Oil passes $119/barrel
If it doesn’t drop back down, kiss the economy goodbye. Note that while the proximate cause of this is the civil war in Libya, it was made possible by:
1) extremely loose monetary policy on the part of the US Fed.
2) Pushing growth into China and other developing 2nd world countries. Every dollar of GDP growth in China uses twice the energy used by a dollar of growth in the developed world. In exchange for cheap labor you use energy. Labor is in oversupply, oil is bottlenecked. This is moronic. (This is not to say such countries don’t need to grow, just that doing environmental, regulatory and labor arbitrage into them has huge costs that aren’t recognized.)
3) Refusal to do anything about climate change, which has led to very volatile weather which has led to widespread and unpredictable crop failures which makes food price spikes likely. Those food price spikes make it so that the day laboring class in countries like Libya and Egypt and so on can barely afford to eat. That makes revolutions happen.
4) Refusal to move off of oil in a large way. Trillions of dollars for bankers, but hardly any money to refit western economies to a new energy regime.
5) Refusal to bankrupt rich people when they, actually, go bankrupt, leaving them with tons of money for speculation and to spend on activities and items which actually are using oil now.
Until the West gets serious about climate change, refitting their economies, financial regulation and taxing not only their rich but the rich of the oilarchies, there will be no sustained economic recovery that doesn’t feel like a hangover, and every recovery will be fragile and ultimately limited by resource price runups. The world economy is already running as hot as it can. Any hotter and even without a crisis, oil would have spiked.
The power of the rich will have to be broken. Historically that happens in two ways: war (including real revolutions) and massive economic collapse.