Oil and debt do not mix. Lost in the blizzard of theories to explain the non-recoveries of Greece, Ireland and Portugal are high energy prices. The euro zone's hapless bailout triplets have to import almost all of their oil at a time when they are getting poorer and can't afford the equivalent of $100 to fill up their tiny cars.
Take Greece, able to roll over its debt only because the European Union and the International Monetary Fund are handing out €110-billion ($150-billion) of cheques. Greece is the world's 39th-biggest economy, and sinking, but is the 21st-largest oil importer. And the imports are going up.
According to the CIA World Fact Book, Greece's oil imports rose almost 18 per cent between 2003 and 2008 (they have levelled off since then, thanks to the brutal recession). Over the same period, Brent oil prices went from $30 (U.S.) a barrel to a peak of $147. Brent was trading Wednesday at about $115, still a hefty price for a country that is effectively bankrupt and where 20 per cent of its citizens are poor.
But didn't last week's monster oil selloff show that oil prices are unsustainably high? Indeed, oil did sink like a lead life jacket. Brent (the better measure of future prices than West Texas intermediate) went to $105 a barrel, a 17-per-cent drop from its year-high of $127.
Since then, it has recovered about half of its losses and, barring a global recession, the price is bound to keep moving up, robbing Greece and its fellow weaklings of growth at a time that it needs it most to avoid suffocating in debt.
There is plenty of evidence to suggest that $100 oil will be fondly remembered as a table-thumping bargain not too long from now.
According to a recent Morgan Stanley presentation, the slight drop in demand in the rich countries (represented by the 34 members of the Organization for Economic Co-operation and Development) since 2007 is being more than offset by galloping demand in emerging markets. Non-OECD demand is expected to reach more than 43 million barrels a day this year, up 15 per cent since 2007. That will take total global demand to about 89 million barrels, up almost 3 per cent since 2007.
China can take a lot of the blame. Its oil demand is setting new records virtually every month. In December, its year-on-year demand rise was 19.7 per cent, to 9.8 million barrels. The other big factor driving prices is soaring domestic demand in the Arab world, home of the biggest conventional oil reserves.
Take Egypt, a fairly large oil producer, though not a member of OPEC, and the site of the third-largest reserves in the Mediterranean. Thanks to rapid population growth, from 20 million in 1950 to 80 million last year, and waning production, Egypt became a net oil importer (though only just) in 2010. The year before, its exports fell by an astonishing 26 per cent. The pattern is similar in several other oil-producing countries with burgeoning economies. This does not bode well for weak developed countries that pray for cheap oil to help reverse their fortunes.
Oil, of course, is not the only form of energy that is going up in price. So is electricity, as a result of rising oil and coal prices (if not natural gas), lack of nuclear development, increasing energy taxes and ever climbing demand as computers, mobile phones and iPods spread like germs.
The U.S. Energy Information Administration keeps a rough track of household electricity prices around the world, measured in dollars per kilowatt-hour, and the picture isn't pretty. In most of the dozens of countries on the spreadsheet, electricity went up 50 to 100 per cent or more between 2001 and 2008, and no doubt the price has climbed since then.
Ireland's household electricity price almost tripled over that period. Portugal's more than doubled. Greece's went up 60 per cent between 2001 and 2005 alone (that's the latest figure for Greece). If rising oil and electricity prices weren't enough, another household essential - food - is also on the boil. Prices of many food commodities are back to their 2008 peaks, when food riots erupted in dozens of countries.
High energy prices can wreck economies. Since 1970s, most recessions were preceded by a sharp runup in energy. In the past, governments could employ aid and stimulus programs to help the poor cope with ugly energy bills and keep the economy from imploding. But this time is different - governments everywhere are tapped out.
There is no doubt that Greece, Ireland and Portugal are the authors of their own misfortunes. But we need to wish them luck, because the odds are truly stacked against them as prices for household essentials bleed consumers dry at the very time their economies need a spending jolt. Is the worst behind these countries? Not a chance.
Eric Reguly