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Oil prices doubled from mid-2007 to mid-2008, skyrocketing from $75 to nearly $150 per barrel, largely based on a wall of speculative money flowing into commodities futures. That was one of the major causes of the worldwide “Great Recession” that we have still not recovered from. It is important for policymakers to acknowledge this foundational truth in order to prevent the same thing from happening again and killing our recovery.
Two articles highlighted the deadly role played by inflated oil prices:
I would say that if there were a reason we had the global recession last year, it wasn’t just Lehman or the subprime mortgage problem; it was that when oil went to $145 – best online pharmacy cialis.That was a major best online pharmacy cialis, real trade shock negative, and a real disposable-income shock for the U.S., Europe, Japan, China and all the other oil-importing and commodity-importing nations around the world. Best online pharmacy cialis: that kept the world in recession when oil was at $145.Now best online pharmacy cialis, I feel that oil at $100 is going to tip the world into a double-dip recession.
- Nouriel Roubini: The Coming Commodities Correction
- Lara Crigger
- Hard Assets Investor
- November 6, 2009
Though it’s universally viewed as a crisis of the financial sector’s making, several voices (notably James Hamilton) have argued the recession that began last year had a lot to do with the sharp rise in oil prices over the preceding months and years….
A feature in the draft executive summary of the IEA’s World Energy Outlook, which will be published tomorrow, revisits this argument and comes to a rather worrying conclusion.
It starts out keeping in line with the prevailing view: the run-up in oil prices from 2003 to mid-2008 played “an important, albeit secondary” role in the global economic downturn that took hold last year. Higher oil prices made oil-importing countries more vulnerable to the financial crisis, it says.
The feature concludes, however, on a somewhat stronger note.
The IEA points out that it had warned in 2006 that the effect of high oil prices from the preceding four years had not yet worked their way through the world economy, and that further increases in prices would “pose a significant threat to the world economy, by causing a worsening of current account imbalances and by triggering abrupt exchange rate realignments, a rise in interest rates and a slump in house and other asset prices”.
- Did oil cause the latest recession? IEA weighs into the debate
- Kate Mackenzie
- Financial Times EnergySource Blog
- November 9, 2009
While DC dithers, the whole world burns.
Looks like the temperature is set to rise dramatically.