The higher energy prices go the lower the price of Apple stock will go same thing happened in 2000 and 2008 for Apple which counts on discretionary income for larger profits.
in the upcoming recession where “the higher Oil Prices go the less disposable income consumers have in their pockets.”
Just remember as in 2008 analysts will not tell you that high Oil, gasoline and diesel prices will contribute to collapse of the economy and a full blown recession because these analysts are on mainstream media payroll sponsored by the oil lobbyists.
In the summer of 2008 an analyst said this… a few months later the economy was in full blown recession….
Lukman spoke with CNN in Vienna and defended the cartel's position, insisting the high price of crude would not result in a global economic downturn:
"We don't see a recession in the offing due to high oil prices. Oil prices at $138 are not going to cause recession in the global economy." He pointed out that industrialized economies "are less dependent on oil than they were before."
In summary the faster oil prices go up the quicker we get to a full blown recession
Did oil cause the downturn in 2008?
The implication that almost all of the downturn of 2008 could be attributed to the oil shock is a stronger conclusion than emerged from any of the other models surveyed in my Brookings paper. Unquestionably, there were other very important shocks hitting the economy in 2007-08, most notably the problems in the housing sector. But housing had already been subtracting 0.94% from the average annual GDP growth rate over 2006:Q4-2007:Q3, when the economy did not appear to be in a recession. And housing subtracted only 0.89% over 2007:Q4-2008:Q3, when we now say that the economy was in recession. Something in addition to housing began to drag the economy down over the later period, and all the calculations in the paper support the conclusion that oil prices were an important factor in turning that slowdown into a recession.
There is also an interactive effect between the oil price shock and the problems in housing. Lost jobs and income were an important factor contributing to declines in home sales and prices, and the biggest initial declines in house prices and increases in delinquencies were in the areas farthest from the urban core, suggesting an interaction between housing demand and commuting costs. Once house price declines and concomitant delinquencies reached a sufficient level, the solvency of key financial institutions came into doubt. Whether those financial problems were sufficiently insurmountable that we would have eventually arrived at the same crisis point even without the extra burden of the recession of 2007:Q4-2008:Q3 is a matter of conjecture. But it seems to me that oil prices indisputably made an important contribution to both the initial downturn and the magnitude of the problems we’re currently facing.
It is also interesting that the observed dynamics are similar to those associated with earlier oil shocks and recessions. The biggest drops in GDP come significantly after the oil price shock itself. What we saw in earlier episodes was that the drops in spending caused by the oil price increases resulted in lost incomes and jobs in affected sectors, with those losses then magnifying other stresses on the economy and producing a multiplier dynamic that gathered force over subsequent quarters. The mortgage delinquencies and financial turmoil in the current episode are, of course, not the specific stresses that operated in earlier downturns, but the broad features of that multiplier process are surprisingly similar to the historical pattern.
My paper concludes that the economic downturn of 2007-08 should be added to the list of recessions to which oil prices appear to have made a material contribution.
Acknowledgment: The above was adapted from testimony by the author before the Joint Economic Committee of the US Congress and summaries at the website Econbrowser.
Abrupt changes in oil prices, by increasing uncertainty, can also reduce investment and durable goods consumption. To the extent that the return from an irreversible physical investment project depends on the price of oil, increased uncertainty about the future price of oil could cause firms to delay investment and reduce capital expenditures. Following a similar mechanism, uncertainty associated with sharp movements in oil prices can also hinder consumption of durable goods.
For example, for OECD countries, a 10 percent increase in oil prices has been associated with a decline in real activity of 0.3-0.6 percent in the United States and 0.1-0.3 percent for the Euro Area. Studies for developing countries have reported a wide range of findings.
Hamilton (2005) estimates that a 10 percent oil price spike would reduce U.S. output by almost 3 percent below the baseline over four quarters
Past oil price spikes associated with Middle East conflicts and OPEC embargos were each followed by a global economic recession
Big oil price increases that were associated with events such as the 1973-74 embargo by the Organisation of Arab Petroleum Exporting Countries, the Iranian Revolution in 1978, the Iran-Iraq War in 1980, and the First Persian Gulf War in 1990 were each followed by a global economic recession. The price of oil doubled between June 2007 and June 2008, a bigger price increase than in any of those four earlier episodes. Blinder and Rudd (2009) argue that this oil prices hike had very different effects than those in the 1970s. But to what extent were these most recent oil price increases a factor that contributed to our current economic problems?
In April, I presented a paper at a conference at the Brookings Institution entitled Causes and Consequences of the Oil Price Shock of 2007-2008 (Hamilton 2009). In that paper, I looked at both what caused the dramatic increase in oil prices and what role that oil price spike may have played in the subsequent economic downturn.
