Higher oil price will destroy world growth. Every major recession since the 1970s has been associated with an oil shock. It will be no different this time.
While some of the price is due to a weak (US) dollar (in itself part caused by misuse of credit), it seems that many of the major oil fields are in decline (such as North Sea, and even Russia according to recent news), and even Saudi Arabia is not pumping extra. If supply can not keep up with demand (which I expect) then we will see much higher prices.
Of course I could be wrong. The States could go into a major economic recession and so drag a lot of the world down along with them. In this case demand for oil will drop and the prices might drop a little.
Either way, the sensible thing would be to see if we could make changes to our lives that would conserve energy and save us money.
Here's my guesses of how people will adjust short term:
- Smaller cars. Already happening in the US as car makers are in terrible trouble except for small models http://globaleconomicanalysis.blogspot.com/2008/04/march-auto-roundup-and-retail-sales.html - Increased reliance on public transport and walking in cities - Trading down in food, especially eating out and prepared meals - Decreased use of out-of-town retail parks - Smaller homes and decay in commutersville for park-and-ride dormitory towns
That last one spells trouble for UK housing, I think
5 comments:
Higher oil price will destroy world growth. Every major recession since the 1970s has been associated with an oil shock. It will be no different this time.
How many barrels of oil to one ounce of gold?
$927.5/113.93 = 8.14
1974 (year highs)
$195/10 = 19.5
So oil is about 2.5 times it's normal price. A crude calculation (excuse the pun) but it's best not to think of oil in $ or any other fiat currency.
Nick
While some of the price is due to a weak (US) dollar (in itself part caused by misuse of credit), it seems that many of the major oil fields are in decline (such as North Sea, and even Russia according to recent news), and even Saudi Arabia is not pumping extra. If supply can not keep up with demand (which I expect) then we will see much higher prices.
Of course I could be wrong. The States could go into a major economic recession and so drag a lot of the world down along with them. In this case demand for oil will drop and the prices might drop a little.
Either way, the sensible thing would be to see if we could make changes to our lives that would conserve energy and save us money.
"IslandCrow"
IslandCrow,
Here's my guesses of how people will adjust short term:
- Smaller cars. Already happening in the US as car makers are in terrible trouble except for small models
http://globaleconomicanalysis.blogspot.com/2008/04/march-auto-roundup-and-retail-sales.html
- Increased reliance on public transport and walking in cities
- Trading down in food, especially eating out and prepared meals
- Decreased use of out-of-town retail parks
- Smaller homes and decay in commutersville for park-and-ride dormitory towns
That last one spells trouble for UK housing, I think
Nick
Nick,
The smaller homes in the suburbs is more a problem for London.
Gold prices, I wonder if it is a bubble.
Alice
Post a Comment