The turmoil in the Middle East, the Federal Reserve's decision to
further devalue the U.S. dollar through a third round of "quantitative
easing" (QE3), and rising oil prices are combining to create a toxic
economic brew that could send the global economy into recession.
That was the assessment of International Energy Agency chief economist Fatih
Birol. "I see the [oil] prices today, in this economic context, as
unbearable for consumers," said
Birol on Friday. "High prices together with other factors could push the
global economy back into recession."
Mr. Birol's comments come as U.S. oil prices hit a four-month
high on Friday:
Since late June, the price of crude oil has climbed about 25 percent,
fueling a 16-cent increase in the average price of regular gasoline and adding to the
economic headwinds facing President Obama in the final weeks of the election
Industry experts believe that President Barack Obama may use the Middle East
uprisings and soaring fuel costs to justify tapping the nation's
700 million-barrel emergency Strategic Petroleum Reserve, similar to what
Mr. Obama did last year to no lasting effect.
But it was the Federal Reserve's decision to pump $40 billion so-called
"stimulus" dollars a month into the U.S. economy in the form of
buying mortgage-backed securities that ultimately may prove to be the match
that lit the economic powder keg. As the value of the
U.S. dollar goes down, oil prices go up. That means slower economic
growth and higher consumer prices.
As Reuters explains, the
confluence of all these economic factors is producing a chain reaction of
higher consumer prices, plunging industrial production, and soaring gas prices:
Highlighting the risk to the economy from surging oil prices, a jump in
gasoline costs pushed up U.S. consumer prices in August at the fastest pace in
more than three years and squeezed spending on other items, threatening to slow
Industrial production dropped 1.2
percent in August, the biggest decline since March 2009. The consumer price
index increased 0.6 percent, the first rise in five months and the biggest
since June 2009.
Gasoline prices, which also
recorded their largest increase since June 2009, accounted for about 80 percent
of the rise in consumer inflation last month, the Labor Department said.
Whether Mr. Obama can duct tape the looming economic
collapse long enough to win reelection remains to be seen.
some ways, Mr. Obama should be claiming credit. As Obama
Energy Secretary Steven Chu told the Wall
Street Journal back in 2008, the goal all along has been to explode
U.S. gas prices to the $6 to $8 a gallon prices found in Europe. "Somehow
we have to figure out how to boost the price of gasoline to the levels in
Europe," Mr. Chu said.
Through its mismanagement of the Middle East crisis and endless
rounds of "quantitative easing" (and the concomitant currency
devaluation such "stimulus" brings), the Obama Administration has almost reached its goal of European-style gas prices.
On Friday, a gallon of regular gas in the Bronx cost nearly $5