In the spring of 1974, I bought my first car, a Volkswagen Beetle. I was a restless teenager with a newly minted driver’s license. And I could barely afford to drive anywhere.

Gasoline prices were exorbitant, if you could even find gas. During the world’s first “oil shock,” which lasted from October 1973 to March 1974, the price of crude skyrocketed by 300%. The average U.S. retail price of a gallon of regular gasoline rose by 43%.

The shock was precipitated by OPEC’s oil embargo against the U.S. and other western nations for militarily supporting Israel during the 1973 Arab-Israeli “Yom Kippur War.” The oil crisis paved the way for a global economic recession and bear stock market.

To what extent do we face another oil crisis? Let’s look at the facts, and investment moves you should make now.

Inflation comes in hot…

The U.S. Bureau of Labor Statistics reported Wednesday that inflation in the U.S., as measured by the consumer price index (CPI), jumped to 6.2% on a year-over-year basis in October from 5.4% in September. This reading far exceeds the consensus expectation of 5.3% and represents the largest annual increase in 30 years.

The annual core CPI, which excludes volatile food and energy prices, rose to 4.6% in the same period, compared to the expectation of 4%. On a monthly basis, the CPI and the core CPI came in at 0.9% and 0.6%, respectively.

The energy index rose 30% over the past 12 months, energy’s largest 12-month increase since the period ending September 2005. All the major energy component indices increased sharply over the last 12 months. The gasoline index rose 49.6% over the last year, and is now at its highest level since September 2014.

As evidenced by today’s inflation report, the energy sector’s powerful rebound is a double-edged sword. Energy is a bellwether of economic health, especially as it relates to transportation. When planes, trains and automobiles are moving again, it means the economy is vibrant. But rising demand is pushing up energy prices, which is fueling inflation and pain at the gas pump. Consumers, businesses and investors are uneasy. The Federal Reserve may be prompted to tighten sooner than expected.

U.S. stocks fell Tuesday on inflation fears, ending a run of record highs. After the opening bell Wednesday, the major U.S. stock market indices were again trading in the red, as the hotter-than-expected inflation data spooked investors. The 10-year Treasury yield spiked higher.

The Saudis sound the alarm…

The American Petroleum Institute (API) reported Tuesday that U.S. crude supplies fell by 2.5 million barrels for the week ended November 5, a surprisingly robust draw that sent crude oil prices soaring. On the news, the U.S. benchmark West Texas Intermediate (WTI) jumped 2.71%; international benchmark Brent North Sea crude rose 2.12%. It was the API’s first reported oil inventory draw in six weeks.

Also on Tuesday, officials at energy behemoth Saudi Aramco stated that the world is likely to see its level of spare crude oil production decline in 2022, as jet fuel demand returns to pre-pandemic levels.

You don’t need a doctorate in economics to figure out that rising energy demand combined with tight supplies equals higher prices (see chart).

Energy equities can be very volatile, due to the commodity-sensitive nature of cash flows. Year to date, however, the energy sector has exploded to the upside.

The benchmark SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has generated a year-to-date daily total return of 89.6%, compared to 25.9% for the SPDR S&P 500 ETF Trust (SPY), as of market close November 9.

Rising oil prices are indicative of economic recovery. But if prices rise too far, too fast, the extra costs to businesses and consumers become deleterious.

It’s a given that the economic recovery is on track. The dominant story right now is inflation. Whether high inflation proves sticker than expected or eventually moderates, you need to implement inflation hedges now, before those assets get more expensive.

Watch This Video: Inflation Hedges Are Gaining in Popularity

Do we face an oil shock? Not if oil producers have anything to say about it.

Mitigating against the possibility of an energy crisis is the fact that major energy companies are investing in oil and gas production again, reversing production pullbacks that were implemented during the worst of the pandemic. That’s particularly true of producers that are primarily stated owned, such as Saudi Aramco.

Saudi Aramco is the world’s largest oil exporter. The company this week reiterated its plan to boost its oil production capacity to 13 million barrel per day (bpd) by 2027 from its current level of 12 million bpd.

As the coronavirus pandemic fades, energy supply and demand should return to equilibrium and energy prices should stabilize. In turn, inflation should cool off.

But maybe you’re looking for an investment method that works regardless of energy market gyrations and rising inflation. That’s where my colleague Jim Fink comes in.

As chief investment strategist of our premium trading service Velocity Trader, Jim Fink has devised a methodology that makes money in up or down markets, in good times or bad.

Jim will soon take part in a special event that will show ordinary investors how to make massive investment gains within the next 12 months. Reserve your spot by clicking here.

John Persinos is the editorial director of Investing Daily. To subscribe to John’s video channel, follow this link.