An NPR segment yesterday about rising concerns over “stagflation” in the nation’s economy reminded me of a book I read last summer called The Coming Economic Collapse, by investor and peak-oil-proponent Stephen Leeb. I checked it out at the library again so I could share. Leeb writes:

In 1973, America’s new vulnerability was exposed when OPEC nations imposed restrictions on oil exports, causing a 70 percent rise in global oil prices. Shortly after, OPEC forced oil prices even higher by imposing a total embargo on oil exports. It did this to protest U.S. support for Israel in the Yom Kippur War. The spike in oil prices put a heavy strain on the American economy, resulting in a new type of malaise, dubbed “stagflation,” in which growth stagnated and inflation rose at the same time.

Stagflation put the government in a bind. Should it raise interest rates to fight inflation, or lower rates to restore growth? Obviously, it could not do both, so the 1970s became the most difficult economic period since the 1930s, for average citizens and policy-makers alike.

Eventually the political situation in the Middle East calmed, Leeb continues, and oil prices fell again. What does that have to do with what’s happening today? Jobs are getting scarcer, leading to fears about a recession, but at the same time, rising energy costs are driving up the price of the things we buy. Leeb predicts this is going to be a long-term phenomenon as the world’s demand for oil grows faster than oil production can increase. He’s even coined a word for it: oilflation. It won’t be as dramatic as what happened in the ’70s, but it will be more intense and long-lasting, Leeb writes.

From a recent issue of Leeb’s “Complete Investor” newsletter:

The next ten years will be worse than the 1970s … The two crises of the ’70s were just political events. (There was actually plenty of oil.) But today, oil prices are high because there are genuine supply problems . . . and new oil discoveries have been bleak to nonexistent. During the ’90s, new finds brought only 7 billion barrels a year, while world demand grew by 20 billion more barrels. Each year. For that reason, oil cannot go down for long. It will continue to zig-zag upward till the end of time. We’re rapidly running out of the stuff. And during that span, it will continue to drive inflation (albeit less strongly after alternative fuels start to kick in).