The $4 Gas Threat: Oil Plunges But Recession Risk High

AAA Fuel Gauge National Average for Regular: $3985.

The price of oil made a staggering collapse today and fell below $100. Light, sweet crude for June delivery moved lower by 8.6%. Economic fundamentals have not changed enough in the last few days to justify such a dramatic move. But, April unemployment data could keep pressure on oil if it is worse than expected.

As a way to combat the current price of oil and to guard against long-term high prices Republicans passed a plan in the House to expedite oil and gas leases. In reality, there is nothing the action will do that could have any affect for several quarters. The legislation is not likely to make it through the Senate.

Car rental companies have used the rise in fuel prices to charge exorbitant amounts for gas. Hertz (NYSE: HTZ) is charging renters over $9 per gallon in many locations, which is impossible to justify economically even if the firm has to carry gas to refill its cars to rental locations by hand.

Among the grim observations of the day, Economist James D. Hamilton wrote at Time.com that “of the 11 recessions in the United States since World War II, 10 were preceded by a spike in oil prices.”

Douglas A. McIntyre