Over a year ago the economy was humming along at record setting rates. Employment levels were at an all time high. Everything looked rosy but as the price of fuel began to rise everyone began to complain, as I did, that the unfair daily jump in the cost of fuel was making it hard to pay the bills. Eventually companies imposed fuel surcharges, which ultimately were passed on to the consumer, which just exacerbated their financial problems.
The economy can only absorb so much change before it's affected. In this case, the leading cause of the economic downturn was, in my opinion, the unregulated oil business, not the credit crisis.
The credit crisis was a result of the cutbacks caused by rising oil prices.
It's ironic that this should happen in Canada since we are one of the world's major suppliers of oil.
Since oil is the lubricant of the world's economy, it's no wonder that business was so quickly affected by the unprecedented rise in energy costs. There's only so much any one or any business can cope with before the straw breaks the camel's back.
When you remove a person or business's profit through extortionate means, daily uncontrolled, unregulated rising of energy costs, that person or business, in an effort to survive, must make hard choices to cope. The rapid decline in sales of gas guzzling SUVs and trucks for example. The cutbacks in air travel for another.
So is it any wonder the world's economy was so quickly affected?
As we've seen, everything is linked. When one part of the chain is kinked or broken, the rest of the line can' t deal with the load.
Sure, the housing bubble and credit crisis are serious consequences of an overheated market, an unregulated market, but I feel they were not the root of the problems we're currently dealing with. As I've tried to explain here, I feel it's the oil industry, which has brought on this calamity. It's their desire to make as much money as possible before the wells go dry.
The oil crisis of the 1970's resulted in similar economic chaos. You'd think we'd learn the lesson. Alas, people seem to have short memories.
The elephant in the room is the oil industry. We need to regulate it or even better, find alternative energy sources so we're not so vulnerable to one industry's whims.
Since Canada has an ample supply of oil, isn't it in our own best interests to use that for ourselves and to regulate the price independent of other markets? Oil may be a commodity but in light of the fact that it's limited, should it be classified as such? Should we allow this valuable resource to be sold on the speculative market? And since it's so important to the economy, should not its price be regulated by the government to prevent economic upset? As citizens of this great country, we all have a stake in what's in the ground, be it oil, gold, potash or any other valuable substance. Therefore we should have a say how it's used.
Unless we lobby our elected representatives to act in our best interests, lobbyists with opposing agendas (profit) will continue to have sway over what affects our individual economies.
Let's use this time of change to make a real difference in how our economy is structured. Let's use some or all of the tax money collected on the sale of oil to use for research into alternate, renewable energy sources. We have the technical expertise and the skilled labor to make it happen. We just need the political will to make it a reality.
UPDATE: May 27/09 On CTV the other day a former CIBC economist,
JEFF RUBIN, has written a book on how the sudden oil price surge is really the root of the world's economic mess we're in now. He predicts the rust belt will be reborn as the cost of manufacturing goods overseas becomes too costly due to high fuel costs.