It is my belief that the real cause of the recession has been the huge oil prices the world has had to endure for the past 8-months. At the end of February this year we saw oil hit the $100 a barrel mark and has only receded back at the beginning of October. The reason is that for years the world has been used to a very steady $30 a barrel which Opec was meant to maintain to stop the boom and bust of the 70’s. On the back of this economies have been built which gets turned upside down when prices not only double but quadruple.
Since 2004 you can see a steady increase in costs as fears over Iraq push prices higher but instead of Opec increasing production to maintain the price focus they have got rich by letting the world talk itself into high prices. And now that oil is back to $60 a barrel they are in crisis talks about cutting production because they have become fat on the high revenues and are scared that the world won’t tolerate higher prices if lower prices are maintained.
Oil is involved in every part of modern life from transport and energy production (important to grow food for example) through to millions of uses for oil products such as plastic. So if this commodity increases in cost it is not only car drivers that are affected but every aspect of life and in more ways than just one.
This I believe pushed America into the housing crash as people could no longer afford to eat which has started the vicious circle. I am not absolving banks and financial procedures from blame but I think with a stable oil price we wouldn’t have been affected in the way we have.