When the price of oil signals a recession and how close we are to it

As an analyst covering the auto sector earlier in his career, Colas remembers the presentation decks used by economists employed by the "Big Three" automakers three decades ago, which they had been using since the 1970s oil shocks.

"The rule of thumb I learned from auto industry economics in the 1990s is that if oil prices go up 100% in a one-year period, expect a recession," he says.

A year ago, crude oil was $63.81 (March 4, 2021) a barrel. Double that and that is the strike price for a recession. Crude oil is currently at $115.

"We are close and getting there fast," Colas said.

"We're at the point now where prices at the pump are higher on the way home from work than on the way in," Bespoke wrote in a note to clients on Friday.

But Colas added oil prices would need to be persistently over that doubling, staying at $130 rather than merely spiking and pulling back quickly, to be concerned. "A day or two is OK, but a few weeks is not," he said.