Here is a quote from my first book:
“In 2008, oil prices reached 7.5% of GDP in the US and triggered a major demand reduction. In 2010, Deutsche Bank predicted the next oil shock will come at 6.5% of GDP, which reflects their assessment of an increasing sensitivity to oil prices. As I write this in 2012, the price of oil is approximately 5% of US GDP.”
The article referenced is:
Sankey, Paul, David T. Clark and Silvio Micheloto, (2010:51). The End of the Oil Age. 2011 and beyond: A reality check. Deutsche Bank: Global Markets Research.
The “sweet spot” for oil as a percentage of GDP is 4-5% (based on a global consensus). What the oil companies and speculators did in 2008 was to see how far they could push it. Around 2010, I started tracking both the WTI and Brent prices on a daily basis to see how far they deviated from the pricing “sweet spot.” On November 13, 2012, I started graphing the rise and fall of the WTI price, the Brent price, and the percent of GDP based on averaging the two and comparing them to a proxy value of $100 per barrel = 5% of US GDP (again based on a global consensus). The percent of GDP on that date was 4.84%.
Right now, oil prices are so low that the percent of US GDP is 1.93%. Because oil is so cheap and necessary for GDP growth, there should be LOTS of growth in economies worldwide. [But there’s not!] In 2008, the high price of oil in relation to GDP was the reason for demand reduction. In today’s world, demand reduction is not due to the price. The world is awash in cheap oil, so why aren’t companies making more products and providing more services? Why aren’t there more jobs?
The best answer I can come up with is the lack of money for those who want to spend it. In my analysis, the rich have hoovered up so much money that us poor and middle-class folks simply don’t have enough of the world’s money to spend to stimulate growth. The demand reduction in oil is a result of the supply reduction in money for the masses. The money is still out there – it is just locked up by the rich.
Let me repeat that. The reason we have such a cheap supply of oil is because the rich have all the money. The solution? Start doing without money. Get into alternative currencies, trade for what you need, reduce your cashflow needs, grow your own food, reduce your travel, work duties, and all other activities that require money. Hunker down and get to know your family again.
And where does this cross over into the climate change variables? Without recession/depression/collapse, there is no cleaner world. Get used to it. If any of your so-called “progressive” friends tell you we can have a clean world and still keep our phony-baloney American lifestyle, they are just astroturfing.