Restoring spare capacity to more comfortable levels will require a business-cycle downturn, which is why a recession or at least a serious slowdown is inevitable. RECESSIONS AS RESETSProfit-maximising enterprises do not intentionally invest in higher oil inventories or spare production capacity. Recessions in 1974, 1980, 2008 and 2020 all left oil production and consumption on a permanently lower trajectory than before. There is no recorded instance where spare oil production capacity rose when the global economy continued to grow strongly. It explains why inflationary pressures are cyclical, subdued in the immediate aftermath of a recession, when spare capacity is plentiful, then building progressively as the expansion matures and spare capacity erodes.

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