Peak cheap oil is an incontrovertible fact

If the looming global oil crunch has been postponed for another decade or two as widely alleged, this is far from obvious in today’s commodity markets.

Brent crude jumped to $115 a barrel last week. Petrol costs in Germany and across much of Europe are now at record levels in local currencies.

Diesel is above the political pain threshold of $4 a gallon in the US, hence reports circulating last week that the International Energy Agency (IEA) is preparing to release strategic reserves.

Barclays Capital expects a “monster” effect this quarter as the crude market tightens by 2.4m barrels a day (bpd), with little extra supply in sight.

Goldman Sachs said the industry is chronically incapable of meeting global needs. “It is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand,” said its oil guru David Greely.

This is a remarkable state of affairs given the world economy is close to a double-dip slump right now, the latest relapse in our contained global depression.

Britain, the eurozone, and parts of Eastern Europe are in outright recession. China has “hard-landed”, the result of a monetary shock and real M1 contraction last winter. The HSBC manufacturing index fell deeper into contraction in July.

The CPB World Trade Monitor in the Netherlands show that global trade volumes have been shrinking for the last five months. Container shipping volumes from Asia to Europe fell 9pc in June. Iron prices have fallen by 30pc since April to $103 a tonne.

So we face a world where Brent crude trades at over $100 even in recession. Fears of an Israeli strike on Iran may have spiked the price a bit, though Intrade’s contract for an attack is well below levels earlier this year. More