A journey through recessions and black gold

By Paul Reid

10 January 2024

recession and oil 2024

Over the decades, oil recession traders have likely perceived oil as both hero and villain, telling epic tales of supply and demand swings. More than once, the slippery black gold has been the cause of economic crashes. And with both conflict and whispers of recession in the air as we stand on the precipice of 2024, one can only wonder whether or not we can expect oil to behave in predictable ways. Let’s turn back the clock and see how oil reacted to previous recessions.

Oil’s recessionary dance began in the 1920s, a time of growing economic imbalance. As the world approached the Great Depression (1929-1939), oil was abundant, the market stable, with prices gently hovering between $1.00 (USD) and $1.50 per barrel. But as The Depression took hold, that stability crumbled. By 1931, prices had plummeted well below $1 per barrel, followed by a long and volatile recovery. Oil did not fare so well from the recessionary influences of the time.

Fast forward to the 1970s, a decade marked by the oil shock of 1973/74. Here, the script flipped. Before the recession, oil prices were a modest $3 to $4 per barrel. But geopolitical tensions rippling out from the Middle East, particularly the 1973 Arab oil embargo, sent prices soaring to $12 per barrel, fueling what would become a global economic inferno.

Just when the world had finally picked up the pieces, oil prices hit a new all-time high in 1980 due to the Iranian Revolution and the Iran-Iraq war. Oil prices rocketed from $14 to $39 per barrel in 1979, but as the recession unfolded, demand waned, and prices started to decline.

Conflict also prompted the early 1990s recession. Before that, oil prices were on a slow and volatile rise. In the months preceding that downturn, oil had fallen from a 5-year high of $22 to $17. Then, two months before the bullets started flying, oil rose again. Within three months, oil prices more than doubled to a high of $39.51, but that high was short-lived. Five months later, they dropped to between $20 and $25.

So, a price dip before the recession, a rise at the beginning, and a correction within the first year.

A new century’s ups and downs

As we venture into the 21st century, we begin with a recession unrelated to Middle Eastern conflict — the bursting of the dot-com bubble. Oil prices fell slightly before the downturn in 2001, briefly rebounding from $26 to $28 as the financial world accepted a recession was underway. A month before the ‘September 11’ tragedy shocked the world, oil crashed and kept falling until November, hitting bottom at $19.

A minor price dip before the recession kicked in, followed by a significant drop.

Jumping to 2007, we witnessed an oil rally in progress. In April, a leading subprime mortgage lender filed for bankruptcy, while in June, two leading hedge funds faced severe financial difficulties. These events were in the news, but nobody suspected anything at the time.

The stock market reached record highs in July 2007, and oil continued its rally. Then, the Fed got involved, injecting liquidity into the banking system and, later in the year, began a series of interest rate cuts. All hell broke loose from there, but oil kept rising until June 2008. 

Then it crashed, dropping from a high of $140 to $41 in just six months. Anyone still holding a long position on oil was sure to have a terrible day that day. A rally before the recession, then a very harsh reversal.

Notable mentions

While 2014 doesn’t officially count as recessionary, oil did take a big tumble from $105 to $48 that year. That was because the US had dramatically increased oil output due to advances in hydraulic fracturing, so-called ‘fracking’ and horizontal drilling technologies, massively boosting shale production. OPEC took a gamble and did not cut production, resulting in a massive oversupply. 

A similar glut occurred again in 2019/2020 as the world’s industries and markets entered standby mode to survive COVID.


Time after time, we’ve seen a volatile but bullish year preceding a recession. The months before the official recession dates were notably in a brief decline, followed by a historic rally. And very often, those rallies ended abruptly, followed by horrific crashes.

As for the timing of these events, it’s easy to look back and see the ideal entry and exit points, but zooming in to a daily view would show significant volatility that likely crushed many a trading account.

If you plan to trade oil before the forecasted recession of 2024, be sure to choose your leverage carefully and account for price fluctuations with your stop loss. As for setting take profit, aiming too high could cost you dearly, so be modest with your profit expectations.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Paul Reid
Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.