TODAYonline | World | Peak Oil is back with a vengeance
Oil spikes usually metastasise once energy costs reach 9 per cent of global GDP. The longer they stay there, the greater the damage.That proved to be the pain barrier in the 1970s and again in 2008, and we are just shy of that level right now.”Oil is already capturing a higher level of European GDP than in 2008,” said Francisco Blanch from Bank of America.
The rule of thumb is that a 10 per cent rise in crude cuts United States growth by 0.2 per cent four quarters later, but the science is flabbily soft and nobody knows where the inflexion point lies.The effect is famously “non-linear”. Nothing much seems to happen until confidence suddenly snaps.What is deeply troubling is that Brent crude should have reached fresh records in sterling, £79 S$157, and euros, €94 S$155, with a knock-on effect on US petrol prices, mostly tracking Brent – even though the International Monetary Fund has sharply downgraded its world growth forecast to 3.25 per cent this year from 4 per cent in September, and even though the International Energy Agency IEA has cut its oil use forecast for this year by 750,000 barrels per day bpd.
Oil is not supposed to ratchet defiantly upwards in a downturn, which is what we have with the euro zone facing a year of contraction in 2012, and much of the Latin bloc sliding into full depression. Japans economy shrank in the fourth quarter.