Can We Have a Recession Without an Oil Shock?

"Formula for success: rise early, work hard, strike oil." -Paul Getty

Oil is a foundational commodity for the world economy. No other product’s basic material matters more. It impacts commercial and consumer transportation. When it really gets moving, there is a trickle-down effect on the prices of nearly every good.

Chart of the Week

An increase in the price of oil acts like a tax on the entire U.S. economy, choking off discretionary spending, as well as freezing the Federal Reserve with inflationary fears. That’s why a jump in the cost of energy has preceded many recessions. We are not currently seeing this spike, and yet, there are some signs of a slowing economy. Could we see an alternative surprise, or black swan, that halts current growth, as the housing market did just before the 2008 recession?

Economic Update

The Federal Reserve is tasked with fighting inflation. It has set a target of 2%, despite being far above that level for 4 years. The impact of this inflation builds over time, as shown in the cumulative price changes.