The price of a barrel of crude oil spiked to $72.49 before settling (for now) at $71.95.
Mayhem from major oil-producing countries contine while oil suppliers can’t seem to keep up with demand. With oil prices rising, obviously gasoline prices will follow.
Here is a recent chart from Chart of the Day. It shows the average US price for unleaded gas increasing by 52 cents per gallon in an unbelievable seven weeks time.
When adjusted for inflation, gasoline prices are not far off the inflation-adjusted peak of $3.18 that occurred back in 1981.
Look at what happened when gas peaked in 1981. A recession soon followed. If you look closely at the chart, it seems everytime there is a spike in gas prices, a recession occurs.
Luckily, during the spike caused by Hurrican Katrina, the US didn’t fall into recession. Is our luck about to run out? If so, then foreign investors would liquidate their US investments such as stocks, and that means they would have to sell dollars and convert it back to their native currencies.
This would definitely be dollar bearish.