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Currently, higher energy costs present the biggest risk of further boosting U.S. inflation from its four-decade high, which is bad for the American economy, with consumer confidence hitting the skids. A University of Michigan survey showed that consumer confidence slipped 8.2% from January to February, with fewer consumers planning to purchase homes, automobiles, or go on vacation over the next six months amid concerns about the short-term economic outlook.
Indeed, there are fears that the U.S. economy could even slip into a recession.
Diane Swonk, chief economist at Grant Thornton, estimates that the U.S. economy can weather six months of oil prices averaging around $100, although it could worsen the inflation problem, but a sustained period of $125-a-barrel oil would almost certainly stall growth and lead to rising unemployment.
Remember, these are today dollars, which are worth a lot less than last year's dollars. Hard to compare apples to apples on oil using today's monopoly money.
Today's crude oil price is over $104 and climbing. So we are on our way....
And unlike last time oil climbed past $100/B, there will be no massive "shale oil boom" to provide relief.
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Most shale companies are still paying off the extreme debt they took on when oil was $12 a bbl. They had to go into survival mode during the pandemic and watch as all the other sectors received a bailout. The public stepped on our necks and celebrated low gas prices on Facebook, when confronted by the massive amounts of people who lost their livelihood the response was “well you knew what you were getting into.”
None of them realized that period of extremely low oil prices is the direct cause of what’s coming. Extremely high gas prices.
Now companies don’t have the revolving credit to ramp up their drilling programs, don’t have the experienced Personel to drill or Frac the well.. Horizontal drillers don’t exactly grown on trees.
So many people lost everything in that quick downturn that they are not coming back.
They found less paying but more stable jobs and they are not going to put their families through that again.
The oil companies stock prices still hasn’t recovered to where it was when oil was at $65-75 a barrel four years ago and oil is $90
I say all that to say this.
Oil prices are going to get higher, much higher.
But don’t worry Facebook a55-h0les who celebrated dirt cheap gas prices… “We know what we are getting into”
When the price of oil skyrockets, what the hell do you think is going to happen to the price of electricity?
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