Gregor Weekly Macro Note: Saturday 19 December 2009

• Gregor Macdonald
• December 19th, 2009

Someday this war’s gonna end. For this week’s Campfire series on The Oil Drum, I have submitted a kind of post-peak, energy-transition, urban renewal plan and used Philadelphia as my tableau. Embedded in what is otherwise a rather thematic, big idea kind of essay are most of my views on energy transition, permanently higher oil prices, and a slow to no growth US economy. As 2010 is now accessible with the turn of a page on the calendar, I thought it was time to trot out my investment map for next year. But I’d like to put such a map in the context of a longer timeline–the next decade.

I think it’s going to take 10 years before the United States extracts itself from its current position, and begins to enjoy sustainable broad-based wage growth once again. My forecast takes into consideration at least two more acute phases of the oil crisis, and, the cost of mitigating the relentless ebbing away of affordable oil. Overall, I see a serial recession-and-recovery oscillation that plays out at least 3 more times by 2020. And that’s a best case scenario–a scenario that avoids a political or systemic rupture.

We are currently in just such a recovery now. It’s not sustainable, and it won’t play out like other post-war economic recoveries with soaring GDP growth to kick things off. Instead, it will be a muted recovery that takes back some of the acute collapses in jobs, inventories, and production that started last year. And then we’ll roll over again. If we’re lucky, each of the 3-4 more recessions we experience into 2020 will become successively shallower. But that will be hard given what’s coming mid-decade in the global supply of oil.

It’s been some time since I’ve addressed oil. My recent work on coal, the problems facing cities, and this weekend’s outcome at Copenhagen have have all combined to persuade me that when it comes to addressing the ongoing energy crisis…(this article continues for subscribers through the membership gateway, on the right side of this page)

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