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Below I’ve reposted a new article by Roger Baker, former ’60s SDSer and current peak oil activist in Austin, TX, linking the Economic Crisis with Peak Oil.  There is more evidence mounting that last year’s global economic downturn was to some degree a direct result of the unprecedented oil price spike that immediately preceded it.

For example, this article (“Jeff Rubin: Oil Prices Caused the Current Recession”) explains that Europe and Japan (which are both more vulnerable to oil prices because they produce less oil than the US but consume plenty) entered recession before the financial subprime crisis hit global markets.

Quote: “Higher oil prices started four of the last five world recessions; we shouldn’t be too surprised if they started this one also.”

Keep in mind the unprecedented nature of this recent oil price spike, where the price of oil went to all-time record levels of nearly $150/barrel. This chart suggests that the economic effects of past price rises will likely pale in comparison to this much greater recent spike, at the end of the day.

Finally, we have this telling quote from Gail the Actuary: “It seems to me that the problem with non-availability of credit, particularly long-term debt, is ultimately tied in with peak oil. It is difficult to have more than a tiny amount of long term debt once an economy is no longer growing.”

My book, The End of Capitalism, will explore this theme in more depth, but it’s worth conjecturing:  If the global economy literally cannot grow any more, because of real and unavoidable limits on vital resources such as oil, how can we anticipate the multi-layered global consequences?

We have arguably begun witnessing the first wave of financial consequences, but this is just the tip of the iceberg.  How might the economy as a whole system have to transform, and if growth as the paradigm of industrial capitalism is literally behind us, what kind of economy will the paradigm shift towards? Will we see a new sustainability rooted in democracy and freedom, or an even greater tyranny than what capitalism has wrought?
[alex]

Some Economic Implications of Peak Oil

World oil production probably peaked in 2008. Liquid fuel production, including oil, is indicated by the OPEC data [1] to have reached a peak in July 2008 at about 86 million barrels per day, with its price peaking at about the same time. ASPO International agrees, as indicated on the chart page of their recent newsletters [2].

Peak oil has profound economic implications, most of which are unwelcome. There is good evidence indicating that peak oil triggered the global economic crisis; that oil price was the limiting factor that broke the momentum as the global economy tried to keep expanding. [3,4].

Predictably some factor like the end of cheap oil must limit the ability of global investments to expand exponentially, while paying interest on the global debt bubble. The risk was evenly spread by instruments like credit default swaps, so the collapse was global.There is scholarly confirmation of the role of the 2008 oil shock on the global economy should see the April 2009 Brookings paper “Causes of the Oil Shock of 2007-08″, by UC San Diego economist Dr. James Hamilton: [5,6].

“…Whether we would have avoided those events had the economy not gone into recession, or instead would have merely postponed them, is a matter of conjecture. Regardless of how we answer that question, the evidence to me is persuasive that, had there been no oil shock, we would have described the U.S. economy in 2007:Q4-2008:Q3 as growing slowly, but not in a recession.” Read the rest of this entry »