What could stop $200 oil? A double-dip recession might be the only hope, says Jeff Rubin, oil expert, author, and former chief economist and managing director of CIBC World Markets.
Rubin points out on his blog that oil prices were in the triple-digits even before the chaos began in the Middle East.
He noted that $147 oil, the previously unthinkable high hit just before the financial crisis began in the fall of 2008 helped precipitate the ensuing economic crash.
|A customer fills his tank in Calif.
“What speculators will have to worry about is where things are going. If we learned anything from the last recession, it was our oil dependent, transport heavy, global economy doesn’t run very well on $147 per barrel crude,” Rubin says.
Given rising demand from global growth, “largely fictional” excess Saudi reserves, and the risk of more shutdowns, higher oil seems a very likely result, Rubin says. Oil futures now trade over $102 a barrel.
“We are moving inexorably closer to another oil price induced recession. And when we get there, oil demand and oil prices will once again collapse,” Rubin writes. “The only question is will we see $200 per barrel oil first?”
Rising oil could set of a new wave of higher food prices, warns the UN in a new report.
"Unexpected oil price spikes could further exacerbate an already precarious situation in food markets," David Hallam, director of FAO's trade and market division, told The Associated Press.
"This adds even more uncertainty concerning the price outlook just as plantings for crops in some of the major growing regions are about to start."
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