Stagflation is Back

Conventional oil supplies will remain tight in the years ahead.New discoveries will not suffice.World crude-oil production nearly tripled in 1960-73 (from 21 million barrels a day to 56 million), but has grown a mere 30% since then, to around 73 million barrels per day in 2006. In fact,Persian Gulf crude-oil production stopped growing entirely after 1974,

Three decades ago, in a bleak stretch of the 1970s, an economic phenomenon emerged that was as ugly as its name： stagflation. It was the sound of the world hitting a wall, a combination of no growth and inflation. It created an existential crisis for the global economy, leading many to argue that the world had reached its limits of growth and prosperity. That day of reckoning was postponed, but now, after a 30-year hiatus, at least a mild bout of stagflation has returned, and matters could get much worse. We are back to the future, with the question we asked 30 years ago： How can we combine robust economic growth with tight global supplies of such critical commodities as energy, food, and water？