Quote Originally Posted by GPaulus View Post
In November oil was $77 and now it is 95. How can that be? A 20% increase. Has oil demand risen by 20 percent?
The very question already shows that you have no clue about economic theory. The correct question would have asked for the price elasticity of demand for oil. That's 1st or 2nd semester microeconomics.

You asserted
But when 20 - 30 % swings occur or the prices climb too fast, the markets cannot react quickly enough. The result is usually double digit inflation.
and the graph proves you wrong. There was no double digit inflation in decades despite such crude oil price spikes.

Earlier spikes of the inflation coincide with world wars (and their aftershocks) and earlier recessions (which happen to involve high crude oil prices).

A global or a national economy has many more variables than energy cost and inflation rate. Federal reserve bank policies allowed high inflation (not this time) in the 70's, but not this time. In fact, there were huge deflation tendencies which were counteracted by expansionary federal reserve bank policies - the end result was a moderate inflation.
The whole link between energy costs and overall inflation/economic crisis is rather weak and indirect. Other variables can easily overcompensate the link.


The increasing energy costs of the mid-2000's did not help, but they're not the root of the global economic crisis. Likewise, subprime mortgages and CDOs were merely symptoms.
The crisis was a a correction movement against unsustainable imbalances with lots of secondary effects.
A high crude oil price is easily sustainable, as evidenced by the fact that some economies already pay a high price for crude oil products due to high crude oil-specific taxation.
The corrections of unsustainable imbalances happened at the weak spot of obviously unsustainable resource mis-allocations; distorted housing sectors (market price bubbles). Secondary effects rippled through an unproductive financial sector which had grossly neglected the management of systemic risks.
Finally, financial sector problems and their bandaging led to the fiscal de facto collapse of several states (Iceland and Ireland experienced economic nightmares because of out-of-proportion financial sectors, Greece/Portugal experience(d) fiscal nightmares because of unsustainable fiscal deficits).

High oil prices alone would merely have sufficed to challenge the viability of some products/business models and have caused some adaption processes in economies. In worst case, some countries would have felt a substantial change in terms of trade - comparable in aggregate effect to a changed rate of currency exchange. That's what we saw in 73/74.

Our economic crisis looked VERY differently this time.