With gasoline and crude oil prices near levels associated with recessions, some investors are betting it is time to take profits in energy stocks. Maybe not.
hitting its highest price since 2008 and the stock market on edge with the first land war in Europe since WWII being waged by one of the world's biggest crude oil suppliers, oil prices and energy stocks are an area of focus for investors.
There is of course disagreement and contrarian takes. Citi's commodities team wrote last week it is becoming "probable" that oil prices have peaked already or could soon consolidate near a top. But that would require a de-escalation in the Russia invasion of Ukraine and progress on Iran talks. U.S. inventories are at or near lows, but Citi says stock builds are on the way in 2Q'22.
A big caveat: the evidence isn't deep. "Recessions don't come along that often, so we're talking three periods since 1990," Colas said. The spike in oil and gasoline prices comes just as commuting is returning to normal again as well, with more companies calling back workers across the country as the omicron wave of Covid has declined.
He said there is evidence from recent periods when spikes in oil prices didn't spell doom for the economy, but there was a key difference between those periods and today. Previous periods which were close to recession-inducing levels, but when no economic contraction occurred, include 1987 and 2011 .