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With Summer Gas Prices Highest Since 2008, Morgan Stanley Issues A Warning

Tyler Durden's picture




 

As oil prices have risen on geopolitical concerns (that have been printed away by central banks in stocks), so gas prices at the pump in the US have risen to their highest for this time of year since 2008 (and that did not end well). We are not alone in our concern as Morgan Stanley's (and esx Fed) Vince Reinhart warns that a more extreme jump in oil prices would be enough to stall the recovery (lowering real GDP growth by 1.7 percentage points one year out; and perhaps more worryingly, raise CPI growth by about 3.6pp, lowering real consumer spending growth by a full two percentage points).

 

Gas prices were last this high in the Summer in 2008...

 

And that did not end well... (especially with wages continuing to drop)

As Morgan Stanley warns,

Whether price increases are temporary or sustained matters most when modeling the contemporaneous effects on the economy of a rise in oil prices. Simulations of a permanent, upward shift in the price of Brent crude of $10/barrel indicate that real GDP growth four quarters out would be reduced by roughly 0.4 percentage points (pp) and that CPI would be higher by about 0.9pp - compared with our baseline. Growth in real consumer spending would be reduced by 0.5pp.

 

If, however, we model a transitory $10/bbl rise in Brent crude prices (occurring in the current quarter and dropping back to previous levels in the subsequent quarter), the impact results in no net change in the growth rate of real GDP, nearly no net impact on CPI, and no net change in the growth rate of real consumer spending – one year out.

 

A stress test of our model indicates that a more extreme, sustained $50/barrel jump in oil prices would be enough to stall the US recovery, precipitating a single quarter of sub-1% growth and lowering real GDP growth by 1.7 percentage points one year out. A price surge of that severity would also raise CPI growth by about 3.6pp and lower real consumer spending growth by a full two percentage points.

 

 

Not exactly encouraging (but then stocks don't care; growth will come roaring back after the Polar Vortex, the war, and El Nino)

 

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Fri, 06/20/2014 - 15:13 | 4878917 Flakmeister
Flakmeister's picture

Baby, you ain't see nuthin yet...

Fri, 06/20/2014 - 15:26 | 4878950 Grande Tetons
Grande Tetons's picture

Back when KISS was still wearing make-up the shit almost hit the fan. 

http://en.wikipedia.org/wiki/1979_energy_crisis

Not much has changed....except KISS no longer wears make-up and the fan is bigger. 

Fri, 06/20/2014 - 15:27 | 4878970 COSMOS
COSMOS's picture

All these fires around the world the USA is starting might just come back to burn it in the ass in the not too distant future.

Fri, 06/20/2014 - 15:31 | 4878991 ParkAveFlasher
ParkAveFlasher's picture

A $10/barrel price surge will be transitory, just like gold will never see $1300, right Morgan Stanley?

Fri, 06/20/2014 - 15:46 | 4879009 Headbanger
Headbanger's picture

Damn..  I miss my '69 Beetle that got me through the '73 oil "embargo"

It was a bitch getting laid in the thing especially with my very well built horny honey at the time..

 

Hey, anybody else remember the tune "Volkwagen Blues"?

It started off with "Got them Volkswagen blues.."

Cause I sure would love to get a copy of it.

TIA

Fri, 06/20/2014 - 16:07 | 4879104 synergize
synergize's picture

I have no idea what you said b/c i'm staring at your GIF icon - lol

Fri, 06/20/2014 - 16:38 | 4879140 pakled
pakled's picture

Yeah, you could fill the tank just from scroungin loose change from a couple of other car seats.

 

I was living in AK during the embargo. No gas lines at all. Just everybody driving around with a bumper sticker that read "Let the bastards freeze in the dark". They were refering to the 'Lower 48'.

 

 

 

ps - I've got a copy of "The Talking Vietnam Potluck Blues". You can have that.

Fri, 06/20/2014 - 15:30 | 4878989 JRobby
JRobby's picture

And there is much more shit

Fri, 06/20/2014 - 15:29 | 4878987 Cattender
Cattender's picture

it's Different This Time!!!!!! HAHAHAHAHA!!!! Dow 17,000 Baby!!!!

Fri, 06/20/2014 - 17:15 | 4879253 Citxmech
Citxmech's picture

Some super-resilient recovery - when it can be reversed by a measly 0.25 rise in the price of gas. . . 

Fri, 06/20/2014 - 15:38 | 4879014 CrashisOptimistic
CrashisOptimistic's picture

Flakguy, I saw someone post somewhere that analysts on bloomberg or cnbc said "the $10 rise in oil will take 0.2% off GDP", but apparently in Sept when oil was $103 and dropped to $94 early Dec, the analysts announced this would be worth a 0.9% GDP gain.

Personally, my read is it smacks trade deficit XX billion.  Then the inflation pop shows up in the implicit price deflator and THAT further drags GDP.

SPR release threat should be coming soonish.  There's an election in November.  This can't be allowed to go on too long.

 

 

Fri, 06/20/2014 - 15:41 | 4879025 Headbanger
Headbanger's picture

Cool. But not a realistic crash cause the plane would have a severe left yaw and nose into the ground right after the left wing touched down.

But point taken.

Fri, 06/20/2014 - 15:16 | 4878926 centerline
centerline's picture

"recovery"

Makes me laugh every time I see some idiot use this term.

Fri, 06/20/2014 - 15:28 | 4878982 NotApplicable
NotApplicable's picture

At least now with this latest fall-guy in place, they can officially stop using it.

Fri, 06/20/2014 - 17:21 | 4879258 Citxmech
Citxmech's picture

yeah - here's our "recovering economy":  http://www.youtube.com/watch?v=iRMlvBfSBYQ

(from Weekend at Bernie's)

Fri, 06/20/2014 - 15:17 | 4878927 pods
pods's picture

I guess you have to justify your job somehow?

Recovery?  

The only way we get back to normal is if Janet is holding billions of dead dinosaurs in her coochie.

pods

Fri, 06/20/2014 - 15:32 | 4878995 ParkAveFlasher
ParkAveFlasher's picture

I can actually envision layer upon layer of decaying, compressed organic sediment ... in her coochie.

Fri, 06/20/2014 - 15:34 | 4879003 BandGap
BandGap's picture

Stop this right now. Ugh.

Fri, 06/20/2014 - 15:51 | 4879055 Headbanger
Headbanger's picture

Man. that is a cruel image right there..

Ugghhhh...

Fri, 06/20/2014 - 15:39 | 4879020 cro_maat
cro_maat's picture

LOL I think she is more of a ferns to coal type of reptile. Is there a particle accelerator we can put her in to speed up the conversion process.

Let me state for the record that I would not frack that.

Fri, 06/20/2014 - 15:49 | 4879049 ParkAveFlasher
ParkAveFlasher's picture

I can totally find better places to inject my guar gum, too.

Fri, 06/20/2014 - 15:52 | 4879057 Headbanger
Headbanger's picture

Yeah, but could make for a great nucular waste dump site, no??

Fri, 06/20/2014 - 15:57 | 4879077 ParkAveFlasher
ParkAveFlasher's picture

This is turning into a comic book villain origin story.

Fri, 06/20/2014 - 16:08 | 4879109 cro_maat
cro_maat's picture

How would you seal it? Can we bury her in Yucca Mtn as well?

Fri, 06/20/2014 - 16:42 | 4879145 pakled
pakled's picture

"The only way we get back to normal is if Janet is holding billions of dead dinosaurs in her coochie."

 

That's fucked up.

Fri, 06/20/2014 - 20:04 | 4879556 Thunderbox
Thunderbox's picture

I am ready for my shock therapy Nurse Ratshit

Fri, 06/20/2014 - 15:21 | 4878940 Calculus99
Calculus99's picture

They pay people for this kind of research?

No kidding a $50 rise in oil prices will derail the party. Even a retard knows that.

Fri, 06/20/2014 - 15:28 | 4878984 Grande Tetons
Grande Tetons's picture

You hang must hang around with them smart retards that I keep hearing about.

Fri, 06/20/2014 - 15:21 | 4878942 Rainman
Rainman's picture

Oooops ... nobody coulda seen this coming. Time to smash up some more hard drives. 

Fri, 06/20/2014 - 15:21 | 4878943 matinee55
matinee55's picture

Bullshit.  29 Trillions was printed to save our asses & another 29 trillion more can be printed again or 1000 gazillion.  Nobody really gives a crap about debt anymore - DO THEY - if they do, there are pummeled by the leftard media etc.

Fri, 06/20/2014 - 17:23 | 4879265 Citxmech
Citxmech's picture

Until the day where all those electronic bits can actually fill up a fuel tank or power a factory - it ain't gonna actually fix anything.

Fri, 06/20/2014 - 15:21 | 4878945 AccreditedEYE
AccreditedEYE's picture

*YAWN!!!* I have yet to see a single data point to scare this market. The upward march will continue... SPX 2100 or Bust!

Fri, 06/20/2014 - 15:39 | 4879021 CrashisOptimistic
CrashisOptimistic's picture

What market?  Why are you watching something that doesn't exist.

Fri, 06/20/2014 - 17:49 | 4879314 Citxmech
Citxmech's picture

Yeah - here's your "upward march":

http://www.youtube.com/watch?v=VRrMu7B1L2I

Fri, 06/20/2014 - 15:24 | 4878958 Make_Mine_A_Double
Make_Mine_A_Double's picture

Are they measuring the last decade in constant dollar value?

Given since 2008 the Fedsters have devalued the currency by a good 25%? Or perhaps based on the PP of a weighted dollar than and now?

 

Fri, 06/20/2014 - 15:25 | 4878961 order66
order66's picture

What a recession hedge. These bozos are now seeing that negative GDP is here for a while.

Fri, 06/20/2014 - 15:27 | 4878975 adr
adr's picture

So all that will mean is that real non seasonally adjusted miles driven will continue to plummet. Real gasoline demand will continue to drop far below historical norms, but the centrally planned tribesmen dominated market will continue to trade oil and gas contracts higher.

Not because there is demand for the actual commodity, but demand for the contract, always believing there will be someone else willing to pay more. More bullshit will be spewed about foreign demand, China, etc. But the reality will be an absolute halt of commerce.

The definition of a bubble, blown by the Fed, irrational exuberance celebrated by the most useless creatures ever to inhabit the Earth.

Fri, 06/20/2014 - 15:28 | 4878976 Mercuryquicksilver
Mercuryquicksilver's picture

BS. Chart shows 2008 going to sub $2 in October. BS

Fri, 06/20/2014 - 15:37 | 4879012 BandGap
BandGap's picture

It was $1.87 a gallon here when the brown clown took office in 2008. Bullshit called, Look it up.

Fucking doubled since then.

Fri, 06/20/2014 - 15:42 | 4879031 Mercuryquicksilver
Mercuryquicksilver's picture

Yep, I checked historical and stand corrected. Prices near me never dropped that low and I was being myopic.

Fri, 06/20/2014 - 22:38 | 4879846 Overfed
Overfed's picture

It was only down to around $2.2x here in FEMA region X. It hasn't been below $3.25 since mid-late '09. It was $4.06 today when I bought some gas for the lawnmower.

Fri, 06/20/2014 - 15:41 | 4879024 CrashisOptimistic
CrashisOptimistic's picture

The spike in 2008 was sharp.

It's not October.

Fri, 06/20/2014 - 15:28 | 4878983 NOTaREALmerican
NOTaREALmerican's picture

Gas worries are for the Trash Class.  The Trash Class bitching about high gas prices gives the Fed justification to keep those rates low (think of the children) and the asset prices of the Elysium Class keep going up (causing the job creators to create more jobs).      It's a pretty good system these guys have figured-out.

Fri, 06/20/2014 - 15:39 | 4879019 Winston Churchill
Winston Churchill's picture

But it may interupt their serfs getting to work,

The elites are pretty helpless when it comes to anything but psychopathy.

Fri, 06/20/2014 - 15:50 | 4879053 cro_maat
cro_maat's picture

That's why they invented outsourcing, automation, eugenics, tele-commuting, etc.

Long bikes and longboards.

Fri, 06/20/2014 - 15:35 | 4879005 debtor of last ...
debtor of last resort's picture

Hah, that dude at the gas station said to me: if you can suck one drop out of this stone, you don't have to pay.

Fri, 06/20/2014 - 15:37 | 4879008 boattrash
boattrash's picture

Well, you can always stay home to beat those high gas prices...ooops...I forgot, with Obama's Exec Order/Power given to the EPA, our Nat Gas and Electric bills will double to be at home too. Go ahead and lube up. It helps the sand stick.

Fri, 06/20/2014 - 15:40 | 4879022 Saratoga
Saratoga's picture

Thank you Master of the Obvious.

I betcha you get paid 7 figures for such astute advice.

Fri, 06/20/2014 - 15:51 | 4879056 papaswamp
papaswamp's picture

Da Prez: "The weather is too nice what can we blame now?"
Da Fed: " Start a conflict in Syria, Iraq and the Ukraine causing destabilization and the price of oil will rise, and we can blame it on that."
Da Prez : " Wonderful! I can go play more golf..."

Fri, 06/20/2014 - 16:01 | 4879090 syntaxterror
syntaxterror's picture

Is it still going to be "the recovery" in 2 years, 5 years or 10 years?

Fast forward to June, 2024 - "the recovery is stalling yet again for the 145th time since it began in 2009."

Fri, 06/20/2014 - 16:08 | 4879108 1929agin
1929agin's picture

Don't worry, Feds gonna give free fuel for all ..

Print money, ponzi scheme....

Fuel for all ponzi scheme...

Let's be happy, shhh, don't say a thing

tgif

 

 

Fri, 06/20/2014 - 16:12 | 4879127 Davos
Davos's picture

Dump and pump?

Fri, 06/20/2014 - 16:32 | 4879180 1929agin
1929agin's picture

C'mon ZH'ers, Putin is part of the Ponzi Scheme, driving oil prices exactly like summer of 2008, politicians and the Fed will blame the equity collapse, (if it happens), on Putin's aggression...

escape velocity...fyi

Putin is a punk, wake me up when he tries to go Israel

 

Fri, 06/20/2014 - 19:00 | 4879434 Magooo
Magooo's picture
The Long Emergency

 

 

Synopsis

Kunstler's premise is that "cheap, plentiful" oil is the foundation of industrial society and the pervasiveness of its effects is not widely appreciated. Through the 21st century, oil and natural gas will become increasingly difficult to obtain, becoming increasingly expensive and ultimately unavailable. Scarcity of petroleum will cause significant problems for transportation and generation of electrical power. In addition, shipping of food and manufactured items will become increasingly expensive, ultimately prohibitively so. Also, natural gas is vitally important to food production as it is the raw material for much of commercial crop fertilizers. In the industrialized West, most food production and manufacturing is performed far from, and generally abstracted away from the consumer.

The author further argues that alternative sources of energy will be insufficient. As petroleum sources become scarce, environmentally harmful or risky technologies such as coal and nuclear will become necessary but not sufficient for our energy needs. Hydroelectric, solar, and wind power, even in combination with coal and nuclear, will also be far from sufficient. Kunstler does not consider hydrogen to be a true energy source since one cannot drill into the earth and obtain hydrogen. Hydrogen must be extracted from other energy sources, such as natural gas or using electricity at a total net loss of energy.

Kunstler states that, as energy becomes scarce, transportation will become difficult or impossible, causing food and other necessary commodities to become unavailable in many communities. It will be necessary for local communities to become self-sufficient for food production, but many communities will be unable to do so, particularly large cities. The result will be mass starvation, disease, and civil unrest. Kunstler suggests that governments will be incapable of managing these problems.

http://en.wikipedia.org/wiki/The_Long_Emergency

Fri, 06/20/2014 - 19:01 | 4879438 Magooo
Magooo's picture
The End of Growth The End of Growth: Adapting to Our New Economic Reality

 

Economists insist that recovery is at hand, yet unemployment remains high, real estate values continue to sink, and governments stagger under record deficits. The End of Growth proposes a startling diagnosis: humanity has reached a fundamental turning point in its economic history. The expansionary trajectory of industrial civilization is colliding with non-negotiable natural limits.

 

http://www.amazon.com/The-End-Growth-Adapting-Economic/dp/0865716951

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