"Expensive oil … does appear to be suffocating the debt-ridden, global economy, just as it is trying to recover …
Unfortunately, mainstream economists, including those in government, seem oblivious to the close relationship between energy, debt, and economy, and this means they are unable to see that expensive oil is one of the primary underlying causes of today’s economic problems. Consequently, they craft their intended solutions (e.g. stimulus packages, quantitative easing, low interest rates to encourage borrowing, etc) based on flawed, growth-based thinking, not recognising that the new economics of energy means that the growth model, which assumes cheap energy inputs, is now dangerously out-dated. When growth-based economies do not grow, household, firms, and nations struggle to repay their debts, and quickly things begin to unravel in undesirable ways." (Source: Energy Bulletin)
Excellent analysis by Dr Samuel Alexander of the links between global energy descent, rising commodity prices, the end of growth and the Great Depression.
From the conclusion of this report:
“Economic growth requires energy, especially oil. Stagnating oil production, however, is happening at a time when demand is continuing to rise. This means that oil is going to get more expensive – a consequence already playing out – but it is not clear that our economies can function on oil prices much above $100 per barrel or when total oil expenditure exceeds roughly 5.5% of GDP. The exact figures can be debated, and will be debated. But a strong case can be made that the price implications of slow-to-negligible growth in crude oil production is causing the global economy to stagnate, leading, among other things, to the inability of many households, firms, and nations to meet their debt obligations. This is causing significant economic instability around the world, and as oil prices rise in the future the situation is probably only going to get worse. This is not a happy message to convey, but in order to respond to problems effectively it is important that first their gravity is recognised and acknowledged.”