McClatchy on Energy Depletion

In a mediascape that generally denies or ignores the subject of energy depletion, McClatchy offers a thought-provoking article:

Will high oil costs permanently ruin world’s economy?

For President Barack Obama and Republican rival Mitt Romney, the race for the White House seems indisputably centered around one issue: Who can do more to bolster the sputtering U.S. economy.

But to some experts, spikes in oil prices over the last several years have signaled an ominous turn that could make it nigh on impossible for any president to expand the economy as it has in the past.

Unlike previous oil price jumps stemming from turmoil affecting Middle East oil producers, prices surged over the last eight years because tightening supplies couldn’t keep pace with Third World demand, researchers have concluded.

“The question is how much can we keep growing without a growing supply of energy?” said James Hamilton, a University of California-San Diego economics professor who has been on the leading edge of research into the impact of high energy costs.

James Hamilton and Menzie Chinn run the highly regarded Econbrowser blog. Although sometimes their posts are intended for other economists or econometricians, many of the posts are of interest to the layman.

In a paper published in 2009, Hamilton reported that the price of crude oil has jumped sharply in advance of 10 of the 11 U.S. recessions since World War II.

His bigger discovery was that the sharp rise in prices before the economic collapse of 2008 didn’t stem from an Arab oil embargo, military conflict or other Middle East supply disruption, as occurred before five other major economic downturns. Instead, it was largely “booming demand and stagnant production” that briefly sent the price to a record $145 a barrel in July 2008, probably accelerating the crisis that sank the world economy, he found.

Sure enough, after oil prices pulled back in 2009 and 2010, consumption shot up by more than 5 percent last year, and prices spurted above $100 a barrel again. The world economy soon slumped into its current doldrums.

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