Whatever recovery is afoot now is a very modest one, especially in the US and rest of the developed world. China may be able to take a blow from $100 oil prices, but due to it huge and rising consumption of crude the blow would be a hard one. The US, on the other hand, cannot continue to see tiny improvements in GDP if energy costs soar again.
The consumer is stretched to his limit because of lack of access to credit, a new-found habit to save money, and high unemployment. A family with two adults commuting is going to have trouble paying an extra $100 or $200 a month on gas.
The airline industry is barely holding its own as passenger traffic stay at historically low levels. A sharp increase in the price of jet fuel could offset all that the sector has done to restructure balance sheets and cut routes and people. The car and chemical industries won’t withstand high oil costs either.
Oil prices may now be as critical as anything else that affects the recovery, and oil prices are going up.
Douglas A. McIntyre
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