Many events might cause a recession. Let’s count: Threatening to withdraw from NAFTA while bullying Canada and Mexico, throwing tariffs and ultimatums at allies, starting and intensifying a trade war with China, and more bullying of the Federal Reserve.

President Donald Trump has done all of these, hurting trade, scrambling supply chains, hurting farmers and endangering America’s global leadership position. Yet the economy continues to grow, albeit at a slower pace and with the inversion of yields on Treasury securities, a sign of investor pessimism.

Yet Trump gets away with it. So far.

Another big test came over the weekend, when Saudi oil facilities were attacked by drones. Oil prices jumped Monday, although they calmed Tuesday. But oil shocks are another cause of recessions.

This happened most famously in oil boycotts during the 1970s. During the 1973 Yom Kippur War, Arab nations halted oil exports to the United States because of its support for Israel.

Within three months, prices shot from $3 a barrel (about $17 in today’s dollars) to $12 ($67). Gas lines formed nationwide.


The shock caused a recession that lasted until 1975 — an especially bad one for the domestic auto industry — and showed that pricing power rested no longer with the Texas Railroad Commission, but with OPEC. This was because America had reached “peak oil” — the apex of conventional production — in the Lower 48 while our consumption kept growing.

The so-called Energy Crisis lasted through the decade, seeding stagflation (stagnant growth and high inflation). A second shock, with output reduced by the 1979 Iranian Revolution, helped cause the 1980 recession.

High oil prices also preceeded the Great Recession. Because of high demand and relatively constrained supply, the benchmark Brent crude price hit a peak of nearly $134 a barrel in July 2008. It plummeted to $41 by December. But the early recovery was hampered by rising oil prices until U.S. fracking began to expand supplies.

This past weekend’s attacked rattled markets for several reasons. The damaged Abqaiq plant is behind 5% of global supply and important for turning Saudi crude into exportable products.

And whether the perpetrators are Yemeni Houthi guerrillas (backed by Tehran) or Iran itself, this is trouble at the heart of the world’s oil supply. Saudi Arabia isthe world’s second-largest producer, behind the United States. What if it becomes a wider conflict?

This is an hour-by-hour story, so any observations must be broad and fit within the columnist’s warning, “Frequently wrong, but never in doubt on deadline.”


So far, Trump once again appears in the clear if Democrats are hoping a recession would help bring him down. Despite some early Twitter saber rattling, he hasn’t leapt to military retaliation (the departure of the hawkish John Bolton as National Security Adviser helped here).

Oil prices are relatively low. Reuters reported that Saudi Arabia may be able to restore production faster than initially feared, helping calm Tuesday’s markets. Stocks aren’t tanking. Consumers are still spending.

All this could turn on a dime, mind.

The Saudi-Iran contest is already dangerous. For years, the kingdom has been fighting in Yemen, a proxy war against Tehran. And Iran has carried out extensive cyberattacks against Saudi oil operations. The contest is costly, too, with Saudi Arabia the third-largest military spender after the United States and China, according to the Stockholm International Peace Research Institute. Yet for all that money, critical installations can be taken out by a cheap, if well targeted, attack.

With climate change, we need to keep carbon in the ground. But not with violence.

Should there be a major war in the Middle East — especially one that drew in the closet Saudi ally, nuclear-armed Israel — oil prices would be the lesser of our problems.

But I’ll offer the common economic consequences: A severe oil price spike would be bad for consumers, cause deep pain for airlines and trucking companies, and very likely to bring on a recession.

If that were to transpire, Trump’s luck runs out. But so does ours.