Will the current decade turn out to be like the 1920s, 1970s, or 1990s? We are still assigning subjective probabilities of 60% to the Roaring 2020s (like the 1920s), 20% to a bout of irrational exuberance (like the late 1990s), and 20% to a second peak in inflation (as occurred during the 1970s).
We might have to increase the odds of a 1970s-like scenario if the price of oil continues to rise. Our very good friend Steve Soukup posted an April 6 article titled "Saudi Arabia and the Tale of Two Presidents." You should read it. The basic thesis is that the Saudis might like to see President Joe Biden lose to Donald Trump. So they might do whatever they can to boost the price of oil before the November election. Both the Saudis and Russians started reducing their output last summer (chart).
The price of oil has also been rising on mounting geopolitical risks resulting from the escalating wars between Ukraine and Russia and between Israel and Hamas (chart). Iran has reportedly put its military forces on “full high alert,” as it vows revenge for an alleged Israeli strike on Monday that killed a top Iranian commander in Syria and several other Islamic Revolutionary Guard Corps members. Israel's defense minister said on Sunday that the country was ready to handle any scenario after Iran threatened to retaliate. A direct confrontation between Israel and Iran would rapidly boost the price of a barrel of Brent crude oil over $100.
