A “sustained spike” in crude oil prices due to the crisis in the Arab world may trigger another U.S. recession, said economist Cary Leahey, senior managing director at Decision Economics Inc. in New York.
“The odds of a recession from the current situation are probably 1 in 5,” Leahey said today in an interview on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. Leahey said crude oil at $150 a barrel or higher will probably precipitate another contraction.
The current increase in crude oil to about $100 a barrel from about $80 a barrel may trim a quarter to a half percentage point from gross domestic product this year, Leahey said.
During the fourth quarter of last year, GDP expanded at a 3.2 percent annual rate, faster than the previous quarter’s pace of 2.6 percent, according to statistics from the Commerce Department. Revised figures on fourth-quarter GDP will be issued Feb. 25.
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