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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Flakmeister's picture

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

Grande Tetons's picture

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


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

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.

ParkAveFlasher's picture

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

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.


synergize's picture

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

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.

JRobby's picture

And there is much more shit

Cattender's picture

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

Citxmech's picture

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

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.



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.

centerline's picture


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

NotApplicable's picture

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

Citxmech's picture

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

(from Weekend at Bernie's)

pods's picture

I guess you have to justify your job somehow?


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


ParkAveFlasher's picture

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

Headbanger's picture

Man. that is a cruel image right there..


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.

ParkAveFlasher's picture

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

Headbanger's picture

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

ParkAveFlasher's picture

This is turning into a comic book villain origin story.

cro_maat's picture

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

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.

Thunderbox's picture

I am ready for my shock therapy Nurse Ratshit

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.

Grande Tetons's picture

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

Rainman's picture

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

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.

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.

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!

CrashisOptimistic's picture

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

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?


order66's picture

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

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.

Mercuryquicksilver's picture

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

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.

Mercuryquicksilver's picture

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

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.

CrashisOptimistic's picture

The spike in 2008 was sharp.

It's not October.

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.

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.

cro_maat's picture

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

Long bikes and longboards.

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.

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.

Saratoga's picture

Thank you Master of the Obvious.

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

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..."