Well oiled recessions

WorldChanging has this troubling graphic.

oil driven recessions

The extraordinary rise in oil prices since 2003 has sucked hundreds of billions of dollars out of the US economy (and the Cascadian economy). High oil prices have been a contributing cause of most recessions: Since 1948, “all large oil price increases but two have been followed by recessions,” as Andrew Hoerner and Nia Robinson of Redefining Progress (RP) write (pdf). “Four of the five recessions since 1970 . . . were preceded by big jumps in oil prices.”

The worrying thing is that, with peak oil now here, we can expect not just regular increases in the price of oil, but also more random, and larger jumps up in down in its price. It won’t track up slowly but jolt up and plummet down erratically as supply gets harder to extract and oil dependant corners of the economy try to react. And the people who will be hurt the most are those already in poverty.

In short, if we weren’t so addicted to oil, we would not be so vulnerable to price shocks. This fact underlines the importance of seizing the opportunity of the financial meltdown and its resulting economic downturn to break the addiction.

All of which is why investing in accessible public transport, clean renewable energy and energy efficiency measures such as the $1 billion home insulation fund are the type of fiscally prudent measures that we need to take now while we have the chance.

5 Comments Posted

  1. We spent much of the last 100 years investing in accessible public transport, almost 90,000km of all-weather roads….providing access to millions of uninulated homes. The choice of motive motive power has turned out to be the wrong one but revisiting the early alternatives to the infernal combustion engine will solve that problem – I reckon a Stanley Steamer would be the bees knees.

    Two out of three ain’t bad, frog

  2. The opening line in this article (which I appreciate is a quote) is flawed; it states “The extraordinary rise in oil prices since 2003 has sucked hundreds of billions of dollars out of the US economy”

    Given that almost all oil is traded in USD, every country other than the USA needs to buy USD from America to purchase their oil. Thus the USA gains far more running the printing presses to issue USD than it does in terms of spending USD for oil.

    The trading of oil for USD is one of the factors that makes the USD “magic”, and allows the USD and thus America to operate in a way that no other country can.

  3. emmess Says:
    October 14th, 2008 at 8:25 pm

    > You fools still on about peak oil.

    The underlying geology hasn’t really changed in the last few months. Oil prices are falling at the moment because demand is falling, not because of any increase in supply.

    Peak oil happens when supply can’t increase no matter how much demand increases, it doesn’t predict that prices won’t fall when demand falls due to a recession. But the relatively constant supply as oil prices rose dramatically over the last few years is evidence that we’re pretty near the peak.

  4. You fools still on about peak oil.
    I predicted here a couple of months ago when the price fell below $130 that prices would fall to $60 to $80 in a month or two.
    Today, I’ll go further when the world hits the bottom of the recession, the producers will be facing a glut.

  5. Your solution to high oil prices is, er, the vastly more expensive alternatives.

    Hardly a sound or even sane economic argument.

Comments are closed.