Linking oil to US economy

There have been arguments as to how much influence the price of oil had on the state of the United States economy. The opinions range from some to significant. However in all cases there is agreement that the price of oil did play a roll.

Within the last few days the US government finally admitted that the US was in a recession from December 2007. As with any steering factors in the economy, it takes time to see results. Think of it like a big ship at sea. Stopping or turning an oil supertanker the distance is measured in miles.

There are 2 factors that must be kept in mind. The first is the rapid price rise of oil was way too fast for the economy to assimilate. That means no matter what changes the government does to fix the economy, they can be undone in a month if the price of oil goes up quickly. The only fix from that is a divorce from an oil driven economy. So in this case perhaps it is best to think of oil as that bitchy wife with huge mood swings.

The second factor is what price of oil is tolerable for today’s economy. Connecting the Dots has concluded that a simple scale works best. Simply subtract the price of oil from $100.00 meaning that if the price of oil is $30.00 per barrel then it is 70% tolerable in today’s market economy. If the price of oil is $90.00 per barrel then it is only 10% tolerable. That means the tipping point is $50.00 per barrel.

As the US moves away from oil the $100.00 starting point will go up. That means if the US has moved completely off oil at some future date, the price of oil becomes irrelevant to the economy.

The direction of the economy needs to be changed, and that is clearly in President elect Obama’s plans. Think of it this way, the direction of the economy needs to change from time to time. So picture this, you start in New York and get in your car and head west. Things are fine for awhile but it cant last forever. Sooner or later you will be looking at the Pacific Ocean and the economy stops. From there a new direction must be chosen as your car will only make it a few feet into the water before it dies completely and sinks to the bottom.

The new direction needed is being pointed out very clearly by several factors, one of them is global warming. That divorce from oil needs to happen and happen now. Those mood swings and getting clubbed with a frying pan has to go. Getting hooked up with earth friendly alternate energy is the direction needed. Connecting the Dots will be publishing a series “Moving away from oil” later this month.

So keeping in mind that delayed reactions are seen when steering factors are moved, a weekly price of oil is listed below. You can come to your own conclusions as to how much oil played a factor. The predictions of the duration of the US recession can also be seen if you look close enough at the price of oil.

December 30, 2005      $61.04
January 6, 2006           $64.21
January 13, 2006         $63.92
January 20, 2006         $68.48
January 27, 2006         $67.76
February 3, 2006         $65.37
February 10, 2006        $61.84
February 17, 2006        $59.88
February 24, 2006        $62.91
March 3, 2006             $63.67
March 10, 2006           $59.96
March 17, 2006           $62.80
March 24, 2006           $64.26
March 31, 2006           $66.35
April 7, 2006               $67.43
April 13, 2006             $69.45
April 20, 2006             $72.98
April 28, 2006             $71.58
May 5, 2006                $69.97
May 12, 2006              $71.93
May 19, 2006              $68.53
May 26, 2006              $71.29
June 2, 2006                $72.75
June 9, 2006                $71.64
June 16, 2006              $69.97
June 23, 2006              $70.78
June 29, 2006              $73.52
July 7, 2006                 $73.86
July 14, 2006               $76.80
July 21, 2006         $74.57
July 28, 2006         $73.36
August 4, 2006     $74.77
August 11, 2006     $74.35
August 18, 2006     $71.14
August 25, 2006     $72.51
September 1, 2006     $69.19
September 8, 2006     $66.25
September 15, 2006     $63.33
September 22, 2006     $60.55
September 29, 2006     $62.91
October 6, 2006     $59.76
October 13, 2006     $58.57
October 20, 2006     $59.33
October 27, 2006     $60.75
November 3, 2006     $59.05
November 10, 2006     $59.59
November 17, 2006     $58.97
November 24, 2006     $59.24
December 1, 2006     $63.28
December 8, 2006     $62.03
December 15, 2006     $63.43
December 22, 2006     $62.41
December 29, 2006     $61.05
January 5, 2007     $56.31
January 12, 2007     $53.30
January 19, 2007     $51.99
January 26, 2007     $55.42
February 2, 2007     $59.02
February 9, 2007     $59.89
February 16, 2007     $59.39
February 23, 2007     $61.44
March 2, 2007     $61.64
March 9, 2007     $59.69
March 16, 2007     $57.11
March 23, 2007     $62.28
March 30, 2007     $65.87
April 6, 2007         $64.28
April 13, 2007     $63.63
April 20, 2007     $64.11
April 27, 2007     $66.46
May 4, 2007         $61.93
May 11, 2007     $62.37
May 18, 2007     $64.94

May 25, 2007     $65.20
June 1, 2007         $65.08
June 8, 2007         $64.76
June 15, 2007     $68.00
June 22, 2007     $69.14
June 29, 2007     $70.68
July 6, 2007         $72.81
July 13, 2007         $73.93
July 20, 2007         $75.79
July 27, 2007         $77.02
August 3, 2007     $75.48
August 10, 2007     $71.47
August 17, 2007     $71.98
August 24, 2007     $71.09
August 31, 2007     $74.04
September 7, 2007     $76.70
September 14, 2007     $79.10
September 21, 2007     $81.62
September 28, 2007     $81.66
October 5, 2007     $81.22
October 12, 2007     $83.69
October 19, 2007     $88.60
October 26, 2007     $91.86
November 2, 2007     $95.93
November 9, 2007     $96.32
November 16, 2007     $93.84
November 23, 2007     $98.18
November 30, 2007     $88.71

Official start of US recession

December 7, 2007     $88.28
December 14, 2007     $91.27
December 21, 2007     $93.31
December 28, 2007     $96.00
December 31, 2007     $95.98
January 4, 2008     $97.91
January 11, 2008     $92.69
January 18, 2008     $90.57
January 25, 2008     $90.71
February 1, 2008     $88.96
February 8, 2008     $91.77
February 15, 2008     $95.50
February 22, 2008     $98.81
February 29, 2008     $101.84
March 7, 2008     $105.15
March 14, 2008     $110.21
March 21, 2008     $101.84
March 28, 2008     $105.62
April 4, 2008         $106.23
April 11, 2008     $110.14
April 18, 2008     $116.69
April 25, 2008     $118.52
May 2, 2008         $116.32
May 9, 2008         $125.96
May 16, 2008     $126.29
May 23, 2008     $132.19
May 30, 2008     $127.35
June 6, 2008         $138.54
June 13, 2008     $134.86
June 20, 2008     $135.36
June 27, 2008     $140.21
July 4, 2008         $145.29
July 11, 2008         $145.08
July 18, 2008         $128.88
July 25, 2008         $123.26
August 1, 2008     $125.10
August 8, 2008     $115.20
August 15, 2008     $113.77
August 22, 2008     $114.59
August 29, 2008     $115.46
September 5, 2008     $106.23
September 12, 2008     $101.18
September 19, 2008     $104.55
September 26, 2008     $106.89
October 3, 2008     $93.88
October 10, 2008     $77.70
October 17, 2008     $71.85
October 24, 2008     $64.15
October 31, 2008     $67.81
November 7, 2008     $61.04
November 14, 2008     $57.04
November 21, 2008     $49.93
November 28, 2008     $54.43


One Response to Linking oil to US economy

  1. Avatar Mike Hunt
    Mike Hunt says:

    So what happens when the US starts to get out of recession?