Recessions of the past 40 years - were all results of high gas prices
Recessions of 1973, 1980, 1991, 2001 and 2008 were the direct result of pain at the pump
In predicting hard financial times - it's best to look to the gas pump on the city street corner. That's the sage bits of advice from Forbes columnist Robert Lenzner. "I was reminded by Kirk Spano, the founder of Bluemound Asset Management today that spiking oil prices in 1973, 1980, 1991, 2001 and 2007 contributed to 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," he warns.
Forbes columnist Robert Lenzner also offers word of caution about the months ahead. " . In the coming few weeks, you are going to hear a great deal of alarmist prognostications by the dooms-dayers"
Predictions are uniformly gloomy. Oil is quickly becoming scarce again across the worldwide stage. Strikes by oilfield workers in Libya have reduced daily production of crude oil dramatically from 1.6 million barrels a day to an estimated 250,000 barrels a day. There have also been bombings of pipelines in Iraq which have interrupted production. This activity promises to put a cap on Iraq's ability to increase oil production. Production in Nigeria has fallen by 10 percent daily due to leaks caused on account of political instability.
"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 through $120 a barrel that holds due to the odds that we will have to send some cruise missiles into Syria, creating tension, and triggering speculative trading in crude oil. A worst case scenario would be the spread of violent action to other nations in the Middle East," Lenzner says.
An inspection of 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 percent 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 phony 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," Lenzner adds wryly.
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