Does a U.S. recession mean lower oil prices? Not necessarily

By Jad Mouawad

Jan 23, International Herald Tribune

NEW YORK: As fears of a U.S. recession ripple across the globe this week, analysts and energy experts are wondering whether the great oil boom of the past five years is finally coming to an end - or whether it is merely taking a break.

While an economic slowdown might lead to lower oil demand, as consumers scale back their gasoline consumption and businesses cut down on air travel, economists say this might not necessarily lead to much lower energy prices.

Oil supplies are tight, geopolitical tensions remain high, and oil companies still need higher prices to bring badly needed and more costly oil to the market.

After briefly touching $100-a-barrel twice this year, oil prices have shed over 12 percent in a few days. Crude oil for March delivery on the New York Mercantile Exchange was down $2.44, or 2.7 percent, at $86.77 a barrel in late trading Wednesday.

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photo: Traders in the oil futures pit of the New York Mercantile Exchange on Tuesday. After briefly touching $100-a-barrel twice this year, oil prices have shed over 12 percent (Chip East /Reuters)