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Oil: Rising oil prices may be a recession indicator

2020-01-09 18:42:03

Our article on oil leads us to leave you with a statement that oil can be an indicator of recession

 In a drawback that has been seen recently between the USA, and Iran have had some emphasis on oil as a fundamental objective, causing that oil can be an indicator of recession, because with these conflicts the global economy presents a slowdown making the oil prices present a considerable increase upwards. 

What is the opinion of investors that oil can be an indicator of recession?

 The increase in oil prices generally has a considerable impact according to the most recent recessions caused by the United States. Below we indicate the three dates in which these recessions have occurred: 
  •  July-October 1990 oil price increase of 135 percent.
  • 19992000 managed to double considerably, this recession lasted until 2001.
  • In 2007-2008, oil prices increased by 96%.

Can rising oil prices be an indicator of recession? 

 Just a couple of days ago we had the opportunity to review and inform ourselves about the events that have shaken oil prices, due to the assassination of General Qasem Solimani at the hands of the US, This is causing an escalation of reactions throughout the Middle East, which could lead to oil being an indicator of recession, due to the supply of this hydrocarbon worldwide, crude oil had presented an increase of 3.3 percent placing the barrel at a cost of $63.18, currently there was an extremely strong increase, because this death has happened just a couple of days ago, generating an increase of 4.8 percent which could lead to this continuing to generate some increase. 

 The rise in oil prices may be an indicator of recession, I do not say this, this is affirmed by Paul Hickey the founder of Bespoke Investment Group, who states that according to the increases in the price of crude oil there may be some unique cost for these companies, since the interruption of oil supplies generates that a recession may occur.
 The world economy has shown some signs of tension, because only on Friday we had the possibility of observing some declines in manufacturing, in a span of a decade, because the bull market has managed to see an increase of 370 percent in a span of 11 years, in relation to investors, especially in the case of crude oil, a highly valued commodity worldwide.

What could be Iran's response to the fact that oil may be an indicator of recession? 

 Chronologically, the oil prices have been presenting variations that allow us to see the black gold revolution, because by the end of 2014 there was a considerable fall in everything giving way to an increase of 37 percent, because it is here where the so-called oil shale began to see the light in the United States, this managed to slow down a little the increase in oil prices, but that does not remain stable, especially if we place ourselves to study the recent events on oil can be an indicator of recession

 Strategist Pavel Molchanov states that "in the days and weeks ahead, we will need to watch how Iran and its retaliation for leading to a real disruption of oil supplies responds," as it is most obvious that Iran will take some retaliatory action against the United States, It is no secret that relations were broken, but now with the assassination of the Iranian general everything becomes more complicated, as the Persian defense minister has said, verbatim, that "a crushing revenge was taken" but that is not all because the foreign minister states that "it was extremely dangerous and a foolish escalation" the statements issued by the minister, in one way or another is a conflict that remains latent.

What opinions can we gather regarding oil prices?

  •  The world market has been patient before the recent events between the United States and Iran, here are some interesting details on this topic oil prices can be an indicator of recession
  •  Bespoke's Hickey has stated that oil prices are not necessarily "problematic", when we talk about the stock market, because for the world market to really get worried, the cost of oil would have to be $70 or $80.
  • The major averages showed a 1 percent drop on Friday, even though the U.S. took the news in stride.
  • When the U.S. was in recession, oil prices were reflected with a 90 percent increase, especially when this occurs within 10 to 12 months.
  • DataTrek Research founder Nicholas Colas says that investments should remain vigilant according to the price of oil, because with the rise of oil the recessionary risk presents the possibility of bringing down the bull market we are facing today.
  • Colas says that a real problem could be if pink oil reaches $100, which indicates that we should remain vigilant, because in his opinion this would not bring anything good, we just have to wait and see how the oil market develops.
   In this sense, the increase in oil prices can be an indicator of recession, since following the most recent conflicts, the value of oil in the world economy can be high.

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