This column originally appeared on Real Money Pro at 9:37 a.m. EDT on Aug. 29.While I am far from an expert on the Middle East, it is my view that the Syria situation will not likely derail the U.S. economy or stock market much further. However, it will likely contribute, along with other variables, to limiting the market's upside and confirmation of my view that the market has topped for the year. Though China and Russia are clearly opposed and at odds to U.S. military intervention, there are numerous contributing factors to my view that our economy and markets won't be derailed -- most of which relates to my view that the price of crude oil will not rise much further. 1. The U.S. is more energy independent that at any time in history.
2. Progress in technology has permitted the developed world's economies to use less energy per dollar of output.
3. The Middle East countries associated with the most recent turmoil are not large oil producers.
4. Those Middle East countries that are the largest oil producers are materially of the same view and mindset as the U.S. (vis-a-vis Egypt and Syria), so there is no big threat to the supply of oil. (I would note that even in Egypt, a large oil-producing country, most of the centers of production are far from population centers). The U.S. consumer is sensitized to retail gas prices. Thus far, the price rise has been contained. Evidence of well-behaved oil prices is that gas prices are down by more than 5% over the last 12 months. Year to date, retail gasoline prices are up by only $0.30 per gallon (+9%) and have steadily declined since the beginning of March. At present, nothing in the energy complex's prices has dented economic growth or put the stock market at risk. In the last 12 months, and year to date, the price of Brent crude is flat, though up from its nadir in April and +11% year to date. Brent crude currently resides at $116.10 per barrel and will likely stay in the $110 to $120 range. I would guess that $140-plus would be needed to dent the U.S. economy and stock market. (I define derailing the U.S. economy as having a greater than 1% impact on real GDP).