Chart of the Day 03/04/2011 Crude Oil

Today's chart of the day displays crude oil prices adjusted for inflation along with previous recessions and middle eastern tensions.

With crude oil prices rising with tensions in Libya recently and ongoing, the chart below takes a look at currnet vs. historcial prices to bring things a bit into perspective.

Gasoline prices are expected to once again hit $4.00+ per gallon this year in 2011 and are putting an additional drag on the already propped up euphoric stock economy and stock market.

Looking at the chart below, back in 1980 when prices went above $100 per barrel, they began a large percentage decline shortly afterwards. In 2008, crude oil prices rose to nearly $140 per barrel and then declined to about $40 per barrel in no time at all.

With tensions still high in the middle east, prices very well could spike higher towards $140 again but as they do, expect an increasing number of speculators in the market along the way.

What does that mean? It means that if prices do spike higher and cause a continued noticeable drag on the economy, those speculators may very well abandon ship with little to no notice at all once they feel people simply cannot afford to keep the demand up. If that happens, another rapid decline could be in store again.

In addition, the last time crude prices moved up towards $140 in 2008, the stock market continued declining for several months afterwards to their March 2009 lows...

The decline in crude oil prices that began in mid-2008 was historic -- plunging over $90 per barrel in just eight months.

Over the past two years, however, crude oil prices have increased by over $60 per barrel. Today's chart provides some perspective on the historic decline and recent spike with a long-term view of inflation-adjusted West Texas Intermediate Crude. Today's chart illustrates that most oil price spikes were a result of Middle East crises and often preceded or coincided with a US recession.

It is also interesting to note that the recent spike in oil prices has brought the price of oil back to a historically high level -- a level that was surpassed only briefly during the tail-end of the major price spikes of 1980 and 2008.

Chart courtesy of Chart of the Day
Chart of the Day 03/04/2011 - Crude Oil



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