Gail Tverberg's Blog

If an economy is growing, it is easy to add debt. The additional growth in future years provides money both to pay back the debt and to cover the additional interest. Promotions are common and layoffs are few, so a debt such as a mortgage can easily be repaid.

We are used to expecting that more investment will yield more output, but in the real world, things don’t always work out that way.

United States oil consumption in 2012 will be about 4.7 million barrels a day, or 20%, lower than it would have been, if the pre-2005 trend in oil consumption growth of 1.5% per year had continued. This drop in consumption is no doubt related to a rise in oil prices starting about 2004.

There is ample evidence that spikes in oil prices leads to recession, at least in the US, which is an oil-importing nation. James Hamilton has shown that 10 out of the last 11 US recessions were associated with oil price spikes.

A person might think from looking at news reports that our oil problems are gone, but oil prices are still high.

We have been hearing a lot about escaping the fiscal cliff, but our problem isn’t solved. The fixes to date have been partial and temporary. There are many painful decisions ahead. Based on what I can see, the most likely outcome is that the US economy will enter a severe recession by the end of 2013.

Most of us have heard that Thomas Malthus made a forecast in 1798 that the world would run short of food, and that great famine would result. But most of us don’t understand why he was wrong.

The “standard” way of looking at government income and expense is as a percentage of GDP. As a practical matter, though, about 80% of federal taxes relate to individuals, so it makes more sense to me to use a wage base for comparison, especially if there is concern that wages aren’t keeping up with GDP.

The International Energy Agency (IEA) provides unrealistically high oil forecasts in its new 2012 World Energy Outlook (WEO). It claims, among other things, that the United States will become the world’s largest oil producer by 2020, and will become a net oil exporter by 2030.

As I look at the situation, it seems to me that many of the crises around the world are connected to oil supply and the cost of this oil supply. If oil supply gets tighter, there is potential for these crises to get worse.