Oil and the economy: A systematic review of the literature for ecological economists

This article offers a systematic review of the mainstream literature in oil economics, macroeconomics (international and financial economics) and political economy, complementing and complicating the way ecological economics understands the links between oil and the economy. We look at the supply and demand factors that affect oil prices; the ways oil prices affect the economy; the effect of interest rates, capital flows and exchange rates on oil prices and extraction; and the role of (geo)politics in governing oil and money flows. We develop an illustrative system model of the causal pathways that link oil and the economy and compare alternative explanations of the oil price shocks of the 1970s and 2000s. The emphasis of ecological economics on peak oil and resource limits to growth may be relevant over the long run, but is less capable of explaining precisely how oil contributes to concrete economic short-run crises now.