With oil prices within spitting distance of triple-digit levels (Brent traded over $99 per barrel last week, while West Texas Intermediate was north of $90 per barrel), it may be time to reconsider just how long this recovery will run.

The fact that we’re seeing oil at triple-digit prices in this cycle should come as no surprise. After all, that’s where oil prices ended up last cycle before deep-sixing the global economy. But to see triple-digit prices again this early into what by all historical standards has been a painfully slow global recovery must be disconcerting to a world economy never hungrier for growth.

If merely getting back to pre-recession levels of global industrial production has oil knocking at the gates of triple digits, where do you think crude will be trading should we be fortunate enough to sustain this economic recovery for another year?

If anyone doubts how vital oil is to economic growth, just look at what happened last year. Global oil demand grew at two and a half per cent from the year before (almost double the International Energy Agency’s original forecast for 2010). China alone added almost one million barrels per day to its daily petroleum diet. Should demand grow by another two to two and a half per cent this year, crude prices could easily be taking out last cycle’s high of $147 per barrel. And if the speculators jump on the bandwagon, the forecast I made three years ago for $200-per-barrel oil prices in 2012 may yet pan out, the recession of 2009 notwithstanding.

But where would that leave the global economy? While economists may not formally consider oil as a factor of production, oil and economic growth are inextricably linked. In a world where conventional oil production hasn’t grown in over half a decade, that connection means that continued economic expansion can only be at ever-increasing wellhead costs and ever-higher crude prices, provided, of course, that soaring oil prices don’t do what they have always done before—cause major recessions in oil-powered economies.

Every major global recession over the last forty years has had oil’s fingerprints all over it. The first OPEC oil shock led to a devastating recession in 1973, only to be followed by the double-dip recessions on the heels of the second OPEC shock. When Saddam Hussein invaded Kuwait and lit its oil fields on fire, pushing oil up to the then unheard-of high of $40 per barrel, once again recession quickly ensued. And of course, when oil prices surged to a record-high $147 per barrel, the deepest post-war recession ever followed close behind.

So why should we expect our next rendez-vous with those prices to yield any different results?

  • Signup_12345a

    “Sustainable growth” – the economic oxymoron of oxymorons.

  • Test10

    The only way for the term “Sustainable growth” to make any sense is if that growth is *negative* when measured in consumption. It can only mean growth by tremendously increasing efficiencies, eliminating waste, learning to use much less energy input for our lives etc.

  • K Cobley

    Current Oil prices are also mid winter (northern hemisphere), when summer comes the argricultural & mining machinery are running hemisphere wide and the “summer driving season ” begins it will be a major shock it's a 1.5 MB per day increase and for the Sauds to ramp up their spare heavy crude operations it takes time and energy input. If they haven't started now they are not going to have the capacity come summer.
    Expect serious increases in Oil prices by early April!

  • Sean Ingram

    Jeff Rubin! Get in touch with Donald Trump. He is talking about oil everyday and he needs your advice. I tried to send him an email but…I am small.
    I think he is on the right track but he NEEDS your 30 plus years of genius insights.

  • Denny

    No need to worry about diminished supply because the Pemex chief has vowed to increase production (http://www.cnbc.com/id/4118169…). On the heels of BP's announcement that oil will start flowing from the Arctic by 2020 and a possible discovery three miles below the sea near Angola, the long term supply is apparently guaranteed. This is a relief given the shutdown of the Alaskan pipeline, continued sabotage in Nigeria, bomb blasts in Iraq, and the uprising in Tunisia. Those dirty canadian tar sands must look increasingly more attractive to Washington. In an uncertain world that relies on debasing currency to keep economic dreams alive, a reliable supply of the the most valuable commodity, despite costs to the environment, must be viewed in a more favorable light

  • Carbonman

    It is so great to see clean, ethical oil sands production is bound to increase — great for Alberta and great for Canada.

  • Dhouston

    all of these sky is falling stories makes good press but as Darwin illustrated we will adapt to any rise in oil and we will live on and survive and even thrive with the higher oil prices. Look at what is happening now. Gas prices are not far off of the spike his in 2007 -08 and yet hardly a peep from consumers. the economy is chugging along and we are actually buying larger not smaller cars.

  • corsen

    Ya its great if you enjoy living a polluted gulag and enjoy cancer

  • Krychek

    Yes, we will survive, but our society will look entirely different, with our standard of living decimated and wealth and technology being generated in other societies whose languages you can't speak and whose history you are not in the least familiar with. But, sure, we'll survive. (hint: start learning about Han culture now, so that you can at least begin to understand how to work the technology that they will develop that you will aspire to own).

  • Jimmyb189

    errr, what happened to that plant that was suppressed to make way for crude oil? I think its called Hemp. Use 10% of every states land area for hemp and you would have food and household fuel covered at least.

    On a more spiritual note, the native americans viewed crude oil as the earths blood. Crude oil usage makes humans the equivalent of leeches, and we know how leeches get dealth with. Instead of cigarette, maybe solar flare??? who knows.

    either way hemp has always been a superior material for industrialised economies, i think its a case of whether the survivors of whats coming down the pipe will learn from the mistake.

  • P. Atriot

    This is ecofreak propaganda with no evidence to support the case. If anyone there feels they are getting cancer by living in is beautiful area, move somewhere else and let the development this pot of liqiuid gold make Canadians prosperous. This is our continent's answer to energy self sufficiency.