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Possibility of a Second Peak-Oil Related Recession Looms
Based on a report by Moodys some experts are warning that pulling Russian oil off the market could result in a global economic downturn.
The report also states that
• "Every recession in the past 50 years has been preceded by an oil price spike.
The report was covered in a nice piece by TSVETANA PARASKOVA today at oilprce.com https://lnkd.in/dFfTwavm. Interestingly, no citation was provided for this last statement coupling recessions to oil price spikes. It was apparently assumed to be a matter of conventional wisdom.
The tight relationship between recessions and spikes in oil price variance over the last 50 years was first reported in my article of 2009 at the OilDrum.com (https://lnkd.in/dKbYKCMs, see figure from this 2009 article linked to this post). The relationship was subsequently highlighted by the UCSD economist James Hamilton in 2010 (https://lnkd.in/d9vzjaj9).
It has been the frequent habit of professional economists and economic commentators to associate recessions with anything but doings in the energy markets. The best example of this is the financial crisis of 2008, where causality was assigned by most experts to the “sub-prime” mortgage crisis. This, despite the fact that like all recessions of the last 50 years, the 2008 crisis had been immediately preceded by a major spike in oil price volatility,
I have argued for the last decade that the recession of 2008-2009 was actually our 1st Peak-Oil recession - see my interview at James Kunstler's podcast https://lnkd.in/dmddxF_p.
I agree with Moody’s that a recession is possible, and perhaps even likely. However, I disagree on their assignment of potential causality. As always, that which is most immediate and tangible appears to be posited as the "prime mover” i.e., the Russian war in Ukraine and the response of the West to this aggression.
However, as I posted last year (https://lnkd.in/dZZUdwM4), spikes in oil price variance were predicted and duly occurred in November 2021, well before Russia invaded Ukraine. Second, the up and downs of the energy market since the initial phases of the invasion have actually shown little relationship to oil market fundamentals. Finally, and most importantly, the current phase of volatility in oil price falls right in line with a 3-4 year cycle that I have been harping on about ad nauseam since 2009.
Based on my objective assessment of the data, I would therefore posit that the major cause of any pending economic down-turn will again be Peak-Oil. Thus, if it does occurs this will be our second Peak-Oil related recession.
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