Tuesday, September 09, 2008

$100 Oil

by Bill McBride on 9/09/2008 04:03:00 PM

The NYMEX is showing Light Sweet Crude closed at $102.16 per barrel today.

Bloomberg is showing the dated Brent Spot price at $98.52 per barrel.

Barchart.com is showing ICE Brent Crude Oil for Oct at $99.37 per barrel.

Whatever price you use, oil prices have fallen by almost one third since the peak in July.

So far so good on oil prices.

Note: My comment "so far so good" was referring to the impact of oil prices on the economy. I've been pointing out for sometime that if we are to avoid a severe recession, we probably needed oil price to fall sharply. My prediction earlier this year for oil prices to decline in the 2nd half of 2008 was based on demand destruction, lower subsidies in certain Asian countries, weaker demand growth in China, and a few other reasons.

Whether this will be enough to keep the recession mild to moderate (in terms of unemployment staying below 8%), we still don't know - but it will definitely help. And this will also help with inflation too - and keep the Fed from raising rates.