The bubble talk of a couple days ago has been muted by another record price run for oil, this time above $147 per barrel. The culprits of the day were further drops in the dollar’s value (at $1.593 per euro we are close to its record low of a few weeks back) and threats to stability in Iran. Israel and the US are playing war games while Iran tests its missiles showing that it wouldn’t just roll over if attacked. A deep recession would be guaranteed if the conflict were to take the world’s third largest exporter of oil out of the global market. Prices could hit $250 per barrel (~$8 per gallon) and airlines would drop like flies. The world needs a peaceful resolution to the current tensions. We are hurting enough from high oil prices without a war, as ExpressJet just became the latest casualty of high fuel costs, announcing their close of operations effective September 2nd.
In positive news, a report was just released which notices significant drops in road fatalities as gas prices rise and people drive less. As long as we can handle the transition, such benefits can combine with other environmental and public health benefits to make us better off in the end.