On 11 October 2004, Stephen Roach opined,
In the end, the nature of the oil shock is the biggest wildcard in all this. Many are inclined to dismiss the recent run-up in oil prices as a non-event insofar as macro impacts are concerned. A common pushback I hear is that since oil prices are still low in real terms -- in fact, well below levels of the early 1980s -- they aren�t squeezing consumers. Yet macro tells us that price changes matter more than levels: At $50 on a WTI basis (now well below the latest quote of $53 on 8 October), the real oil price is fully 66% above the average that has prevailed since early 2000. That�s a shock in my book. Then there is the view that I always hear around oil-shock time -- that energy conservation has reduced the importance of oil in the macro equation. Try telling that to over-extended consumers.Those following the bouncing ball closely will remember that back in Fall 2004, WTI spot prices closed above $50/barrel for only one month and then proceeded to fall back rapidly. By 10 December oil (WTI spot price) closed at a mere $40.71/barrel and the "oil shock" threat became just a bad memory.
Duration is obviously key in all this. If the oil price quickly reverses course, its shock effect will recede just as fast. I have stressed the three-month time threshold as the functional equivalent of a psychological breaking point.
Fast forward to 22 February 2005 when spot prices closed above $50 once again. This time, however, except for a few brief blips under the magic level, prices have remained consistently buoyant above the $50/barrel mark and in less than two weeks will have reached Roach's magic 3-month "psychological breaking point".