Most of the explanations that we’ve been given for our recession, (or is it now a depression?), look at things from above, an overview. Phrases like Toxic debt, and reduced consumer demand, attempt to disguise the fact that ‘they’ are talking about real people, just like us, who became unable to make ends meet, and stopped spending money on ’stuff’, and lost their homes.
What I want to do is look at this from the bottom up, an underview, and explore how the high and rising price of oil was probably the most important factor in all of this. This is a personal view.
In the two years leading up to the recession, I can remember seeing the price of petrol rising. Petrol is a commodity, the price of which depends on supply and demand. With most of the world enjoying economic growth, the demand for oil kept rising, and along with that demand, the price rose. At home, the price that we pay for our energy is linked to the oil price. So we saw large rises in the cost of electricity, gas, and heating oil. These rises were way above the rate at which wages were going up. As much of the cost of food is also dependent on oil, food prices were also increasing. In my house this led to us regularly overdrawing. At first I thought that we were simply spending too much, but when I looked at our outgoings, it was apparent that we were spending our money on the same things, but that they were costing us more. Our solution was to cut back. I realise that one household spending less doesn’t cause the collapse of the financial system, but when millions of people start to spend less, things start to change. Much of our economy depends on services, including leisure, but these are often the first areas that people cut back on. The result is a reduction in jobs, and even fewer people spending money. This is the reduced consumer spending that governments talk about. To me, lots of people, like me, having to make savings.
The alternative is borrowing. If you cannot make ends meet either you borrow, or you end up with debt. Now the so called toxic debt wasn’t just about people being loaned money who could never pay it back. Otherwise, no payments would have ever been made, and these loans would never have got off of the ground. So these families were able to start paying off their loans, or mortgages, but just like the majority of us, found their bills rising faster than their wages, or lost their jobs. Real people suffering hardship.
So we have rising costs, directly linked to rising energy and food costs, reduced spending, job losses, recession. All linked together. The recession itself has caused a reduction in the demand for oil, which led to a small drop in the price for us. Elsewhere in the world, they might have benefitted more, but as our government has continued to increase the tax on petrol, we haven’t noticed it as much. Now perhaps I’m being a little cynical here, but aren’t fuel prices back to roughly what they were immediately before the recession? That’s with our economy still in recession, and therefore with demand suppressed. As the world economy starts to expand again, the price will continue to rise, and we will again face the same scenario, increased costs, without increased wages. After a dramatic fall in 2008, in 2009, world oil prices doubled. If rising oil prices started this recession, surely the same thing will happen again, and keep on happening?
Peak oil is a problem of supply. World oil production has failed to rise substantially since May 2005, despite the high and increasing level of demand, and subsequent high prices. If production is unable to rise to meet demand, prices will continue to rise, with recession as the only mechanism currently able to force a drop. Unless we can reduce our own consumption of energy, and therefore demand for oil, we face what has been called The Long Recession, where every time that the economy picks up, rising prices lead to another fall. Each potentially deeper and longer than the one before. It’s pretty depressing stuff, and for most people, too much to think about, so they ignore it, and hope that it won’t happen. Personally I don’t believe in burying my head in the sand. One way or another we will have to live with less fossil fuel. Either we plan that Transition, and steer it the way that we want it to go, or we wait until it hits us.
What the Transition Model is doing around the world is asking local communities how they want their lives to be when we have less oil based energy, and then working towards that goal. Looking at issues such as where our food will come from, how will we build our homes, how we will make our livings, how our children will be educated, health, government, heating, transport, and developing local solutions, that meet local needs. Please come along to an event and talk to us. Get involved. Take action now.
Deano
