Share slump and credit crunch: passing peak oil

Regular readers may be surprised to see me offer commentary on the financial markets, given my dim view of such factories of speculation and greed. This is no sideshow, however. The unfolding turmoil may eventually be seen as a historic event. Another turning point, the worldwide peak in oil production, is a key player in this unfolding drama, although its role goes unnoticed by most in the audience.

The Die is Cast

In the wake of the dot-com crash in 2000 and 11th September 2001, the US Federal Reserve began reducing interest rates to stimulate a weak economy. Between 2001 and 2004, interest rates were cut from above 6% to effectively zero. Debt became cheap.


But in 2004, the booming Asian economies pushed world oil demand up noticeably. The days of spare oil capacity in the Middle East were suddenly all but over, and oil prices headed up sharply. The Federal Reserve began to steadily raise interest rates; conventional medicine for the resulting inflation. That started the vicious cycle that is now beginning to unwind in a very unhappy fashion:

Oil Prices Up