Prices ended up climbing to $147 a barrel during the summer of 2008 before collapsing, along with every other asset in the world, back to $33 just a few months later due to the financial system meltdown.
Since then people have assumed that it was all just a bad dream. But here we are today, 3 years later, and oil prices are back in the low $90's, creeping toward $100 a barrel.
There are two key differences between where we are today and three years ago:
1. Unemployment today is close to 10%. Back in 2008 is was close to 5%.
2. Our country has run up $5 trillion on the national debt to try and backstop the economy
Our country is far more vulnerable to an oil shock today than it was 3 years ago. I write this not as a prediction for oil prices in the short term. They could easily reverse course and correct hard downward. (This would provide a tremendous buying opportunity)
I look at an oil price shock as a "black swan" type event that analysts do not have factored into their risk models.
With the continued unrest in the middle east, it will a very important commodity to follow.
