Oil prices may be going up, but they can still cause a US recession
Bob Bryan
BusinessInsider.com
Feb. 28, 2016
It appears oil prices have found the bottom in recent days, with prices recovering from mid-$20-a-barrel lows back into the $33 to $34 range.
But according to Jason Schenker, president and chief economist at Prestige Economics, the uptick in oil price isn’t enough to save many oil companies — or the US economy — from disaster.
“Oil prices simply aren’t going to rise fast enough to keep oil and energy companies from defaulting,” Schenker told Business Insider.
“Then there is a real contagion risk to financial companies and from there to the rest of the economy.”
According to Schenker, this means the US economy will dip into a recession either at the end of 2016 or the start of 2017.
Schenker’s logic works a bit like dominoes. First, oil will rise but only to the mid- to upper-$30 a barrel range, which is not enough to keep many US drillers from defaulting on loans. This in turn puts a squeeze on banks’ bottom lines.
The Rest…HERE
