$100 Oil May Mean Recession as U.S. Economy Hits `Danger Zone’

By Simon Kennedy and Joe Richter

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Nov. 12 (Bloomberg) — Rising fuel prices that businesses and consumers took in stride earlier this year may now be near the point of pushing the weakened U.S. economy into recession.

“We are in a danger zone,” says Nariman Behravesh, chief economist at Global Insight Inc. and a former Federal Reserve economist. “It would take two shocks to bring the economy to its knees. We got one shock in the form of the credit crunch. Oil could be that second shock.”

Crude-oil prices are poised to cross the $100-a-barrel mark while the U.S. economy is still reeling from a surge in corporate borrowing costs. Europe and Japan are vulnerable as well, after the U.S. subprime-mortgage collapse contaminated their credit markets.

Even before the latest jump in energy costs, economists expected U.S. growth to slow to less than 2 percent in the fourth quarter — half the third quarter’s pace. Andrew Cates, an economist at UBS AG in London, said his models suggest a 45 percent chance of a U.S. recession next year, up from 33 percent last month, as oil prices prove a “growing concern.”

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