Will oil price rise hamper economic recovery?

June 15, 2009

Charles Schwab’s Chief Investment Strategist Liz Ann Sonders believes the rise in oil prices is in part directly related to the improvement in the economy. Sonders says “there’s no reality if the economy is starting to improve to the ten-year staying at 2-percent and oil staying at $32 dollars.” Do you agree? Or, will the rise in prices start raising red flags? Click here to listen to Sonders’ view.

Will the rise in oil prices slow the economic recovery? from Reuters TV on Vimeo.


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Yes oil should be expected to go up some ahead of recovery. The fact it has gone up this much with industrial production still falling is troubling. It is rising with other commodities mostly due to loose Fed policy and inflation expectations. If this rise continues it will take more and more money from consumers pockets, fuel inflation pressure in almost everything and increase our trade deficit. None of these are good in our current fragile financial situation.

Posted by Kevin | Report as abusive

It’s the high energy costs that partially led to the mess we’re in: A lot of people tend to live paycheck to paycheck, with little to no savings. When energy costs spiked, it forced many to live on credit cards for ordinary expenses: groceries, gas, etc. Ultimately they faced foreclosure when things started to catch up. (Especially those on adjustable rate mortgages.)

The bad thing about energy costs, is you pay several times over: It takes energy to make fertilizer for the crops. It takes it to ship the produce to the grocery. Anything that creates a product ultimately requires energy costs. Most plastic products are also made of oil, themselves.

Best case scenario: Economic growth will remain stagnant. For us to really recover to the point of economic growth, we definitely need to have energy independence, and look at improvement in efficiency.

Posted by Robert | Report as abusive

I agree with Kevin, however we need oil prices to continue to rise quite a bit more so that the leadership of this country, business leaders, and consumers will change their ways of life by consuming less oil. Nothing is going to change until we are forced to change. Americans are finally realizing that we do not have a “right” to be the biggest, best, and ultimate world consumer. After all, we’ve only been in business for approximately 250 years, and look what a mess we’ve made. Let’s be the model for the world once again.

Posted by Frank | Report as abusive