I have received several questions on the impact of oil price spikes (both personally, via invest-safely.com, and comments on this blog).

I do have an opinion, which is based on my limited knowledge of the facts. I am no expert on the oil industry, let alone how the impact of price is absorbed through corporate value chains and investor perceptions. As I say on my website: We cannot predict. We can only prepare.

I came across some historical data over at the Big Picture that you may want to consider. Since we’re always talking about a process or rule-based decision making, this is the type of analysis that you should consider when making decisions or developing a process.

Mr. Ritholtz posts some interesting findings from David Rosenberg of Gluskin Sheff about the spot price of oil:

“There have been only five times in the past 70 years when this [ed. – spot price of oil doubling in a 2 year timeframe] has happened within a two-year time frame: January 1974, November 1979, September 1990, June 2000, and August 2005. And now, December 2010…all but one involved a recession for the U.S. economy (ed. emphasis added)

Combined with an extended rally which is encountering selling pressure, now is definitely the time to dust of those sell rules!

Sources:
What Does Oil Doubling in 2 Years Mean?
B. Ritholtz – The Big Pitcure
http://www.ritholtz.com/blog/2011/03/what-does-oil-doubling-in-2-years-mean/