years.
Where prices are below their previous peak, any increase can be considered a return to the norm; where they’re above that level, there’s the possibility of a genuine shock. On a Hamilton-style measure, we’re seeing the strongest flashing red light since 2008. 2
Crude Measure
By one way of analyzing it, we’re seeing the largest oil shock since 2008
Source: Bloomberg, Bloomberg Opinion calculations
Are such fears premature? Real global growth will reach 4 percent this year for the first time since 2011, the Organisation for Economic Co-operation and Development forecast this week. Consumer prices, which have been slumbering for a decade in developed countries, could arguably do with an extra kick from higher energy prices to fuel core inflation and speed the return of central bank rates to pre-crisis levels. The Conference Board’s U.S. Leading Index, one widely watched measure of turns in the business cycle, is at some of its highest levels on record.
No Surprises Please
Citigroup’s index of global economic surprises is showing the weakest result in five years, but so far emerging markets are only mildly negative
Source: Bloomberg
At the same time, we shouldn’t expect to see many other signs of weakness yet because oil shocks are prophets, not partners, of slowing growth. And while higher prices don’t yet appear to be seriously crimping consumer spending in rich countries, trucker strikes and government subsidies elsewhere are a strong signal that the cost of crude and slumping currencies are eating into incomes elsewhere.
That should provide an extra impetus to governments in Saudi Arabia and Russia in deciding how much to increase exports. With U.S. crude locked up onshore by infrastructure bottlenecks, a surge in supply and easing in prices may be the only thing standing between us and the next downturn.
81 Comments on "This Is What an Oil Shock Looks Like"
MASTERMIND on Sun, 3rd Jun 2018 3:45 pm
Greg
Davy is a lost cause..He is a Jesus freak..His
“greatest generation” parents likely brainwashed him to the level of Pavlov’s dogs..
MASTERMIND on Sun, 3rd Jun 2018 3:50 pm
ATHEISTS ARE MORE INTELLIGENT THAN RELIGIOUS PEOPLE, FINDS STUDY
https://www.independent.co.uk/life-style/athiests-religious-people-intelligence-smarter-study-imperial-college-london-a8183131.html
Davy on Sun, 3rd Jun 2018 3:53 pm
This is friggen great I have the complete attention of the two board asswipe Canadians. If you notice the lame brains have said nothing today other than whine about me. I have jerked both of their chains all day and laugh while they bark. These guys are hilarious and pathetic at the same time LMFAO.
Davy on Sun, 3rd Jun 2018 3:55 pm
Wow, mm going over to the anti-American side. This is typical of blind lying liberals who hate everything American. Good riddance.
MASTERMIND on Sun, 3rd Jun 2018 4:03 pm
Davy
You just call me names for no reason..You say I am a liar but you never say what the lie is.. I do hate america and I hate all governments..I am an Anarchist..
MASTERMIND on Sun, 3rd Jun 2018 4:21 pm
Davy
Missouri among worst nationally in maternal deaths. Reps say no to study on issue
http://www.kansascity.com/news/business/health-care/article212186624.html
Just like you their leaders reject studies..LOL Talk about fucking dumb as they come…
In Jebus name!
GregT on Sun, 3rd Jun 2018 4:31 pm
Just because you are incapable of getting along with others Davy, does not make them anti-Americans.
You need help buddy.
Cloggie on Sun, 3rd Jun 2018 4:42 pm
You just call me names for no reason..You say I am a liar but you never say what the lie is.. I do hate america and I hate all governments..I am an Anarchist..
No you are not an anarchist, you lying creep. You insist that Russia should be nuked by the US military, that is by the organized US state. In your absolute majestic criminality you outflank meathead by a street length, who is far better at hiding his intentions than you.
I do hate america
Correction: you hate WHITE America and you want to see it destroyed (through mass immigration), just like you want to see white Russia destroyed. It is purely racial hatred.
Davy on Sun, 3rd Jun 2018 4:52 pm
Greggie, still stalking and pricking with no intelligent comment yet today. At least the weasel quit barking. He is almost always noise.
Davy on Sun, 3rd Jun 2018 4:54 pm
Mm, go down to Detroit or Flint and get back to me then we will talk about how bad our states are. What a clown.
GregT on Sun, 3rd Jun 2018 5:05 pm
Just responding to your usual paranoid delusional bullshit Davy.
MASTERMIND on Sun, 3rd Jun 2018 5:16 pm
CLog
Putin is a globalist and the worlds richest man..You are just a dumb ignorant tub o lard..Who wants an authoritarian to worship..
MASTERMIND on Sun, 3rd Jun 2018 5:19 pm
Davy
And what happened with your governor? LOL Another lying CONservative..And he was a former Navy Seal..I bet all the ignorant fools of your state thought he was a hero..The people in your state are conditioned to the level of Pavlov’s dogs..
Davy on Sun, 3rd Jun 2018 5:28 pm
grehgiee, your just being your usual noise. You have contributed nothing today. What a waste.
Davy on Sun, 3rd Jun 2018 5:35 pm
master clown, I could give a shit about the politics in my state. There are some bible thumping wingdingers here along with blind lying liberals like youself so if you think you are hurting my feelings then sorry stupid. My point is your state is nothing special to be throwing rocks.
MASTERMIND on Sun, 3rd Jun 2018 5:54 pm
Global civilization will collapse within the next ten years according to (Meadows, 1972)
(Motesharrei, 2014) (Turchin, 2010)
(Ehrlich, 2013) (Turner, 2014)
(Korowicz, 2012)
https://www.scientificamerican.com/article/apocalypse-soon-has-civilization-passed-the-environmental-point-of-no-return/
https://www.nature.com/articles/463608a
http://www.sciencedirect.com/science/article/pii/S0921800914000615
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3574335/
https://www.scribd.com/document/379418787/Is-Global-Collapse-Imminent-An-Updated-Comparison-of-The-Limits-to-Growth-with-Historical-Data-Turner-2014
http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf
The MSM has done an excellent job calming the cattle before they are slaughtered..
GregT on Sun, 3rd Jun 2018 6:59 pm
“My point is your state is nothing special to be throwing rocks.”
The states, ranked from best to worst. Coming in at #1, Michigan. All the way down to the bottom of the list at #42, Missouri.
Poor widdle Davy…..
https://www.thrillist.com/travel/nation/ranking-the-united-states-of-america-from-best-to-worst
onlooker on Sun, 3rd Jun 2018 8:01 pm
We basically needed to convert self-entitlement into self-responsibility within a single generation, on a global scale.
Was never going to happen.
Davy on Sun, 3rd Jun 2018 8:04 pm
“thrill list” travel? Wow, what an intellectual list grehgiee. I think you are grasping for a prick and came up limp. That is about your speed like when you whined about climate change on your Hawaiian vacations a few years back. What a f*nut.
I am glad Missouri is low on whatever list. Hopefully people will drive right past and not stop.
MASTERMIND on Sun, 3rd Jun 2018 8:35 pm
Davy
Belief in a cruel god, makes a cruel man..
-Thomas Paine
MASTERMIND on Sun, 3rd Jun 2018 8:42 pm
The #MAGA Prez is about 500 days into his term: #Obama was 61% at 500 days: GWBush 57% ; Clinton 58.2%; GHWBush: 58%; Reagan 67.6%; Carter 63%; Ford 45%; Nixon 59%; LBJ 79%; JFK 83%; Eisenhower 72% ;Truman 87%;
#DonTheCon -41.6%-via FiveThirtyEight
GregT on Sun, 3rd Jun 2018 9:07 pm
“thrill list” travel? Wow, what an intellectual list grehgiee.”
It’s just a list of best states to worst Davy. No need to get all emotional about it.
“That is about your speed like when you whined about climate change on your Hawaiian vacations a few years back. What a f*nut.”
Climate change is real, and will affect all of us in an extremely negative way at some point. It’s the idiot deniers like yourself who are the most to blame.
“I am glad Missouri is low on whatever list. Hopefully people will drive right past and not stop.”
The lynch mobs from St. Louis will be coming your way buddy, you can count on it. You’ve chosen a very poor location to ride out the death of the Zionist Empire. Add to that your close proximity to a major US offensive base, poor widdle Davy.
MASTERMIND on Sun, 3rd Jun 2018 9:29 pm
GregT
Davy is becoming very anti social..he knows when society collapses, what can go wrong, will go wrong. and there won’t be any sears technicians to come to your house to fix things..The road to ruin is fast..
Boat on Sun, 3rd Jun 2018 11:48 pm
Greggiet
KC is known for it’s steaks and sports teams. I don’t Jews made the list.
Cloggie on Mon, 4th Jun 2018 12:08 am
Davy
Belief in a cruel god, makes a cruel man..
-Thomas Paine
Exactly and Yahweh is the cruelest of them all.
Did not the world’s most sympathetic anti-semite, I mean the Jewish defector Jesus Christ, say about his fellow tribesmen:
Why don’t you understand what I am saying? It is because you are unable to accept My message. You belong to your father, the devil, and you want to carry out his desires. He was a murderer from the beginning, refusing to uphold the truth, because there is no truth in him. When he lies, he speaks his native language, because he is a liar and the father of lies.
John 8:44
Murderers and liars. The sort of folk that will instigate any war out of sadism. The sort of folk that call for the nuking of millions of people. The sort of people that admire false flags like 9/11 that succeeded. People that gloat about the demise of white people. People whose adage is “kill the best gentiles”. People who as early as April 1939 begin to gloat about the millions of Germans they are going to kill, now that they goaded the British and French into the fatal Polish War Guarantee, the very document US Jews are about the use to get their desired war in Europe started:
https://documents1940.wordpress.com/2017/09/25/bullitt-reveals-in-april-1939-that-war-has-been-decided-upon/
And once they have a nation like Russia into their claws, they lustfully begin to decapitate it by killing millions of the upper strata:
https://www.youtube.com/watch?v=Lj8fP5wCy9g
And they will do exactly the same to white Americans, if they get the chance.
The sort of people like you, millimind.
Cloggie on Mon, 4th Jun 2018 12:21 am
The lynch mobs from St. Louis will be coming your way buddy, you can count on it. You’ve chosen a very poor location to ride out the death of the Zionist Empire. Add to that your close proximity to a major US offensive base, poor widdle Davy.
Don’t worry about the fate of this traitor of European civilization. He has selected the best refuge you can imagine: northern Italy, nearly 100% white and beautiful to the core. Meathead knows on which side his bread is buttered. He will never fight for his nation, because he has none. He only has his bank account and his carriers. Meathead has no country, he has an enterprise, he shares with incoherent people from all over the globe.
Boat on Mon, 4th Jun 2018 12:41 am
Clog
Did you forget the Germans attacked Russisa. Why? Well, Hitler did a lot of drugs for starters.
Cloggie on Mon, 4th Jun 2018 1:25 am
That’s a good question boat! Increasing knowledge always begins with asking good questions, so bravo!
The answer is: if the Germans had not been first, the Soviets would have. Listen to this Soviet spy and defector spilling the beans about Soviet intentions in front of the US Naval Academy:
https://youtu.be/wYSy80WlmWY
Davy on Mon, 4th Jun 2018 4:30 am
“Davy is becoming very anti social..he knows when society collapses”
Ah, who talks about eating babies and raping daughters, master clown?
Davy on Mon, 4th Jun 2018 4:33 am
“northern Italy, nearly 100% white and beautiful to the core”
My farm is beautiful to me and not that it matters but it is 95%, white neder. I bet your town is not any better.
Davy on Mon, 4th Jun 2018 4:35 am
“The lynch mobs from St. Louis will be coming your way buddy, you can count on it.”
Bad Boys from Seattle and Hongcouver will be up to visit you buttercup.