RE:Common sense Oil outlookI don't see a recession risk in the shorter term. Governments have developed a nasty habit of stepping in to prevent one - QE etc. True the economic cycle is now very elongated and the western world debt burden makes the growth very anaemic but the risk now would be a drift into a mild recession which the FED, the BOE, ECb and others would intervene to prevent.
A strong catalyst would be required to trigger a global recession. One of the reason nobody wants to risk a recession is the situation of some of the Eurozone countries. Take Italy, £2trillion equivalent of government debt, industry trashed over past decade, huge unemployment, inability to devalue has been catastrophic for them and they don't help themselves - only recently Italy relaxed laws making it illegal to make redundancies for economic reasons - yes you did read that correctly. A significant recession would cause huge Italian civil unrest, they would leave the Euro, devalue by 30% that is £600B of debt write down, others would follow - you see the problem.
The catalyst for a global recession will be the high oil price. Over $100 oil will put great recessionary stress on the global economy. Nearer $150 oil will trigger a recession far too strong for governments to prevent although they may break themselves trying. Why on earth do so many people think that oil supply shortages lasting several years are only going to trigger oil price rises to the $60 to $70 range. This is a nonsense, by the end of next year the oil price will be well beyond $100 and the recession will be on its way.
Timing. If you are aware of the risk there will be plenty of time to see the high oil price recession coming. As oil prices go high I will take my non-oil investments off the table, sometime mid next year probably but I am not making a precise timeline forecast. High oil prices are great for oilers unless the recession goes so deep so as to hit oil demand signifcantly. This will probably happen but further down the line, oilers will be posting record profits even as the deep recession takes hold, as demand for oil weakens then it will be time to exit the sector. No need to exit hastily before this.
Doug