413. OIL SHOCKS DO NOT CAUSE GLOBAL RECESSION
As noted in the previous article, peak oil doomers constantly say that oil shocks (or high oil prices) inevitably cause economic recession. They produce graphs showing the coincidence of recessions with oil price spikes, and suggest that the historical record is unequivocal.
For some countries, like the US, their point is very true. However, consider the flipside: when the US is getting bled to death and recessing due to high oil prices, countries like Saudi Arabia and Russia are swimming in cash and growing like never before. The money that is sucked out of the US economy is diverted to and spent by oil exporting economies, and the result is a net wash in terms of global GDP. The global GDP doesn't care who spends the money, or where it is spent, or what it is spent on. In fact, there is no simple logical reason why an oil shock should cause global growth to halt or reverse -- a fact which has been noted by economists.
The actual statistics on world growth bear my point out. Here is a graph of world oil production from 1978 to 1994 (a period I like to call "The Big Glitch"; figures from the BP. Stat. Rev. 2007). Note that there was no net growth in oil production in the 14 years from 1979 to 1993.
This was a period which began with a huge oil shock, and some of the highest real oil prices in history (click to enlarge):
And yet world real GDP grew the entire time (figures from the World Bank's World Development Indicators Database):
This is further supported by the following Table of global real GDP 1950-2001 (P. 233, The World Economy, Angus Maddison; click to enlarge). Note that an oil shock has never caused global growth to even halt, let alone reverse:
If declining oil production and high oil prices cause recession, why didn't the world economy recess during the Big Glitch? The world economy grew steadily without any net growth in oil production for 14 years.
In fact, in the 1979-1993 period, the world produced far less than it would have produced in a 14-year production plateau:
And yet world growth continued, unimpeded. The peak oilers tell us that a plateau will have devastating effects on economic growth, because the economy can't grow without growth in oil production. And yet that did not happen during the Big Glitch, even though far less oil was produced than would have been produced in a plateau. On the global level, something is very wrong with their theory that oil shocks cause recession... what is it?