UBS warns oil could spike sharply as the US strategic petroleum reserve drains at record speed, which is bad news for drivers, the economy, and anyone hoping inflation will cool quietly.

• UBS modeling suggests oil hits $128 if the SPR stops releasing and demand drops 7%, and $138 at 14% demand destruction.
• Last week saw the biggest one-week draw on the US oil reserve since records began in 1982, and prices are still above $100.
• Diesel is already near $7 a gallon in parts of the West, and higher oil would push gas and diesel toward $9–$10.
• Food prices are expected to jump in July due to a fertilizer crisis, drought, and weaker US crop output.
• Higher fuel and food costs will force people to cut spending, which slows the economy and does the Fed's inflation-fighting work for it.

Outlook: Expect a sharp summer slowdown in spending and commerce as fuel and food prices keep climbing.