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]
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: [4]
“…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.”
A hugely overextended bubble of unregulated, interlinked, securitized global debt and speculation set the stage for a collapse, as described in Charles Morris’ early 2008 book Trillion Dollar Meltdown. Kevin Phillips’ book Bad Money supplements the picture.
One subtle but important economic effect of rising oil prices is cost-push inflation, seen as stagflation during the energy crisis of the 1970s. This is a type of multiplier effect caused by the embedded cost of oil in goods slowly spreading price increases throughout the economy, seeming like a universal increasing tax.
The current relative collapse in oil prices, even if caused by peak oil, leads to the political problem of convincing the general public that oil dependence should remain a central concern when its price decreases.
The natural tendency of politicians in an economic crisis is to focus on unemployment.…
