The falling oil price may presage a future recession

Reproduced from Prof. Aleklett’s blog. He explains the signs that we’re on the edge of a new recession. The reason is the lack of energy to drive the economy. And the lack of demand to drive up oil prices.

Aleklett's Energy Mix

(This is the English translation of my article in the Swedish newspaper Svenska Dagbladet, Fallande oljepris ett tecken på recession)

brent oil 141015

Since July the price of Brent crude oil has fallen from $113 per barrel to $85.62 (on October 14). Historically we saw a similarly rapid fall in the in the oil price in late 2008 followed by the start of the global recession the year after. In 2008 the fall from July to December was from $140 down to $40 per barrel. At the moment we see no slowing of the price decline and we do not know how low the price will fall.

The fact that increased global energy consumption is a measure of economic growth means that these recent trends are pointing to an economic contraction. Many economists continue to expect that we will recover from the recession of 2009 and, of course, “growth” was also the…

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