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Will Higher Oil Prices Trigger Global Recession?

Wednesday, 6 Dec 2006 | 11:57 AM ET

How high will oil have to go before triggering a global recession? In a recent survey of U.S. Oil and Gas industry leaders--more than half of respondents said the industry can withstand oil prices of up to $90 a barrel. But not everyone sees it that way.

On “Morning Call” CNBC’s Liz Claman took a closer look at that issue with John Kilduff with Fimat USA and Jay Bryson, Global Economist at Wachovia Corporation.

Bryson says when oil prices go up you have to look at why. In the past it’s been supply issues but more recently it hasn’t been about tight supply - it’s about increased demand. Healthy economies around the world are requiring more and more energy.

$90 Oil Causing a Recession?
What drives oil prices higher before triggering a global recession is the actual issue to look at, with John Kilduff, Fimat USA Senior Vice President, Energy Risk Management, Jay Bryson, Wachovia Corporation Global Economist and CNBC's Liz Claman

John Kilduff says if rising prices are a result of robust economies then that’s a silver lining to a bigger problem. But he says if you look at the past summertime price spikes in gas prices – we see weak GDP numbers in the last quarter. That’s because consumer spending gets siphoned right into the gas tank. And with consumer spending being such a large part of our economy--that’s a problem.

Then, Liz Claman asked, if there was a real chance of oil ever reaching $90 a barrel, Right now oil is at about $62?”

Kilduff said with so much instability in the middle east at any given time we’re just a few headlines away from that happening. And in China they’re very concerned. If supply dries up they can be knocked off their block because they’re so energy dependent--hence the current build up of China’s strategic reserves.