LONDON — Nine of the last 10 serious downturns in the world economy followed a spike in the price of oil, and we are heading for another spike, with oil back up near the peak of $78.40 a barrel that it reached almost exactly a year ago.
A record number of options contracts are now being sold that entitle customers to buy oil in the future at $100 a barrel. That tells you where the inside players think the price of oil is heading, since those options will only be of value if the price were actually above $100 a barrel.
The spike at $78.40 in July 2006 didn't cause a recession, so why should this one? Indeed, why would even $100 a barrel cause a global economic crisis, given that $100 today is only worth about the same in most other currencies as $78.40 was a year ago?