$140

The situation is bloody out there.

Remember when I first put a dollar sign at the head of this column? It was to underscore alarm for the fact that crude oil prices was nearing $50 per barrel.

That was only a few months ago. Now oil prices have gone beyond $140. Experts are saying it might likely go to $200. But at the rate things are going, is there really a ceiling price we can bet on?

A few weeks ago, I asked readers of this column to try and imagine filling up with gasoline priced at P100 a liter. They are paying that price all over Europe today. Soon they will pay more and so will we.

A few days ago, crude oil price spiked $11 in one day. The very next day, stock prices in Wall Street dropped sharply. Stock prices everywhere soon followed suit.

Last Tuesday, our own stock exchange shed 3.4% of its value in a single trading day. Stocks all over Asia fell across the board. We do not know when the bleeding will stop.

I have some money trapped in depreciated stocks. My unrealized losses now exceed about a year’s earnings from hard work. If I sell now, those will become realized losses. It is too late to run. I am taking this global episode very personally.

I no longer watch the local news channel with my morning cup of coffee. The past few weeks, I watch summaries of stock trading in New York. And then despair. There are no signs of a recovery on the horizon.

I am not alone. All investors in our stock exchange are down billions of pesos. All over the world, trillions of dollars in stock value have been wiped out.

How can one avoid the feeling that all of us are on the Titanic. And it has just hit the iceberg.

Every possible solution to the present drift of things seems to have a harsh downside.

A few days ago, the US Fed hinted it could reverse course and start pushing up interest rates to arrest the inflationary surge. US stocks dutifully plunged. Higher interest rates could see more funds fleeing the equities market and seeking sanctuary in fixed rate investments.

When our own Bangko Sentral emitted the same signals in the face of near double-digit inflation rates, the same effect happened in the stock market. If interest earnings improve, people could sell down their stocks, take the losses and seek sanctuary in government notes.

Last year, we celebrated the fact that the peso had strengthened as the dollar lost value against nearly all currencies. Few back then anticipated the fact that when the dollar loses value, dollar-denominated oil prices will rise. And they did indeed — way beyond whatever value the dollar had lost against other currencies.

Now everyone seems to be trapped in a Catch-22 situation.

If the Europeans, for instance, decide to step down their interest rates to enable the dollar to recover against the Euro, that will likely stoke inflation in their zone. If the Euro now depreciates against the dollar, European consumers will have to pay even more for oil.

Already truckers are striking in the Euro zone over fuel prices. If the Euro depreciates, there will be even more unrest. Consequently, European leaders are not inclined to allow their currency to depreciate.

If the Euro remains strong, the weakness of the dollar will cause oil prices to rise further. That will harm not only the Europeans, it will harm the Asian economies even more.

The more people are forced to spend for fuel, the less money they will have to buy other things. The prospect of weakening consumer demand is forcing companies to lay off workers, cut back on production and postpone investments in new capacity. That translates into lower profit forecasts for large companies and, consequently, dropping stock prices.

When Apple launched its $399 iPhone two years ago, people lined up overnight to buy the product. When Apple, earlier this week, launched the second generation of that product which has double the speed of downloads but at only half the price, the company’s stock dropped significantly the very next day.

With recessionary prospects heightening, large corporations are not borrowing money for new investments. That leaves the investment banks and the hedge funds with a large amount of cash they could not lend out. To protect the value of that swelling liquidity, the banks and the hedge funds speculate on the future price of oil. By doing so, however, they are forcing up the price of oil — which can only add momentum to the economic slowdown.

A significant portion of the swelling liquidity in the global financial system comes from the windfall earnings of the oil exporters. The higher the price of oil, the more money they make and the greater the excess liquidity will be. The more money there will be to fuel speculation in oil.

It is a vicious spiral. It is a curse.

The only thing that could apply the brakes on the spiral will be a sharp, deep and probably prolonged global recession. That might temper the price of oil. But it will also create unemployment and greater misery in every economy in the world today.