Oil To Make A Break For $100? Our Best Stimulus May Go Away

Posted: March 30, 2010 in Technology and Business
I have said it before:  Our best stimulus package wasn’t anything that the government did… it was oil coming down from almost $150 to the low $30’s… because high oil prices affect absolutely everything we buy.  Which meant that when oil was high, we were paying a huge tax on everything we bought.  And when oil prices crumbled by nearly 80%, it was like getting the greatest tax rebate ever.
In my opinion, that’s what saved us from a second great depression.  There was a global puckering where everyone at once stopped spending.  But then a strange thing happened as oil prices crumbled:  People found — the same people that drive 2/3’rds of GNP spending — the very same people that are a fundamental part of the global spending engine — that they actually had more money in their pockets.  Surprise.  Slowly, they started spending their new found money again (and, interestingly enough, they started saving, too).  
And that’s what fueled the growth over the last 12 months or so.
Oil giveth.  And oil may taketh away again.
Oil has been trading in a range for a while now… from low 70’s to low 80’s.  It made a big move the other day and has settled around $82 a barrel. 
I have this uncomfortable feeling that oil isn’t going to look back any longer… that it will simply keep meandering up from here. 
Next stop, $90… and then $100… a tipping point.  (See Malcolm Gladwell.)
What will happen to stocks?  Upward momentum will help stocks for a while… but once oil hits $100… once everyone finds they have less money in their pockets than before… we may experience another puckering… and we know what happened the last time that happened.
5/6/10 UPDATE:  With oil below $80 again, I’m glad I was wrong about this in the short-run… and I hope I’m wrong about this in the longer run, too.

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