The Recessions of 1973,1980,1991,2001,2008 Were Caused By High Oil Prices

In Libya strikes by oilfield workers have reduced daily production of crude oil dramatically from 1.6 million barrels a day to an estimated 250,000 barrels a day. In Iraq there have been bombings of pipelines which have interrupted production and promise to put a cap on Iraq’s ability to increase oil production. In Nigeria production has fallen by 10%  daily due to leaks caused by the plundering of the oil by political trouble-makers.

At $107 a barrel for West Texas crude and $117 a barrel for Brent crude in Europe, we obviously are quite far from the peak in oil prices in July, 2008, which came right on the eve of the financial crisis, the great recession and the reduction in driving by American consumers. The troublesome breaking point could be a spike trough $120 a barrel that holds due to the odds that we will have to send some cruise missiles into Syria that is bound to create tension, speculation in crude oil. A worst case scenario would be the spread of violent action to other nations in the Middle East.

I was reminded Kirk Spano, the founder of Bluemound Asset Management today that spiking oil prices in 1973, 1980, 1991, 2001 and 2007 contributed t o a greater or lesser degree to the  economic recessions of 1973-4, 1980-81, 1991-92, 2001-2003 and 2007-08 that were painful for all equity investors. And I wanted to warn my readers that in the coming few weeks you are going to hear a great deal of alarmist prognostications by the doomsdayers. They will probably suggest that crude oil prices could go back to $150 a barrel where they topped out in July, 2008, or straining to get your attention pick  the even greater scare of $200 a barrel oil. At $200 a barrel, the emerging economies of  Southeast Asia will be badly hurt at a delicate moment for the world economy.

But, if you look at a chart of the rise and fall of oil prices you find that they always slide fast providing profits for the short traders. George Soros, I happen to know, went short crude oil at  $137 a barrel and went long gold at $900 an ounce for one of his best long-short trading positions ever.By January, 2009  crude oil prices had fallen some 75% from the peak to the $36-$40 a barrel level.  So, that kind of volatility has to be kept in mind during the playing out of the Syrian crisis. Also, you have to bear in mind the not so mini-crises happening in more major oil producers such as Iraq, Libya and Nigeria.

A perverse angle on Middle Eastern oil affected me personally today when I received an offer to invest in the oil production of the Syrian Petroleum Corporation, which some shady characters offered to me in return for my helping to invest proceeds of the sale of other Syrian crude. I was used to these phoney offers coming from all across the globe, and instantly deleted the matter from my computer so as to avoid being bugged. I was a bit shaken that such a weird email came from such an auspicious Anglo-Saxon name. I’ll stick to my position in Chevron CVX +0.05%, BP BP -0.82%, and Shell, thank you very much.

6 Comments on "The Recessions of 1973,1980,1991,2001,2008 Were Caused By High Oil Prices"

TIKIMAN on Mon, 2nd Sep 2013 12:56 pm 



Since Obamas secretary of energy has stated he wants gas prices the same as Europe, we will stay in this depression forever. Obama hates cheap gas, and America.

He’s a traitor.

GregT on Mon, 2nd Sep 2013 3:38 pm 



The American way of life is not sustainable, in the US, or anywhere else for that matter. Higher oil prices are coming, and with them will come continued economic stagnation.

Best to get used to it now, because what is in our future, will make the great depression look like a frat party.

There is nothing that Obama, or anyone else can do, to change the laws of physics and mathematics.

Kenz300 on Mon, 2nd Sep 2013 11:17 pm 



Quote – “The Recessions of 1973,1980,1991,2001,2008 Were Caused By High Oil Prices”

——————-

One more reason to shift to alternative energy sources.

Biofuels can now be made from waste or trash.

Every landfill can be converted to produce biofuels, energy and recycled raw materials for new products.

This will be more sustainable than burying the trash and will help to reduce the amount of waste that is disposed in landfills. It will also create an incentive for the collection of more trash that currently ends up in the oceans or on the streets and fields.

Anything that we can do to switch from oil to any other alternative is a good place to start.

Newfie on Tue, 3rd Sep 2013 12:28 am 



In other words… We live in a Petro-Civilization. It is more or less completely dependent on oil, and as oil becomes increasingly expensive, the civilization will fade away.

GregT on Tue, 3rd Sep 2013 2:16 am 



“Anything that we can do to switch from oil to any other alternative is a good place to start.”

Yes Kenz, it is a good place to start, but it is not where it will end. Alternate energy sources are byproducts of fossil fuels, and when fossil fuels are no longer available, neither will manmade alternate energy sources.

If you are truly concerned about the future, start living a sustainable life now, while you still have excess energy to prop you up when you fail. Oil is what brought us all of our amazing technologies. No oil, no resources, no technology. Learn how to grow, preserve, and prepare food, without any fossil fuel input, and you will ready for the future.

BillT on Tue, 3rd Sep 2013 3:28 am 



GregT, as usual, we are on the same page. These techies cannot seem to understand that ‘progress’ is not going to be more tech, but a whole lot less. It is going to be a lot more physical labor for everyone. A shorter, more painful life without the high tech meds of today. A diet that is supplied locally. And a climate that will produce more and more drastic swings from drought to floods and from sweltering heat to subzero cold. We have ignored Gaia and now she will exact her price.