Crude Awakening: Oil Closes Over $110

U.S. crude oil futures prices jumped above $110 a barrel on Friday for the first time since 2008. May Brent Crude stood at $122.56 a barrel.

A few basics, for each $10 rise in price over $100 per barrel, sustained for one year, has a general effect of .5% reduction in GDP, in the moderate case.  If the price rises are rapid, or say 50% over the one year period from the $100 level, and assuming no currency manipulation, the reduction in GDP could reach a worst case negative 1.1% of GDP for each $10 rise in oil.

The US is currently growing at an annualized rate of 2.5% GDP, the current Nynex price for oil is about $113 per barrel, a roughly 38% increase since the beginning of the year.

If oil reaches $150 per barrel by June, and stays at or above that level for the balance of the year, expect US GDP to be at or near 0% growth.

If the GDP were to drop due to other factors, such as a drop in worldwide demand for US products, or a stalling of worldwide economic activity, expect the US GDP to go negative.

Gas prices have been steadily rising as the national average this week tops $3.72/gal.

Obama is clearly showing his full stripes on the issue, as he rides around in government supplied stretch limousines, VH-3D Sea King Marine One helicopter, and a variety of large and mid sized jets (Barry took Michelle on a New York City junket in a Gulfstream 500 On 16 July 2010, the Obama family flew to Maine for vacation in a Gulfstream III painted in presidential colors). A carbon footprint bigger than his head.

“If you’re complaining about the price of gas and you’re only getting 8 miles a gallon, you know,” Obama said laughingly. “You might want to think about a trade-in.”

Gas Prices Nearing All Time Record High