January 8, 2020
Do Crude Oil Futures Prices Serve as a Recessionary Indicator?
Recent tension in the Middle East has caused crude oil futures prices to rise in the United States, raising the question of whether the spike is an indicator of a forthcoming recession. AAF’s Director of Energy Policy Ewelina Czapla examines the relationship between oil futures prices and recessions and concludes that the recent spike is not a major reason for concern.
Both Brent and Cushing prices rose approximately 8 percent in the past month – far from the 90 percent that has historically preceded a recession. Considering the lowest futures price within the past 18 months was about $49/bbl, just over a year ago in December 2018, prices would need to rise to about $100/bbl to suggest a recession is imminent. In other words, the market would need to see significant continued growth in prices in the coming months for a recession to be likely.