The Oil Drum | Where we are headed: Peak oil and the financial crisis

246 comments on Where we are headed: Peak oil and the financial crisis

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ccpo on March 25, 2009 - 5:38pm

Gail, I've suggested in the past actually calculating the differential on the amount of money spent on fuel, heating, etc., by the public as a result of the higher prices. This would help move your idea from theory to near-fact as the $ spent will likely align very nicely with what people couldn't pay on their mortgages.

You'd have to be a little careful with food and bio-fuels, etc., but I did a very rough calculation and came up with between 1 and 1.5 TRILLION dollars between '03 and '08. Back then, that was a lot of money.

But my math skills are non-existent and I'm just an angry keyboard monkey.

:)

Cheers

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Gail the Actuary on March 25, 2009 - 8:35pm

Good idea, but I am not sure I would know exactly how to go about it, either.

For one thing, the higher price of oil translated into higher prices of food and of goods of all sorts, so the homeowner got hit in many ways.

Also, it seems like there is sort of a multiplier effect as payments work their way through the system. The money a homeowner spends on oil products goes to a significant extent to pay foreign producers of that oil. If the homeowners had spent the money on their mortgage, this money would have gone to pay various employees of the mortgage company and holders of the debt, and they might have bought some additional products as well. This additional money would have helped the economy, over and above the original impact.

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ccpo on March 25, 2009 - 10:02pm

Gail,

I don't think it would be an efficient use of your time, nor would it be necessary, to track all that down. Just covering the basics of oil prices, (some of) the various fuels and some of the food commodities (particularly in relation to ethanol) would be enough to establish a minimum level of additional costs high enough to support your thesis. Maybe not even all I have listed. Like I said, I'm getting between 1 and 1.5 trillion based on oil alone.

Cheers

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246 comments on Where we are headed: Peak oil and the financial crisis

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