Everything goes back to oil; Jeff Rubin blames the housing crisis and the recession on the price of oil:
In what I thought was the best post I have written all year that I think three people read, I blamed the #occupy movement on it.
As oil prices soared from $35 per barrel in early 2004 to almost $150 per barrel in the summer of 2008, consumer price inflation in the US tripled to a rate of almost six per cent. It didn’t take long before interest rates caught up to inflation and, in the process, blew up the massively over-leveraged subprime mortgage market and the economy with it...it was the massive rise in energy inflation, and an associated rise in food prices.
With every bite they eat, the poor, the young, the unemployed and the underpaid are subsidizing the happy motoring world by paying too much for the food they eat so that the drivers can pay too little for the fuel they use. The Maybachs and the Black Cabs carrying the 1% are fueled by subsidized corn, while nobody else can afford to eat.
Sure, the people occupying Wall Street can't put their finger on what is bothering them. But they can feel it in the pit of their stomachs. If you follow the money, it all goes back to oil. It always does.
Now, Henry Blodget says It's Time To Start Freaking Out About Oil Prices
$100+ oil caused many Americans to buy different cars and drive less. And it put a choke chain on the economy, throttling growth. And, shortly thereafter, the economy tanked. And then, of course, oil prices followed the economy down, allowing everyone to focus on other more pressing emergencies....But then, with even a crappy economic recovery from the depths of the financial crisis, oil prices soared again. And now they're back to near-emergency levels, even with the global economy sputtering.
Will the increasing price of oil cut off the recovery? Or have we learned anything from the past? Sami wrote during the last spike in the spring:
With oil prices on the rise once again, we—as people who believe there are solutions to our ridiculous addiction to oil—need to be ready to offer up and implement those solutions as opportunities arise. There will be plenty of loud voices dominating the debate—calling for tax cuts, subsidies, and more aggressive drilling of anywhere and everywhere. But the fact is oil has been so cheap for so long that we use it without thinking.
It's time to start seriously thinking about alternatives.