ROUBINI: 'No Risk Is More Serious Than That Posed By A Further Spike In Oil Prices'

Nouriel Roubini

Notoriously bearish economist Nouriel Roubini has changed his tune lately.

While he has been harping on Europe recently, his newest big fear is actually oil prices, so he says in an editorial published today at Project Syndicate.

Clearly, a slowdown in China, continuing financial drama in Europe, and trepidation that the U.S. will not continue to produce such uniformly positive economic data are all worries on his mind.

However Roubini now believes that “no risk is more serious than that posed by a further spike in oil prices.” He writes:

The reason is fear. Not only are oil supplies plentiful, but demand in the US and Europe has been lower, owing to decreasing car use in the last few years and weak or negative GDP growth in the US and the eurozone. Simply put, increasing worry about a military conflict between Israel and Iran has created a “fear premium.”

If the drums of war [between Iran and the U.S.-Israel alliance] grow louder this summer, oil prices could rise in a way that will most likely cause a US and global growth slowdown, and even an outright recession if a military conflict erupts and sends oil prices soaring.

Oil is already well above $100/barrel, despite weak economic growth in advanced countries and many emerging markets. The fear premium might push prices significantly higher, even if no military conflict ultimately takes place, and could trigger a global recession if one does.

Read Roubini’s full editorial at Project Syndicate >

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