Beyond the Credit Crunch, An Oil Crunch

In the last few days and weeks a few fringe bloggers and Jeremiahs (myself included) have prognosticated that oil prices are about to surge again, and in the last week we have seen prices breach $50.

Oil prices will rise again in 2009 to last year’s record $150 and surpass this record. It may go beyond $200 or even $250 before we see another collapse, in a cycle of convulsions. It is for this reason (severe supply constrictions) that talk of recovery is nonsensical, foolish and shortsighted. A real recovery is impossible. The pretense of a recovery (that is a very short term return to “growth”) is possible, but to base our faith and hopes in this is unwise.
We are headed beyond a Great Recession. We’ll see a Great Depression that will make the 1930’s look like a picnic. It may sound like pessimistic doomsday talk, and often such talk is dismissed out of hand without considering supporting evidence. I concede that such evidence is somewhat subtle, and people need to carefully ponder the scenario for a few moments in order to understand it.

The current economic catastrophe is as bad as it is exactly because people have failed to see the simple subtleties in the market. We’re talking about a resource that underlies all activity, a resource = energy. That resource is now declining, from a Peak Moment, which means whatever your theories, whatever your economics, contraction is going to be your Guiding Philosophy.

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