High oil prices cause higher food and energy costs in Middle East countries. Middle East unrest causes higher oil prices. Higher oil prices causes recessions in the U.S. Recessions in the U.S. cause oil prices to drop. Recessions cause more unrest in the world. More unrest in the world causes higher oil prices. Rinse and repeat.
Today’s chart provides some long-term perspective in regards to gasoline prices by presenting the inflation-adjusted US price of one gallon of gasoline since 1980. There are a couple points of interest from today’s chart. For one, Middle East crises are often associated with major swings in the price of gasoline. Also, gasoline price spikes have often occurred prior to an economic downturn. Both those issues are in play today. Middle East instability (e.g. Arab spring) and Middle East tensions (e.g. Iran) are ongoing. Also, the inflation-adjusted US price for a gallon of unleaded is up over $0.50 since the end of June and has rarely been higher than current levels.