How Will $100 Oil Affect You?

Oil broke above $100 a barrel yesterday for the first time since October 2008. The culprit: Uprisings in Libya sent as much as half of the country's petroleum production offline.

You remember what happened last time oil prices were this high: Consumers stomped their feet and said no thank you. Annualized, we drove 11 billion fewer miles in March 2008 than March 2007. Air travel fell 2.3% that year -- more for strained carriers like United (Nasdaq: UAUA  ) and AMR (NYSE: AMR  ) . Trips to the mall, down. Trips to Grandma's, down. Vacations, down.

When it becomes expensive to move, people stop moving. Alas, so does the economy. While expensive oil obviously wasn't the only factor, many respected analysts blame $140 oil as the tipping point that sent the economy over the edge in 2008.

You can say, or hope, that today's price spike is temporary -- driven by geopolitics, not rising demand, as it was then. But 2008's spike was temporary too -- only a few months, really. The only temporary benefactors, oil giants like BP (NYSE: BP  ) and ConocoPhillips (NYSE: COP  ) , saw their shares plunge 50% or more as the tide went out. It only takes a few months of pain to do serious damage.  

And here we are again.

In 2009, economist Nouriel Roubini said "If oil goes to $100 today, it will have the same effect on the global economy as what $147 oil had last year."

Who knows whether he's right? Today's economy is stronger than it was when he made those comments. But his warning shouldn't be ignored. The psychological impact alone of $100 could send consumers retreating.

Take the Fool poll below and let us know how $100 oil will affect your behavior. Drop a thought or two in the comment section below while you're at it.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 24, 2011, at 5:24 PM, FOXXY01 wrote:

    Sorros is definitely benefitting.....and Obama is a puppet of Sorros.

  • Report this Comment On February 24, 2011, at 5:32 PM, newageinvestor wrote:

    @FOXXY. Seems you should broaden your horizons beyond the GOP Propaganda station and get some actual facts once in a while.

  • Report this Comment On February 24, 2011, at 5:42 PM, Beginner110 wrote:

    It will affect 90% of the people I know. Any family with under $35000 household income will be impacted significantly because so much of their income will go to transportation instead of other necessities. There are a lot more people in this category than one would believe. My numbers may not be exactly right but in my hometown, I know they are valid. Add in the high unemployment and you have an excellent recipe for economic disaster.

  • Report this Comment On February 24, 2011, at 6:34 PM, ChuckWoolery wrote:

    Paying even more money at the pump will hurt but at least I have some oil stocks to benefit in the short term.

  • Report this Comment On February 24, 2011, at 9:25 PM, foolbfun wrote:

    I have invested in Halliburton for many years and made bunches of money. I grew up in their hometown and am very familiar with the oil economy.

    What we are seeing now has as much to do with speculators as it does the supply of oil. Check out the weekly oil supply reports and tell me how gasoline can be going up while crude supply goes up. Saudi Arabia has an excess capacity of 4.5 m bpd of capacity, more than enough to offset the 1.5 m bpd Libyia produces. the speculators have pushed the price of oil up because they are running ahead of the pack. As we catch up, they will be out and selling short.

  • Report this Comment On February 25, 2011, at 3:39 AM, KurtEng wrote:

    I am looking to invest more in natural gas producers. People in Utah and Wyoming have the privilege of fueling up for the equivalent of $1.27 per gallon thanks to Questar gas. The rest of America won't ignore that forever.

  • Report this Comment On February 25, 2011, at 3:44 AM, 19Patrick58 wrote:

    Boy, there sure are a bunch of spam advertisements in this string. Hey, guys, if you can't be serious, get out! We're trying to talk about what's happening in the market now, thank you very much. If we want to buy something, we are all perfectly capable of doing our own research and going out and getting it. We do NOT need you to invade our privacy with your trash. Now, to the business at hand. Rising oil is going to create a bear market. Rising energy costs affect every aspect of our society. For a time, the market will be very volatile, then it will turn down when buying resistance is shaken out. Oil stocks are good right now. Be careful of everything else. Limit your losses at 8% so you don't lose your shirt in a bad downturn. Good luck! By the way, Mr. Obama, how about releasing some of those permits to oil companies to drill in the Gulf of Mexico? The safety measures are in place, companies have colluded on containment plans. C'mon!

  • Report this Comment On February 25, 2011, at 10:08 AM, plange01 wrote:

    oil's use dropping for over two years and yet record prices twice?this is clearly a case of speculators driving up prices and with america still without a leader who will stop them? $100 oil at this time will trigger a major collapse in the fragile US economy and hopefully get the american people to stand on their feet long enough to force a election to bring in a president ....

  • Report this Comment On February 25, 2011, at 2:14 PM, Tomohawk52 wrote:

    I invested what was for me a large amount in a mutual fund for oil producers. I just could not, and cannot, see how oil is going to ever be much cheaper than it is today. Sure, maybe the US economy will lurch along sporadically if oil isn't cheap, and that will restrict demand, but there are a lot of possibilities for that excess to be sopped up by people in places like China and India losing the bicycle culture for the car culture, for better or worse.

  • Report this Comment On February 25, 2011, at 5:12 PM, lovehead41 wrote:

    My only concerning is timing the top, and selling my oil positions ahead of the plunge.

  • Report this Comment On February 26, 2011, at 1:34 PM, crca99 wrote:

    The article and little quiz are about personal transportation. Where is mention of food and goods rising because they are trucked all over the country or flown in? Buffet bought a railroad to win against trucking. How visionary.

  • Report this Comment On February 27, 2011, at 9:18 PM, notme2012 wrote:

    Oil has no where to go but up! The Chinese and all their new cars are going to drive oil prices up and up. And that's all there is to this. The Libya thing has an effect because all the oil supplies are accounted for...and little jolt to the supply and demand will drive prices up. We have to get used to wildly gyrating prices. The powers that be should try to soothe US citizens, that this is how life will be from now on.....

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