The Peak Oil Crisis: Oil in the Great Recession

Earlier this week the Associated Press grappled with the issue of whether or not the current economic downturn has reached the point that it can be called a depression. After consulting many learned scholars the answer seems to be that it is too early to make such a pronouncement.

According to some, it is going to take three growth-less years during which unemployment will have to climb above 10 percent and the GDP will have to decline by at least 10 percent before the term should come into common use. (During the 1930’s unemployment climbed above 25 percent and the economy shrank about 27 percent.) While we have not fulfilled these requirements, some are already suggesting it can be called a “Great Recession.”


Last weekend, as a member of a panel on the outlook for energy at a student conference called Power Shift 09 in Washington, I was asked about what happens to peak oil in a depression. The implication was that if the global economy gets really, really bad in the next few years and the demand for oil drops so far, so fast, that nobody would notice that much of the investment in new oil production had stopped. If demand falls fast enough, declining world oil production resulting from depletion overtaking new production simply won’t be noticed.

As the bad economic news continues to pour in, and the equity markets keep falling through support level after support level, the chances that we are heading into a very serious recession seem to be improving. In recent days, guests on the financial news networks have turned somber. Instead to talking about buying opportunities before the great cyclical rebound, more are speaking of uncharted waters and that we could see the Dow at 4,000 or even 3,000 in the next couple of years.

Falls Church News Press