Cancel
Advanced Search
KEYWORDS
CATEGORY
AUTHOR
MONTH

Please click here to take a brief survey

Oil Addiction and Recession

Vulnerability to oil prices helped cause this collapse.

by Alan Durning

Oil%20and%20Recession.png

Poorly regulated real-estate lending wasn’t the only cause of the economic meltdown now gripping the industrial economies. Oil addiction also contributed.

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 figure above, from the Reserve Bank of St. Louis (hat tip to RP), illustrates the point. Shaded gray bars show the recessions officially declared by the National Bureau of Economic Research. The black and blue lines show the price of oil in inflation-adjusted “real” terms and in unadjusted “nominal” terms.

What’s more, the oil price surges of the recent past helped to trigger the wave of defaults and foreclosures that revealed the overextension of US mortgage lending. High energy prices have severely strained family budgets—especially low- and moderate-income family budgets. Some of those families couldn’t afford to keep paying their mortgages and also buy gasoline.

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.

This piece originally appeared on the Sightline Institute's blog, The Daily Score.

Bookmark and Share


Comments

And what will society do when the money system actually does collapse? What incentives do truck drivers, farmers, doctors, and utility workers have in America to show up to work when their money is no good anymore?

No one likes to hear about upcoming calamity, but denial won't stop entropy. The heat value of twenty "One" dollar bills will keep you warmer than a single twenty dollar bill.


Posted by: Randy White on 14 Oct 08

Not to mention the $700 bn that was dumped into the economy -- no, not the bailout, the war. There is some conjecture that the War on Terror was actually about oil, although that has not been officially confirmed.

$700 bn dumped into an economy that, absent large conversion industries like steel mills, etc., no longer has much use for capital. (http://www.boingboing.net/2008/04/02/vcs-sitting-on-giant.html)

So, you are a fund manager. Your job is to make capital earn income. Most of the growth industries don't really need it. Your clients can get 3% or so with no risk at all.

There are only a couple of places to put that money that have any chance of keeping you employed. They're risky, but you don't have the option to just sit on it, so you buy yourself some time.

Time just ran out, that's all.


Posted by: Ron on 16 Oct 08



EMAIL THIS ENTRY TO:

YOUR EMAIL ADDRESS:


MESSAGE (optional):


Search Worldchanging

Worldchanging Newsletter Get good news for a change —
Click here to sign up!


Worldchanging2.0


Website Design by Eben Design | Logo Design by Egg Hosting | Hosted by Amazon AWS | Problems with the site? Send email to tech /at/ worldchanging.com
©2012
Architecture for Humanity - all rights reserved except where otherwise indicated.

Find_us_on_facebook_badge.gif twitter-logo.jpg