"The peak in oil prices took place in July 2008. When we look at US
mortgage amounts outstanding, we find that home mortgage debt hit a peak
on March 31, 2008 ... When we look at consumer credit outstanding, we find that consumer
credit outstanding hit a maximum on July 31, 2008 ... If oil prices spike, clearly discretionary income falls ... If interest rates spike, suddenly goods that are bought with credit
become more expensive ... The primary approach to keeping interest rates low has been Quantitative
Easing (QE). US QE was begun in late 2008 and has been kept in place
since ... The money from QE also helps encourage investment in marginal enterprises, such as in shale gas drilling ... While we hear much about the growth in oil from shale formations in the
US, this is mostly acting to offset falling production elsewhere ... It is this lack of growth in oil supply together with the high price of
oil that is holding back world economic growth. As stated previously,
very low interest rates are needed to even maintain the level of
economic growth we have now ... In a growing economy, it is possible to repay debt with interest. But once an economy flattens, it is much harder to repay debt ... The problem we have now is that a rising supply of cheap oil is no
longer possible. Most of the cheap-to-extract oil is already gone. Instead, the cost of extraction keeps rising, but wages are not going
up enough for people to afford the high cost of extracting oil (even
with super-low interest rates). The unfortunate outcome is that oil
prices are now too low for many producers ... Because oil prices are too low for companies doing the extraction, we really need higher oil prices.
But if oil prices are higher, they will put the world
back into recession. Interest rates are already very low–it is not
possible to lower them further to offset higher oil costs. We are
reaching the edge of how much central banks can do to hold economies
together ... As we have seen, rising interest rates will bring an end to our
current equilibrium, by raising costs in many ways, without raising
salaries ... A rise in the cost of extraction of oil,
if it isn’t accompanied by high oil prices, will also put an end to our
equilibrium, because oil producers will stop drilling the number of
wells needed to keep production up. If oil prices rise, this will tend to put the economy into recession, leading to job loss and debt defaults."
Zum Artikel von Gail Tverberg, erschienen auf Our Finite World (21. Mai 2014) »
